Loan Offset Eligible for Rollover

[Vlad401k]

Let's say the participant is terminated and has a loan outstanding of $10,000. The company then does the loan offset and the participant receives a 1099-R with code "1" or "7" for $10,000. Can the participant then rollover these $10,000 within 60 days to another 401k or IRA as if that amount was a direct distribution?

[ETA Consulting LLC]

Sure, they can. Not a problem.

Good Luck! 

[QDROphile]

"These" $10,000 have to be replaced with some "real" dollars, which is the economic equivalent of paying the loan before the distribution.

If the question includes the proposition that the debt be maintained in the recipient arrangement, the answer is different.  

 

 

[Bird]

and to be clear, the 60 days starts when the loan is offset, not when the 1099-R is received.  The original language in the question leads to this cautionary statement.

[CuseFan]

yes, i actually did this myself years ago - had to provide a little extra documentation to my rollover custodian that the check from me was for the loan amount being rolled, agree that this must be done within 60 days of the distribution/offset, and that it would be cleaner and easier, but likely slower, to simply repay the loan first. as qdrophile notes, this is different from rolling over the note/debt, which would generally not be permitted - could do a direct rollover or transfer of a loan to another q-plan if both plans allowed for such.