The 1099-R instructions indicate that a permissable additional code for "1" is "L" and for "L" it is "1". It doesn't say that we can combine 7 and L - I don't see why not - what do you think?

I would assume a code L alone would indicate that the participant is over 59 1/2

I believe that code L is for deemed distribution only and that you add the 1 to indicate penalty. A code L1 for deemed distribution is the correct code when a participant is still employed and does not repay the loan and is not yet 59 1/2. If you are using a code 7, then the inference is that the participant is age > 59 1/2 and may qualify for a distribution and does not necessarily have to repay the loan. In that case you only need to report the loan as a code 7 which is a loan offset and not a deemed sitiuation. That is how I understand it to be.

Thanks to both of you; that makes sense.