I’m in an almost identical example to you. My 457 plan charges 1% for the sp500 index. My fixed interest option returns 3.5% (dropping to 3% in 2022.
For now I’m choosing to keep those funds in the 457 plan to keep the flexibility. If you roll them into an IRA you can’t withdraw early without paying a penalty. You could roll a portion into an IRA, then convert that immediately into a Roth IRA. Then you could access the Roth funds after 5 years without penalty. Of course, the Roth conversion creates a tax obligation, so you have to look at your current tax rate.
In my case I value the flexibility, and I think the tax impact of the Roth conversion would outweigh the savings on the plan fees. But, I made that decision looking at my overall situation and other assets.
Another option would be to only keep your fixed rate funds in the 457 and move all your index funds to an IRA. The fixed rate funds could then be withdrawn at any time without a penalty, if you end up needing them in an emergency. Depending on your other assets that could be a reasonable approach.
Edit: I use the fixed interest portion as my “safe” portion of my investments. So I keep 20% of my total investments in that, and the rest in stock index funds. Once the rate drops next year I’ll reevaluate whether it makes sense to shift some of that to bond funds.