Does the IRS now allow 457 plans to have In-service distributions like a 401k plan would? Could a 457 allow for In-service distributions based on years of service and retirement age (ie 59 1/2)?

plan can provide for hardship withdrawals.

Other than for financial hardship, 457 does not allow for inservice distributions even after attaining age 59 1/2. Your right to distributions start with your severance from employment.

Keep in mind that a 457(b) unforseeable emergency withdrawal has much narrower criteria than does a 401(k) hardship withdrawal.

One in-service withdrawal that is avaliable under a 457(b) arrangement is a small balance withdrawal of an inactive account.

An employee participant may request, and a plan may pay a withdrawal of the participant's entire balance provided the participant's entire balance is $5,000 or less, the participant has made no deferrals into the plan for at least two years, and the participant has not made such a withdrawal from the plan before.