Is permitting rollovers optional to the employer? Does the plan have to be amended to permit rollovers to an IRA?

Rollovers are not optional for the distributing plan. Section 641 of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGATRRA") imposes the Internal Revenue Code section 401(a)(31) rules on section 457(B) plans. However, they are optional for the receiving plan. If the individual's new employer plan does not accept rollovers, the individual can still roll 457 money to an IRA, but cannot force the new employer's plan to accept the rollover.