Do I still have time to pay off a 'deemed' 401k loan?

It is not a deemed loan.  As of 06/30/2018 or earlier the outstanding balance of the loan is considered a distribution to you and you should receive a Form 1099-R in 2019.  I don't think most plans send out communication about your loan.  Plans expect you to be aware of the terms of the loan.  In your case, the note says that the loan becomes immediately due and payable on the date which you ceased to be employed.

as noted, it is a bit late to do anything at this point in the game. if you quit and were going to take a distribution rather than rollover any remaining balance then, for all practicality,  it is a moot point whether you would have paid off the loan or not. 

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? 

If you have a loan offset in 2018 due to termination of employment the following should apply. The text below if from the IRS 402(f) Notice.

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If you have an outstanding loan that is being offset

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. If, however, a loan offset occurs due to your termination of employment (or due to the termination of the Plan), then instead of 60 days to rollover the loan offset you have until the due date of your Federal individual income tax return (including extensions) for the year in which the plan offsets the loan offset to complete a rollover.

Watching this thread closely.  I would have said it was too late but I don't know.  I see a couple things of interest particularly  (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)."   I would get a copy of the note and all loan paperwork from your prior employer, including their loan policy and present it to your current employer and ask them if they need anything else in order to set up the loan as a rollover.  Make sure your CPA is onboard as you will get a 1099-R showing the taxable event and he/she will need to take that into account on your tax return.  Given the $$ it's certainly worth the effort.  Good Luck and let us know how things work out.     

I disagree that it's not a deemed loan, at least not necessarily so, and the fact that website says it is deemed is certainly positive (it may or may not be correct but that doesn't matter).  Others seem to be assuming that you had a distributable event and therefore the loan was treated as a distribution, but that's not necessarily so...you don't say whether you took your other money or not, at least I didn't see that.  Most systems would probably deem the loan either on 3/31 or 6/30 (i.e. create a taxable event), and then, when you actually take your other money, would offset the already deemed loan (i.e. treat it as a distribution for recordkeeping purposes).

I think Lou S provided the relevant cite.  Good luck.

The quoted section in the OP looks to me like it meets the definition of a loan offset.
 

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1.402(c)-2

Q-9: What is a distribution of a plan loan offset amount, and is it an eligible rollover distribution?

A-9: (a) General rule. A distribution of a plan loan offset amount, as defined in paragraph (b) of this Q&A, is an eligible rollover distribution if it satisfies Q&A-3 of this section. Thus, an amount equal to the plan loan offset amount can be rolled over by the employee (or spousal distributee) to an eligible retirement plan within the 60-day period under section 402(c)(3), unless the plan loan offset amount fails to be an eligible rollover distribution for another reason. See §1.401(a)(31)-1, Q&A-16 for guidance concerning the offering of a direct rollover of a plan loan offset amount. See §31.3405(c)-1, Q&A-11 of this chapter for guidance concerning special withholding rules with respect to plan loan offset amounts.

(b) Definition of plan loan offset amount. For purposes of section 402(c), a distribution of a plan loan offset amount is a distribution that occurs when, under the plan terms governing a plan loan, the participant's accrued benefit is reduced (offset) in order to repay the loan (including the enforcement of the plan's security interest in a participant's accrued benefit). A distribution of a plan loan offset amount can occur in a variety of circumstances, e.g., where the terms governing a plan loan require that, in the event of the employee's termination of employment or request for a distribution, the loan be repaid immediately or treated as in default. A distribution of a plan loan offset amount also occurs when, under the terms governing the plan loan, the loan is cancelled, accelerated, or treated as if it were in default (e.g., where the plan treats a loan as in default upon an employee's termination of employment or within a specified period thereafter). A distribution of a plan loan offset amount is an actual distribution, not a deemed distribution under section 72(p).

 

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. 

Loan offsets are eligible rollover distributions.  Loan offsets occurring in 2018 or later have the extended time period to roll over an amount equal to the loan balance. (The regulation I quoted above has not been updated to reflect the 2018 change.)   A deemed loan is not an eligible rollover distribution. 

