I work at a non-profit, and we've had our yearly benefits survey. One employee mentioned the possibility of starting a low-cost, organization administered pension fund. What we'd "really" like is an account structured like a 401(k), where employee contributions are used to buy the index ETFs with the lowest expense ratio we can find.

What are our legal options? I have experience in managing money in a corporate setting, but this space is a little different than where I have worked (insurance). How feasible would it be to start a 401(k) (or 403(b)) internally? How should it be structured? As a trust? What obligations would we be taking on?


From the employer side there are A LOT of legal duties attached to sponsoring a 401(k). If you are asking this question I would not suggest attempting to meet all of the regulations related to handling employee money internally.

There are certain annual filings, periodic notices, accounting etc related to these kinds of plans, and the fines for non-compliance are extraordinary. You would be far better off seeking a separate vendor, in my opinion.

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  • I'm not a corporate lawyer, just an actuary. Which means I have managed billions of dollars in a different space. I'm pretty sure I can handle the process. I just need some pointers finding out what needs to get done. – nomen May 12 '16 at 18:42
  • @nomen actuaries aren't fiduciaries. ERISA administrators are. – user662852 May 12 '16 at 18:56
  • @user662852 I AM PRETTY SURE I CAN HANDLE THE PROCESS. WHERE CAN I FIND OUT MORE? – nomen May 12 '16 at 19:02
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    Anybody is capable of sending out a notice. The issue is ensuring that a notice or statement or annual filing or whatever sent out every time, on time, accurately. ERISA rules about handling employee money are very strict and have huge repercussions, it's not worth handling it internally to save the few dollars vs using a third party administrator. In my opinion unless you have direct experience managing employer 401ks, I would not advise forming one independently. – quid May 12 '16 at 19:02
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    @nomen You might be seeing plans that have the 401(k) fees built into the expense ratios. Have you looked into some of the bigger companies, like Vanguard? They have very good funds to choose from with very low fees. – Joe May 12 '16 at 20:22

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