What characterizes hybrid plans?

Hybrid plans are characterized by the combination of features from both defined benefit plans and defined contribution plans. This means they provide some level of guaranteed benefits, often derived from a formula based on salary and years of service, which is typical of defined benefit plans, while also incorporating elements like individual accounts or investment options that resemble defined contribution plans.

This blend allows employers to manage costs more effectively while still offering a retirement benefit that can grow with the participation of employees. Additionally, this structure can provide participants with a safety net through the guaranteed benefits, while also offering the potential for growth through investment choices.

The other descriptions do not accurately represent hybrid plans. For instance, being exclusively employer-funded would typically describe a defined benefit plan, and fixed monthly payments are more characteristic of such plans rather than the flexible nature of hybrid models. Furthermore, all retirement plans typically include some form of investment component, so stating that hybrid plans have no investment components contradicts their design. Therefore, the definition of hybrid plans as having elements of both types of retirement plans is clear and comprehensive.