The extension of the deadline to the due date of the tax return, including extensions, for rolling over a loan treated as a distribution only applies to offset distributions (code M in box 7), not to deemed distributions (code L in box 7). A deemed distribution does not satisfy the loan and the loan remains subject to repayment.
The question then becomes, why was this distribution a deemed distribution rather than an offset distribution? That's a question for the employer. It must be a deemed distribution if your wife was not eligible to receive distributions from the plan at the time that the distribution was required to occur due to still being considered employed by the employer providing the plan. She would have only been eligible to receive a distribution if she was considered to have separated from service from the employer providing the plan. Perhaps a default occurred before the change of employer, in which case i must be a deemed distribution. However, if the plan considers the loan to have been satisfied, it must have been an offset distribution and the Form 1099-R is coded incorrectly.
