To confirm, you defaulted on the loan and the government "dinged" you for income tax plus 10%? If that is true, then the loan should net-out of the 403b and no longer exist. Unless there is something hidden in the Plan Document about loans, you need to have the company record the loan as a withdrawal so it no longer accrues interest. Sorry, just something about "don't worry about it" that makes me worry more about it. Without having "client does not have to pay back accrued interest" in writing, I'd keep pushing them.
Thank you for your prompt response. I called the company from whom I have my plan and managed to speak with a person who was very knowledgeable of the loan process, this time.
She said that this is done so my records indicate that I still have a loan outstanding, so they won't issue me another loan unless I pay it off. It will continue to accrue interest for the life of the loan (5 years) then it will just be on my statement.
I do not have to pay the interest, ever, if I just ignore it, since this is interest I was paying to myself.
So my choices are to ignore it, or pay it off, in one lump sum, if I want to take out another loan.
This still does not leave me with a comfortable feeling, but seems to make sense.
As to something in writing about the interest, she said that it's the law and they can not make me pay it back.
Thank you for your advise,