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

September 2025

Contact

Keith Brainard, Research Director
Alex Brown, Research Manager

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What's New at NASRA: Updated Cost of Living Issue Brief

Cost-of-Living Adjustments (COLAs) play a significant role in public pensions. They help retirees keep up with rising prices, but they also add costs to pension plans. Policymakers and plan sponsors are tasked with balancing three things: benefits adequacy, plan sustainability, and affordability for members and plan sponsors.

The recent increase in inflation caused many policymakers and, in some cases pension trustees, to review how benefits are designed and paid for, including the way COLAs are granted and funded. NASRA’s recently updated issue brief on the lates trends in COLAs is available in the NASRA Research Center.