This IRS document called Eligible Deferred Compensation Plans under Section 457 appears to support the income as wages. Page 4 states:
IV. INCOME TAX WITHHOLDING AND REPORTING ON § 457(b) PLAN
DISTRIBUTIONS
A. Income Tax Withholding on § 457(b) Plan Distributions
Distributions to a participant or former participant from a ' 457(b) plan are wages under § 3401(a) that are subject to income tax withholding in accordance with the income tax withholding requirements of ' 3402(a). The pension withholding rules of ' 3405 do not apply.
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