Is it possible for a company to prevent an employee from withdrawing their 401k early even if they are willing to pay penalties?

You can't take a withdraw while you are still an active employee. If you take money out while you're still an employee then its a loan, not a withdraw. They will automatically set up paycheck deductions to begin repaying yourself.

This is a very common policy. If you leave the company, you can withdraw the money for any reason you want - subject to taxes and penalties of course.

It's my understanding that the company hires a third party vendor to manage the 401k plan and the vendor makes the rules. I never heard of a vendor trying to do this, it would be unusual. It may be inconsistent with the federal government's policy on 401ks. Because a 401k is a tax-savings investment-vehicle, there are certain rules and guidelines the IRS makes them follow, so I imagine what you are describing probably would not be allowed.

Of course it is, and in fact that is USUALLY the case...the rules are intended to "protect you from yourself", since only a very innumerate individual would make a withdrawal from a tax-deferred account before age 59.5 anyway....you will lose at least HALF the money in taxes & penalties...

nope, its your money...instead of four grand in the bank you got 6K in the bank...S_hit happens....you need the money...gotta pay a third in taxes...based on a pre-qualified reason you might not have to pay the penalty.....like a first time home purchase....you either get a check for 4 thousand or thirty-four-hundred....you can take a loan, you can take it out for 59 days once every12 month no penalty or loan ...judst pay it back....the best money maker is have them put it in writing that they refuse to give you your money...then you sue for million because they wouldn't give you your money.. idiots..

So you can take a loan if you really need it. Or you prove a hardship.

Since the company contributes, I would think they have a say in it.