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?

  • 3
    The IRS has a site discussing the different employer retirement plan options. In addition to the 401(k)/403(b) option, consider the SIMPLE IRA and SIMPLE 401(k), which are available to small employers (<100 employees) and generally have much less administrative costs. This question might be too broad to discuss here, but if you do some research and have more specific question, feel free to ask.
    – Ben Miller
    Commented May 12, 2016 at 18:36
  • Have you looked at the offerings for Vanguard or Fidelity yet?
    – Ben Miller
    Commented May 12, 2016 at 21:44
  • How many employees do you have?
    – Ben Miller
    Commented May 13, 2016 at 4:03

1 Answer 1


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.

  • 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
    Commented May 12, 2016 at 18:42
  • @nomen actuaries aren't fiduciaries. ERISA administrators are.
    – user662852
    Commented May 12, 2016 at 18:56
    – nomen
    Commented May 12, 2016 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
    Commented May 12, 2016 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
    Commented May 12, 2016 at 20:22

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