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Thanks to all for your advice on this topic! I can see I'm probably beyond help at this point, but I'll continue raising the stink anyway and let you know what happens... If anyone else has thoughts I'll welcome them - thanks in advance!

Hi - I have a similar situation to the one described above and need some advice, please? I'm actually the employee/participant in this case. I terminated employment with a 401k loan; mid-2015. The principal loan balance was about $8,000; total 401k balance roughly $40k. The plan apparently allowed a grace period of 90 days to repay the loan in full; so fall 2015. Unfortunately, I did not make payment during the grace period; I also took no further action whatsoever regarding the disposition of the 401k account in general, which is still held by the administrator. The administrator apparently recorded a default and deemed distribution (or loan offset; I'm not sure which) at the end of 90 days. Here are my two questions: 1) If inclined to do so, (and with consent of my prior employer), would the administrator be permitted by regulations to make an adjustment to their books at this point that would reverse the default, and allow me to pay off the loan properly (i.e., without incurring such a severe tax penalty from the unqualified distribution)? The reason I ask is because I feel their method of putting the loan in default to begin with was not proper, and constitutes an error for which I'm about to be penalized. There must be some method for correcting accounting mistakes, right? (I did not receive any statement or correspondence whatsoever from the administrator notifying me that I was in default or about to be, nor providing payment information. There was no attempt whatsoever to request payment from me; they just summarily defaulted the account and, from my point of view, made a distribution without my consent. I would have paid if notified. Is this lack of communication common practice?) Question 2) If #1 is not possible (to reverse the distribution), could I instead attribute the distribution to a different purpose at this point? E.g., I would pay the prior loan balance of $8k to the administrator, whereupon they would re-attribute the loan-offset-distribution to read as a distribution issued to me personally, for the purpose of paying un-reimbursed medical expenses. As it happens, I had enough medical expenses that I could have taken an $8k distribution to pay them without incurring the 10% IRS penalty. It's just poor planning on my part that I happened to pay those expenses from my checking account and the 401k loan got paid from my 401k. If I had paid the loan from my checking and the medical expenses from my 401k, I wouldn't be in this boat now... Thanks in advance for any help!