IncSearch not working in s/patt/repl/gc?

I have these two lines in a modified "lithochromatic" colorscheme:

highlight IncSearch ctermbg=NONE ctermfg=NONE guifg=NONE guibg=#f8f8f8
cterm=underline,bold gui=underline,italic
highlight Search ctermbg=NONE ctermfg=NONE guifg=NONE guibg=#d8d8d8
cterm=underline gui=underline

In gvim 7.4.292 64-bit, on 64-bit Windows 7, when I do a
:'<,'>s/pattern/replacement/gc command, the active match (the one
which will be replaced depending on my answer to the prompt from 'c')
is getting the Search highlight instead of the IncSearch highlight.

:help hl-IncSearch indicates that the IncSearch highlight should apply.

Can anyone else confirm this behavior, or should I start digging into
my Vim config for more detail on root cause?

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