A good question, but unfortunately one which does not, to my knowledge, have a clear answer. Only recently have 457 plans had trusts which were treated for tax purposes as entities separate from the employer. (And even now, only governmental plans have such trusts; plans of nongovernmental tax-exempts do not.) So long as the trust was treated as part of the assets of the employer, it was simple enough for the employer just to take mistakenly contributed money back.
Now, for governmental 457 plans, we have a situation in which the plan must have a trust. The statute indicates that such a trust is subject to exclusive benefit rules. However, it is not clear whether those exclusive benefit rules include the same exceptions as would apply to a qualified plan under Code section
401(a)(2).
------------------
Employee benefits legal resource site