Strategy for retirement savings after employer contributions.

Here's the deal: employer has a small biz retirement plan where they contribute 3% of gross salary at the end of the year, regardless of whether an employee contributes anything on their own. Basically a free 3% raise.

The problem is, the company they use only lets you select from a list of funds with high fees. Not ideal. Since there is no matching issue, is it better to max out an IRA at Vanguard rather than contribute to the employer sponsored plan? After the IRA is maxed out, then start contributing to the employer sponsored plan?