It's not legal if you do not have any actions pending with them. It seems to me your company is stuck with bureaucrat doods. You might hire a laywer and threaten them in order to make the upper management go over the heels of the responsible for this and hold off your retirement money immediately.

It is common to take awhile for the term date to get to the administrator -- especially if you were laid off and not terminated. Do you have a call back date? If you do, you cannot take the money, if you still do not since June they should terminate you in the system. Call your employer and demand either a return to work date or you be terminated. Should this fail you would need to go to the State Labor Board to complain.. this won't do you much good in the short term. Unfortunately you cannot remove those funds until you show as terminated --- see if the employer will cooperate.

I had the same problem when I was terminated from my last job. First time I ever decided to invest in a 401k and the same happens. I would suggest calling the employer and like stated before either demand to go back to work or be terminated. My ex-employer delayed it by waiting to tell corporate that I was terminated.

There is a difference between "laid off" and "terminated."
Being laid off implies that your company expects to call you back. They hopefully gave you paperwork showing a termination date, if they couldn't do so. Until you are "terminated," the money in the 401(k) is not available to you.