Well you can contact the plan's administrator to see if it's true and if so, see if you roll it over to a bank managed IRA.

Of course it is legal.. 401ks by definition can only be withdrawn under certain circumstances.. You must : Terminate employment: Reach Retirement age: or be permanently disabled... it is not your employer.. all 401k's are built like this.. the money is your's tax deferred and given certain considerations because it is put away for RETIREMENT.. Read you plan document.. it tells you the terms of withdrawal.. this is a very common error... but it is true and legal. Once the money is put in there.. it stays there until one of the above occurs.. some plans allow loans and hardship withdrawals for certain reasons, each plan sets up it's own rules in that regard. Since you are laid off, you are not considered terminated.. if they do not terminate you after a long term lay off, you can go to the State Attorney General or department of labor.. they cannot delay it forever, they must give you a return to work date, or terminate you at some point.

It is a very indeth answer. I espesially like that he added they cannot delay it forever, because that would have been my next question. He addressed that without being directly questioned in the area. He covered all the bases. Thanks AP

Actually, any length of lay-off allows you the opportunity to cash out or roll-over. You have no income from your employer to maintain your 401k as you may see fit. Lay-off(matters not if two weeks or 2 years) or termination they both are a seperation of service and that is all that is required by law to take out or move your 401k