Thank you, that was very informative. And I mostly understand what you're saying. My apologies I do have two follow up questions.
1. I do intend to pay the loan back. It is a couple hundred dollars however, so I don't have that amount of extra money lying around at this time to satisfy the loan. Maybe I could have been more diligent with this, but I have been with the same company for 15 years up to that point so 401k and rollover, etc etc. was all foreign to me. Something I didn't think I'd have to think about for decades.
To answer your question, they definitely didn't reduce the balance, so it seems to be a "legitimate" deemed distribution. Anyway, regarding one of the things you mentioned "to come up with the funds to do a rollover of a qualified offset distribution." - meaning that I couldn't move the 401k amount to another company until that's satisfied, correct? Would/wouldn't that be the same with the deemed distribution? Or did I misunderstand that?
2. So if I understand correctly, if they DO reduce the balance, and redo it as a offset distribution, I have up until the end of tax season to pay it off. Does the deemed distribution not have that same timeframe? And if not, is that the reason why I am being taxed on it? I am mostly asking because the offset distribution cuts into your balance and gives you a deadline, I was just curious if the "upside" of that is that you aren't taxed. Otherwise if there are only downsides, I don't see why anyone wouldn't prefer a deemed distribution.
