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Loan Offset 1099 dispute

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What recourse does the participant have for the following:

Plan allows for loans to be repaid by terminated participant. Participant made erradic payments through the course of the loan due to financial issues but felt they never were in default by more than 3 months

Participant paid the plan for the loan in the first quarter of 2004. The participant was not sure of an exact amount to repay the loan because he never received an annual valuation or a payoff amount. After several unanswered requests to the plan administrator for the payoff amount the participant made a calculation of what he thought the outstanding amount was, paid it, then rolled over the balance into an IRA.

2 years later the participant receives a 1099 for interest on the loan. The participant argues that if there were a loan offset it would have been in 2004, and so the 1099 should be corrected. He also raises the issue of never receiving a payoff amount after several requests from the plan admin, or an annual valuation to make certain the balance was paid in full.

What should the participant do about the 1099 for 2005? Does he have any cause for legal action against the plan administrator?

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