Who makes the rule that 401k money can only be withdrawn under certain circumstances? Is it the company plan? or the IRS?

employees are frequently asking me if they can withdraw their money. Not loans, I'm talking in service withdrawal. They want to move the funds somewhere else. I know that the employee has to be 59 1/2 or over. Or face a hardship. or leave the company altogether. But I'm getting mixed messages regarding who makes that rule. Is it the IRS? Or is it our plan and the plan sponsor? Or did the company decide that? are there plans exist that due allow it? albeit with high penalties. A few of my employees said they're willing to pay the penalties. but I'm told even then, it's entirely not allow. I'm just trying to explain to them why. I know It's meant for retirement, but I'm still confused about whether or not the IRS made the rule or if it's our plan?