Hybrid Pension Plan
A retirement plan that combines elements of a defined benefit pension (guaranteed minimum) with a defined contribution component (individual investment accounts).
How It Works
Hybrid plans are increasingly popular as pension reforms. They typically provide a smaller guaranteed benefit than a traditional defined benefit plan, plus a 401(a) or 457(b) defined contribution account. This balances retirement security for employees with reduced fiscal risk for the employer. Several states and cities have adopted hybrid plans for new employees while maintaining traditional plans for existing workers.
Related Terms
- Defined Benefit Pension — A retirement plan where the employer guarantees a specific monthly payment for life based on years of service and final salary — the traditional government pension.
- Defined Contribution Plan — A retirement plan where the employer and/or employee contribute a fixed amount to individual investment accounts (like a 401k or 457b), with no guaranteed benefit amount.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.