If the loan was not in default at the time you separated from service, they should have processed this as an offset distribution (reported as a regular distribution even though the money went to pay off the loan) rather than a deemed distribution which just makes the outstanding amount taxable but does not satisfy the loan. A TurboTaxDianeW said, you need to contact the plan administrator to make sure that the loan amount has been offset and that you no longer have an outstanding loan.
