Termed w/ Loan, took funds, now rehired

Participant terms with a loan balance.  He takes his money, taxes taken and loan offset at the record keeper.

A month later he's rehired and wants to start repaying his loan.

is that an option?  

The R/K said they could "convert" a loan using the prior balance (plus any interest, etc) and go from there.  But is that w/in the rules?

My question is, what if he terms again in 6 months and the loan gets defaulted/offset again?  He'll be paying taxes on it again.

As of his rehire date, there is no loan.

Let the guy do a QPLO makeup by his tax deadline, perhaps?

You need to start with the premise that there never was a "loan".  A loan is where you go to the bank and they give your the bank's money and you pay it back to the bank with interest.  A 401(k) loan is where to go to your plan administrator and they give you your own money and your pay it back to yourself with interest. 

Once he left the company and they deducted the "loan" balance from his distribution and withheld taxes there was no "loan" left for him to repay....ever. It ceased to exist.  What benefit would he accrue from paying back the loan.  He cannot deduct it from his income.   

Tell him to make maximum contributions to the 401(k).