Yes, they are correct.. probably
to take a distribution a distributable event must occur. These are:
severance of employment,
reaching retirement age as defined by the plan (usually59 1/2, and does not have to be allowed)
or permanent disability.
They do not have to allow loans, it is their option. Many employers have stopped matching, in these tough times, that amount may force them to shut down altogether..
All the plan provisions are spelled out in the plan document. You should be able to access a summary plan document, or something similar stating your plan specifics.
It is the employer's plan, so they can opt for what they wish...
As for the distribution, that is retirment plan provisions (ERISA) not your employer stating you cannot access your funds. All Erisa plans are this way.....

The information posted above is incorrect. 401(k) plans may be set up to allow for so-called "hardship withdrawals," whose permitted reasons include payment of tuition or medical expenses and buying or retaining from foreclosure a primary residence.

However, plans are not obligated to include the provision of a hardship withdrawal. Many, like mine, do not.