A *governmental* 457(b) plan *is* a type of qualified retirement plan. Distributions from a governmental 457(b) plan are eligible for all of the same types of exceptions to the early-distribution penalty as any qualified retirement plan.
A distribution from a governmental 457(b) can be subject to an early-distribution penalty or not, depending on the nature of the distribution. If the distribution is from original contributions to a 457(b) plan or the earnings thereon, the distribution is not subject to an early-distribution penalty and the Form 1099-R should have code 2, not code 1. However, if the distribution is from a subaccount in the 457(b) plan established by a rollover from an account that was not originally funded by contributions to a governmental 457(b) plan, the Form 1099-R should have code 1 and the distribution *is* subject to an early-distribution penalty. In other words, the code in box 7 of the Form 1099-R normally determines whether or not the distribution is subject to an early-distribution penalty.
Most governmental 457(b) plans should be aware of the proper coding requirements since they are the ones required to maintain the separate subaccount for the rollover contributions that are subject to an early-distribution penalty. However, if the distribution is reported with code 1 when it truly should have been reported with code 2, you can claim the Other Reason exception to the penalty as macuser_22 indicated.
