Industry News

Recently, the National Association of State Retirement Administrators (NASRA) released its issue brief, State Hybrid Retirement Plans, which updates an earlier version published in September 2024. The brief provides information on statewide cash balance and combination hybrid plans. It also contains a map that illustrates the percentage of public employees who participate in mandatory or optional hybrid plans in states that administer such plans for groups of general, public safety or K-12 educational employees.     

While the majority of public employee retirement systems are traditional defined benefit plans, some public sector plans are considering hybrid plans that contain elements of both defined benefit (DB) and defined contribution (DC) plans. Specifically, the brief examines two types of hybrid plans: 1) cash balance plans that combine elements of a traditional DB plan and individual accounts into a single plan; and 2) “DB-DC” plans that combine a smaller traditional DB pension plan with separate individual DC retirement savings accounts.   

In addition, the brief provides summaries of cash balance and DB-DC plans that have been established in various states, with some dating back several decades. According to the brief, public sector hybrid plans have diverse combinations of retirement plan designs to address the cost and risk factors of various state or local governments.

However, most plans continue to include features that meet fundamental retirement plan objectives including: mandatory participation, shared financing between employers and employees, professionally managed pooled investments, targeted income replacement with disability and survivor protections and lifetime benefit payouts. 

The brief also contains an appendix providing detailed information by individual retirement plans of: 1) an overview of cash balance hybrid plans; 2) basic DB-DC hybrid plan facts; and 3) DB and DC component features. 

The issue brief is available here.