dmertz
Level 15

Retirement tax questions

If you did not default on the loan prior to separating from service but the loan simply became due upon leaving the company, the company should have processed an offset distribution (code 1, 2 or 7 in box 7 of the Form 1099-R), not a deemed distribution (code L).  An offset distribution satisfies the loan and your 401(k) balance is reduced by the amount of the offset distribution.  With the loan satisfied in this way, the loan should no longer be shown as active.