A 457 retire­ment plan, a type of retire­ment plan offered by gov­ern­ments and gov­ern­men­tal enti­ties, must meet cer­tain min­i­mum dis­tri­b­u­tion require­ments as do qual­i­fied plans. A 457 retire­ment plan par­tic­i­pant can­not receive a dis­tri­b­u­tion from the plan until one of the fol­low­ing con­di­tions are met:

• the cal­en­dar year in which the par­tic­i­pant attains age 70.5
• the par­tic­i­pant sep­a­rates from the employ­er due to death, ter­mi­na­tion, retire­ment, etc. 
• the par­tic­i­pant is faced with an unfore­see­able emergency 

Note that these rules are the same for 401k plans. How­ev­er, 401k plans have addi­tion­al flex­i­bil­i­ty in that they allow in-ser­vice dis­tri­b­u­tions (dis­tri­b­u­tions while the employ­ee is still employed).

Dis­tri­b­u­tions involv­ing an emer­gency are dif­fer­ent than hard­ship dis­tri­b­u­tions from 401k plans . An emer­gency dis­tri­b­u­tion from a 457 retire­ment plan includes any of the following:

• severe finan­cial hard­ship to the par­tic­i­pant or the par­tic­i­pan­t’s depen­dent due to an unex­pect­ed ill­ness or accident 
• loss of the par­tic­i­pan­t’s prop­er­ty due to casualty 
• sim­i­lar unfore­see­able cir­cum­stances aris­ing as a result of events beyond the con­trol of the participant 

The cir­cum­stances that make up an unfore­seen emer­gency depend on each case. The gen­er­al rule of thumb is that if you can fore­see the expense, you can­not get a 457 retire­ment plan dis­tri­b­u­tion for it. Dis­tri­b­u­tions for unfore­seen emer­gen­cies also can­not be made if the hard­ship can be reversed by any of these methods: 

• through insur­ance or sim­i­lar reim­burse­ment or compensation
• through use of the employ­ee’s non-457 retire­ment plan assets
  by stop­ping defer­rals to the 457 retire­ment plan 

In oth­er words, an emer­gency dis­tri­b­u­tion would require that the employ­ee has no oth­er assets out­side the 457 retire­ment plan.

Ear­ly dis­tri­b­u­tions from 457 retire­ment plans are allowed if made under a qual­i­fied domes­tic rela­tions order (QDRO). A QDRO is defined as any judg­ment, decree, or order that sat­is­fies these two requirements:

relates to the pro­vi­sion of child sup­port, alimo­ny pay­ments, or mar­i­tal prop­er­ty rights to a spouse, for­mer spouse, child, or oth­er depen­dent of a participant 
is made pur­suant to a state domes­tic rela­tions law (includ­ing a com­mu­ni­ty prop­er­ty law) 

Dis­tri­b­u­tions will be tax­able to the plan par­tic­i­pant if the alter­nate pay­ee is not the plan par­tic­i­pan­t’s spouse or for­mer spouse. Dis­tri­b­u­tions will also be tax­able to the plan par­tic­i­pant, rather than the alter­nate pay­ee, if the dis­tri­b­u­tion order does not sat­is­fy the spe­cif­ic QDRO requirements.

Employ­ees are taxed on dis­tri­b­u­tions from a 457 retire­ment plan if the dis­tri­b­u­tions are includi­ble in the par­tic­i­pan­t’s income. A dis­tri­b­u­tion is not includ­ed in income, and there­fore taxed, if a tax-free rollover is made (for exam­ple, into an IRA). Amounts deferred under a 457 retire­ment plan spon­sored by a state or local gov­ern­ment are includi­ble only when the amounts are actu­al­ly paid. 

On the oth­er hand, employ­ees of tax-exempt non-gov­ern­ment employ­ers have a dis­ad­van­tage com­pared to gov­ern­ment employ­ees when it comes to 457 retire­ment plan dis­tri­b­u­tions. Unlike gov­ern­ment employ­ees, employ­ees of a tax-exempt orga­ni­za­tion must include a 457 retire­ment plan defer­ral in income when paid or oth­er­wise made avail­able to the employ­ee or oth­er ben­e­fi­cia­ry. The “oth­er­wise made avail­able” require­ment means that an employ­ee may inad­ver­tent­ly and pre­ma­ture­ly have to pay tax on a defer­ral, even if a dis­tri­b­u­tion is not made, because of an error in the 457 retire­ment plan word­ing or structure.