@IDF783 wrote:
Anyone else out there had an outstanding 401k loan prior to COVID and lost their job due to COVID and were unable to pay the remaining loan? I could not and mine was deemed a distribution. Was wondering if this could apply to the COVID distribution and spread out for 3 years? I'm hearing yes and maybe not. When I select 1 as my distribution code, it will spread out the distribution for 3 years. But if I select 1L (shown on my 1099-R) it won't. It would suck if there was no provision made for this due to the COVID disaster.
That is correct. Code L is a "deemed distribution", not an actual distribution to *you* that you can pay back, it is a distribution to the plan administrator to pay the loan. The IRS has said that does not qualify as a COVID related distribution.
You might have been able to take a COVID related distribution from your plan to pay the loan off before the deemed distribution took place, but that is too late now since 2020 is over.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
