It's not unusual for people to confuse Hardship withdrawal provisions (which are up to the plan administrator) and IRS penalty and tax regulations. The one does not affect the other. Yes, you might allowed to take that loan for that stated purpose, which is now a distribution. No, that doesn't forgive you in the eyes of the IRS, if it's still an early distribution.

I don't understand why none of this is taxable, of course, since it was explained this was all pre-taxed. Also, this: "and it did not indicate that a portion of the balance ($14K) be a non taxable future withdrawal."

If there is no post-tax basis, there is no future nontaxable amount.

Here's the link to the IRS exceptions for the early distribution penalty:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-exceptions-to-tax-o...