Yes, 24jaijay, you could do that. You could even complete the rollover of the offset distribution by rolling it over to the new employer's plan instead of rolling it over to an IRA. It might seem a bit strange to take money out of the new plan as a loan just to put it back into the same plan as a rollover contribution, but nothing in the tax code prevents you from doing that and it would accomplish your goal of moving the loan to the new plan.
