Repayment of Deemed Distribution

[Guest Statler]

I have a participant with a deemed loan of (was deemed 2 years ago) in a plan that only allows for one loan. He would like to take another loan. The loan was deemed with (and the 1099-R showed) a balance of around $5,000. For simplicity, let’s say that the outstanding loan amount is now $5,050 due to interest that has accrued since the loan was deemed. I know that interest continues to accrue for purposes of determining the maximum loan amount, but I am having trouble determining if he will have to repay the $5,000 that was the original deemed distribution to clean the loan off the books and take a new one, or $5,050 which would include the interest that has accrued for the time the loan was deemed.