Deemed vs Offset is a technical distinction. In your case, the determination is easy.  The text at the bottom of your original post says the outstanding loan balance is immediately due and payable upon termination of employment. It also says that failure to pay any installment when due constitutes a default.  That is the situation the text I put in bold above says is a loan offset.  You said your last day was 1/2/18.  If your loan payments were current through 12/31/17, the loan offset occurred in 2018. 

I think a lot of plan administrators don't understand the difference between deemed and offset, as it is somewhat subtle. The issue is that the IRS wants you to be taxable, following a grace period, if you miss a payment and don't cure, but they don't want plans to violate the general prohibition on in-service distribution. So the regulations  create useful fiction of a "deemed distribution," which means that you get a 1099-R for the amount that you defaulted on, even if you have not had a distributable event, such as a termination of employment. Believe it or not, the IRS regs say that that "deemed" distributed loan lives on, ghost-like, in the plan, continuing to earn ghost interest and, potentially, blocking a future loan from the plan, after the date of the default, until you have a distributable event, at which time the outstanding amount of the loan (but not the ghost interest, thankfully) is "offset" against your account, and thus finally gone. Note that you actually can repay a deemed loan before it is distributed, and thus resurrect that portion of your account, in which case you would have tax-paid "basis" in your account for the amount you repaid, but I digress.

Anyway, if the loan default occurs before the distributable event, e.g. separation from service, occurs, and certainly if it occurs in a taxable year before the distributable event occurs, things are relatively simple: You have a deemed distribution in one year, and a 1099-R reflecting that, with its own code, L, in Box 12, and then in a later year you get your distribution, which does not include the previously deemed amount, and you don't pay tax on it again.

It's also pretty simple if the event of default is, as it often is, the distributable event itself, e.g. separation from service. Assume that the plan documents and administration are consistent that if you separate from service and don't repay the loan within some fairly short grace period, it defaults. In that case, you would actually have a taxable distribution of your loan (surprise! you already got the money when you took the nontaxable loan out, so the distribution now is "air," but at least you no longer have the obligation to keep paying your account back). Because in this case the loan was not previously "deemed," so that you did not pay tax on it, it's not unfair that the offset is treated as a taxable distribution on your Form 1099-R, just unpleasant. And note that in this case, because IRS treats it as an "actual" distribution, it doesn't get a code L on the 1099-R.

In your case, although a review of the plan and loan policy documents, and promissory note, would be required to say this with total assurance, it seems pretty clear that what caused your loan to default was probably your separation from service, because the plan probably follows the permissible rule that it defaults the loan when you separate and it can no longer withhold repayments from payroll. (Note that not all plans do that; some permit terminated participants to keep paying by check until the loan is paid off.) I mean, you never really missed a payment, right? So why else could they be defaulting your loan.

The new law states that a loan offset occurring after 2018 qualifies for the more liberal rollover timing (i.e., you would have until your filing deadline in 2019 for your 2018 1040 to roll cash up to the amount of the loan into an IRA) if the loan default is on account of "the failure to meet the repayment terms of the loan from such plan because of the severance from employment of the participant." Sounds to me like you will meet that requirement, assuming that the plan gave you at least 30 days following employment to pay the loan off without calling it a default and your termination date was after December 1, so that the 30 days would put you in 2018. However, if your employer treats the loan offset (seemingly, incorrectly) as a "deemed distribution" and codes it as such on the 1099-R, you could have problems with the IRS Service Center where you file your return, assuming you do roll it over. You might also have problems with the IRA custodian that you deposit the loan offset rollover with, although I doubt it.

There's helpful discussion of the reporting issues and difference between the two types of distributions in the 2018 IRS Form 1099-R instructions. Just Google the .pdf of those and then search in the .pdf for "plan loan offset" and also "Code L." These are discussed in several places.

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 Advisor is telling you it is a termination distribution qualifying for extended rollover. The "deemed distributed" terminology is inconsistent. Keep a copy of the advisor's communication (I'm assuming it was written) and if they put Code L in your 1099-R, then make them correct it next year.