Does an employer get to choose whether they put 1L or 1M? I am asking because I took a loan from my 401(k) // Profit Sharing in February 2020, made my first repayment in March and on April 1 I was informed my department was permanently closed so I separated from employment effective 4/1. My final paycheck was on 4/14 and that was my second loan repayment. I received a general employment termination notice that summarized various benefit procedures. It indicates I have 45 days from the date of termination to repay the outstanding balance. It goes on to say if I do not pay off the remaining balance with it the deadline my loan will be in default and will be considered an early distribution subject to taxes and penalties. It then states the loan may not be rolled over to an IRA or a new employer plan.
While I am unable to pay off the remaining balance within 45 days from the date of my termination I believe I will have the means to contribute the equivalent of that amount into an IRA by my tax filing deadline (April 15 2021).
It is not clear to me when I’ll receive my 1099-R but I am anxious about what the two codes in box 7 will be. I truly hope it says 1M but I’m wondering if the employer can choose 1M or 1L. I don’t want it to be a deemed distribution. I want it to be considered an offset. I’ve read your replies in many of these threads and so appreciate any insight you may have.
