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Hybrid Plans

Introduction

Hybrid plans are a form of retirement plan design that distributes risk more evenly between employers and employees than typical defined benefit (DB) and defined contribution (DC) plans. Figure 1 presents a conceptual illustration of how risk in a retirement plan operates on a continuum, featuring plans that place all risk either with employers or employees at each extreme, with various types of risk-sharing plans between. In the context of retirement plans, risk refers to the possibility of an event resulting in a financial loss compared to what is expected. Public retirement plan risk manifests primarily in three forms: investment risk, longevity risk, and inflation risk.

The degree to which risk is shared between employees and employers varies across differing plan designs. The term “hybrid” generally refers to plans that combine elements of both DB and DC plans to generate participants’ benefit upon retirement. The most common hybrid plan designs are cash balance plans and combination DB-DC plans; these plan designs are the focus of this brief.

Date published

October 2026

Contact

Alex Brown, Research Director

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Becoming a member of NASRA offers a unique opportunity to join a community committed to the sound, efficient, and innovative stewardship of public retirement systems. Membership connects you with a network of professionals and experts, providing valuable insights into managing public retirement systems with a focus on sustainability and risk-averse strategies.

By joining NASRA, you gain the tools and resources to enhance the management of public retirement systems, ensuring their long-term success and reliability for generations to come.

What's New at NASRA:
Hybrid Plans and Risk Sharing in Public Retirement Systems

Public defined benefit (DB) retirement plans have long incorporated hybrid features that share costs and risks between employers and employees. Under federal law, defined benefit plans that account for employee contributions are considered hybrid plans, meaning most state and local public pension plans meet this definition. Beyond shared contributions, many public plans incorporate additional risk-sharing provisions, including variable employee contribution rates and benefit adjustments tied to plan experience. These features demonstrate how public pension plans continue to evolve while preserving the core elements of retirement security.

NASRA's 2026 updated issue brief, State Hybrid Retirement Plans, examines two specific types of plans commonly identified as hybrids: combination DB-DC plans and cash balance plans. The brief explores how these designs distribute investment, longevity, and inflation risks between employers and employees. It also places these approaches within the broader continuum of risk-sharing arrangements already embedded in public retirement systems, highlighting the flexibility of public pension plan design in balancing retirement security with long-term financial sustainability.