If this was a case of the old employer being bought out by the new employer and the 401(k) plans merged, the transfer of the funds and the loan to the new plan could have been done as a nonreportable transfer and there could have been no reporting of an offset distribution. However, it seems that the moved the loan by making an offset distribution, creating a new loan and using the new loan proceeds to roll over the offset distribution. This sound a little bit fishy since the new loan would have to happen before the loan proceeds were used to fund the rollover of the offset distribution and the new loan would be subject to the current balance in the plan, not the current balance plus the amount of the offset distribution. It seems to me that there really should have been no reporting of an offset distribution if the loan was simply transferred to the new plan.
