scavengergirl

Thank you all for your input. My advisor believes I have time, but I'm still concerned about which code is going to show up on the 1099-R. Should I be? What I received from my advisor: "Your loan was deemed distributed by Mass Mutual since it went into default. You will receive a taxable 1099R in January for the loan default." My response: "The loan paperwork I have states the loan would be offset upon separation from service, however it's showing deemed. This is the passage: "If you have an outstanding loan from the Plan, your Plan benefit may be offset by the amount of the loan, typically when your employment ends. The loan offset amount is treated as a distribution to you at the time of the offset and will be taxed (including the 10% additional income tax on early distributions, unless an exception applies) unless you do a 60-day rollover in the amount of the loan offset to an IRA or employer plan." What can I do to get this corrected?" Advisor response: "There is nothing that needs to be corrected. Since the loan default occurred due to termination of employment, if you roll the defaulted amount into your new employer’s plan or an IRA by the due date for filing your 2018 tax return, you would not need to treat the unpaid balance as a taxable distribution."

Deemed vs Offset is now the question I need to take to my advisor. I'm having a hard time understanding the difference, but it seems only Offset loans are eligible for the extension, not Deemed.

The status of the loan shows as 'Deemed' on the 401k website. My intention is to pay the loan off and roll it over into my current employers 401k. If I don't pay it, I owe $16k in taxes and fees, so obviously I'd like to try to avoid that, hence my question, do I still have time?

I took a loan from my 401k in 2017 but then left my job in December 2017. The last payment on the loan was posted in Jan 2018, this was a mistake on my former employer's part. Evidently they fund the 401k by a single monthly deposit which included all the employees contributions. They forgot to deduct my contribution amount & failed to inform the management company I was no longer employed there, so the payment was applied like normal. I didn't inform the management company of the error, I was hoping it would work out in my favor (& my last day was actually Jan 2, 2018, but my former boss didn't want to file paperwork for me for 2018 so he paid me for my last day on my previous paycheck.) Is Jan 2018 when the loan is considered 'deemed'? Is that last payment going to cause a problem because I was no longer employed there? Do I have until tax day 2019 to pay off the loan (based off 2017 tax reform)? "Under the 2017 tax reform legislation, the 60-day deadline is extended to the participant’s tax filing deadline for the tax year in which the offset occurs if the amount is treated as distributed from the participant’s qualified 401(k) plan because either: (1) the plan was terminated, or (2) the participant failed to meet the loan repayment terms because of a separation from employment (if the plan provides that the accrued unpaid loan amount must be offset at this time)." Also, I haven't received any form of communication regarding this loan since I left the former employer, is that standard? I assumed I'd get a notice to warn of the loan defaulting or something informing me it had been deemed. I asked the management company if a letter had been sent, in the past they sent documents directly to my former employer, so I wondered if had gotten thrown away. They responded by forwarding me a copy of the promissory note without any further explanation. I'm a little perplexed over the lack of communication.