Non-Governmental 457(b) Distribution

Non-profit has a 457(b) plan and 401(k) plan. They want to terminate the 457(b) plan and have the assets distributed to the participants (2 executives). One of the executives would like to contribute pre-tax salary deferrals to the 401(k) plan from the 457(b) distribution. The definition of compensation in the 401(k) plan is W-2 plus pre-tax deferrals. The executive is arguing that the 457(b) distribution is reported as W-2 wages and I can't find anything that says it can't be done - it just feels wrong. Does anyone out there have something that either supports or opposes the executive's position? 

Is the executive someone who, without the § 457(b) plan’s termination distribution, would lack enough regular compensation for the § 401(k) elective deferral she desires?

Catch22PGM, take a look at Treas. Reg. 1.415(c)-2(c)(1), last sentence. Even under the general definition of 415(c) comp, deferred comp from an unfunded plan can be comp for qualified plan purposes when it is distributed, if the plan so provides. If the plan uses the W-2 or withholding safe harbor, it probably does so "provide," but you'll need to check the plan document carefully to make sure there is no applicable exclusion. Under Section 414(s), a plan can use a narrower definition than what is permissible under Section 415.

He is taxable on the distribution from the 457(b).  I do not see why he could not then contribute it (or an equivalent amount as Peter Gulia suggests) to the 401(k).  I suspect that he wants to "rollover" and avoid taxation on the 457(b) distribution.  That he cannot do.

Thank you everyone.  Luke Bailey - you hit it on the head and I missed that in the Treas. Reg.  The 401(k) plan document did not specifically exclude deferred comp from plan compensation so the executive can defer into the 401(k) plan from the 457(b) distribution.