The Hancock small business plans are terrible--in fact, I convinced my boss to fire our investment guy and pick a new plan rather than go with the Hancock junk they brought to us. There's some nonsense about insurance companies not being able to sell mutual funds, they have to create new investment entities that OWN mutual fund shares, and then they sell you shares in the new entity. Unsurprisingly, this jacks up the expense ratio by about 1%.
That said, it would have to be a particularly terrible 401(k) for the fees to actually lose you money with any kind of employer match. Remember that we're talking about two different percentages here: your employer match is based on your annual salary, while the expense ratio is based on the assets in the plan. So even if you were paying a combined 5% in fees, you would be getting an extra (3%) * (95%) = 2.85% of your salary if you have a 3% match.
The real comparison is the opportunity cost of deferring your money into a crappy 401k. Again, up to the minimum required to get the full match, this isn't even really a question. Even afterwards, the answer is almost always 401k > taxable account.