Does the tax code allow a participant, that is presently taking "required minimum distributions" because of age
70 1/2, to strike a deal with the plan which will allow him to off-set his quarterly loan payments against his required minimum distributions ?

For example:
He is presently paying $1,000 each quarter to the plan on a plan loan. He is also receiving $800 of required minimum distribution each quarter.

Can he pay the plan only $200 each quarter and have the plan keep his $800 distribution & apply it to his loan?

I realize that he will still have to report $3,200 of distribution income each year ($800 per qtr x 4 qtr).