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Hybrid

As the name implies, a hybrid pension plan contains elements of both defined benefit and defined contribution plans. Some hybrid plans have been in place among states for many years; others have been created in recent years. The Internal Revenue Code considers any defined benefit pension plan that accounts for employee contributions, to be a hybrid plan. Because nearly all state and local governments require employee pension contributions, most meet the federal government’s definition of a hybrid.

Among retirement plans sponsored by state and local government, plans typically referred to as hybrids take one of two forms. One type is a combination of DB and DC plans; the other type is a cash balance plan.
 

  Combination Hybrids

Combination hybrids feature a DB component usually providing a more modest pension benefit than the typical public plan, combined with a DC component that usually is mandatory. Combination hybrids are in place, either on an optional or mandatory basis, at the following statewide retirement systems:

  • Georgia Employees' Retirement System

  • Indiana Public Employee Retirement Systems (PERS and TRF)

  • Michigan Public School Employees' Retirement System

  • Ohio Public Employees' Retirement System

  • Ohio State Teachers' Retirement System

  • Oregon Public Employees Retirement System

  • Rhode Island Employees' Retirement System

  • Tennessee Consolidated Retirement System (effective 7/1/14)

  • Utah Retirement Systems

  • Virginia Employees Retirement System (effective 1/1/14)

  • Washington Department of Retirement Systems 

In addition, federal employees hired since 1983 participate in a "combination" DB-DC hybrid retirement plan.
 
In its April 2011 paper, A Role for Defined Contribution Plans in the Public Sector, the Center for Retirement Research discusses the idea of a so-called "stacked" plan, featuring a traditional pension on a limited salary base, with a defined contribution plan applying to the salary above the base.
 

Cash Balance Hybrids

According to the U.S. Department of Labor, "A cash balance plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance." As with other types of retirement plans, cash balance plans vary in terms of required employee and employer contributions, benefit accrual rates, vesting periods, normal retirement eligibility requirements, etc. Cash balance hybrids are in place at the following statewide retirement systems:

  • California State Teachers Retirement System (for part-time workers)

  • Kansas Public Employees Retirement System (effective 1/1/15)

  • Kentucky Public Employees Retirement System (effective 1/1/14)

  • Nebraska Public Employees' Retirement System (for state and county workers)

  • Texas County & District Retirement System

  • Employees' Retirement System of Texas 

  • Texas Municipal Retirement System

The benefit provided by these plans reflects a combination of market experience (like a defined contribution plan) and a guaranteed minimum return on participants' cash balances (akin to a defined benefit plan).
 

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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: Government Spending Issue Brief

NASRA’s March 2026 update on government spending makes a basic but important point: public pension benefits are not paid out of a government’s day-to-day operating budget. They are paid from trust funds that employees and employers contribute to during an employee’s working years. Those trusts distribute more than $400 billion each year to retirees and beneficiaries in communities across the country. On a national basis, employer contributions to pension trusts in FY 2023 equaled 5.16 percent of direct general spending by state and local governments, which shows that pension contributions remain a limited share of overall public spending even though the level varies from one state to another. 
The brief also shows that pension costs should be viewed in the context of the changes governments have made over the past 15 years to strengthen plan funding. Following the 2008–09 market decline, nearly every state and many local governments adjusted contributions, benefits, or both to improve pension sustainability. More recent data show that employer contributions increased from FY 2022 to FY 2023, but pension spending as a share of total government spending remained broadly stable. The updated brief provides FY 2023 figures and also projects the aggregate pension spending rate for FY 2024, offering a useful snapshot of both current costs and the longer funding trend.