One type of retirement plan that governments offer is a hybrid plan. A hybrid plan combines the features of defined benefit and defined contribution plans and may be offered as a primary, optional, or supplemental plan.

A key distinction of hybrid plans from defined contribution plans is that hybrid plans establish accounting or notional accounts for each participant, while defined contribution plan establish an actual funded account for each participant. The participant’s balance in a hybrid plan continues to grow throughout employment and the benefit is defined by the current value of the account.

The most common hybrid account plans include:

  • Cash Balance Plans – In cash balance plans, the employer sets aside a percentage of an employee’s salary each period and the balance set aside earns interest at a set rate.
  • Pension Equity Plans – In a pension equity plan, the balance in the employee’s account equals a given percentage of the employee’s final average salary for each year of service.

Plans with Hybrid Features

  • Defined Benefit Plan (DB) with Defined Contribution (DC) features - Public sector plans have options under section 401(a) of the Internal Revenue to add a defined contribution feature to a defined benefit plan. Another common approach, though not considered a traditional hybrid plan or feature, is to offer a defined benefit plan and a separate voluntary defined contribution plan such as a 457, 403(b) or 401(k) plan.
  • Defined Contribution Plan (DC) with Defined Benefit (DB) features – Defined contribution plans may seek ways to allow members to manage the risk of outliving their money, including the purchase of an annuity contract, or allowing a transfer out of the defined contribution plan into an appropriately defined benefit plan.


GFOA Best Practices and Advisories

Governments have begun to transition away from defined benefit plans to other plan types, such as hybrid plans. GFOA identified the following best practices and advisories related to hybrid plans.

Plan Design

  • GFOA Best Practice: Design Elements of Hybrid Plans - Should an employer choose to provide a hybrid retirement benefit plan, GFOA recommends that retirement system administrators and finance professionals consider key plan design considerations, funding policy elements, and other design considerations before adopting hybrid plans or combining hybrid features with defined benefit or defined contribution plans.





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Best Practices


Other Links and Resources

Other Links


  • The Pew Charitable Trusts: Hybrid Public Pension Plans: A primer
  • Public Plans Data
  • National Association of State Retirement Administrators
  • National Conference on Public Employee Retirement Systems
  • National Institute on Retirement Security
  • American Institute of CPAs
  • Center for State and Local Government Excellence

Case Study


  • Pension Reform in San Diego