My understanding of this sort of plan is they are holding an unfunded plan account; when you leave, that is a distribution, and it can't be rolled into another plan account that also is supposed to be unfunded. And the rolled over part would be held in a separate account from the new employer's account for this individual, since this came over as funds. That's why they are called Top Hat plans.

Do you have an IRS reference for this statement: "it is my understanding that the taxpayer can roll this over from one non governmental plan to another without generating a tax bill,"

I would enter the W2 as shown; which should show this was taxed already.