If you defaulted on the loan while still employed and you received a deemed distribution, the deemed distribution does not satisfy the loan. You still have an outstanding loan balance that needs to be paid back and any payments you make toward the loan become after-tax basis in your 401(k).
When you later leave the company after having received a deemed distribution, your loan normally becomes satisfied by an offset distribution. Your plan balance becomes reduced by the amount of the outstanding loan and the loan becomes satisfied. I haven't seen the accounting procedure for this explicitly described anywhere. When there has already been a deemed distribution, some plan administrators, simply reduce the the account balance by the outstanding balance of the loan without treating or reporting it as an additional distribution. However, some may report the payoff of the loan as a offset distribution and increase the after-tax basis in your account by the amount of the offset distribution.
When you have after-tax basis in your 401(k), any distribution made from the 401(k) is prorated between nontaxable and taxable amounts in the same proportions as after-tax basis has to your overall 401(k) balance. This means that you won't end up paying taxes twice on the same money.
It's possible that you received a deemed distribution and the plan never processed an offset distribution, meaning that the loan is still outstanding, is accruing interest charges, and still needs to be paid back. It certainly sounds like something needs to get straightened out with the plan administrator.
