What defines hybrid retirement plans?

Hybrid retirement plans are characterized by their combination of features from both defined benefit and defined contribution plans. This blend allows employers to offer benefits that provide the predictable income associated with defined benefit plans while also allowing for the flexibility and individual account management typically seen in defined contribution plans.

In a hybrid plan, employers often provide a guaranteed benefit that is based on a formula, similar to traditional defined benefit plans, but they also incorporate individual accounts that employees can direct, similar to defined contribution plans. This structure helps to address some of the funding volatility seen in traditional defined benefit plans, while still providing employees with a level of security regarding their retirement income.

The other options describe elements that are either characteristics of only one type of plan or do not accurately capture the essence of what a hybrid plan entails. By understanding that hybrid plans leverage the strengths of both retirement plan types, one can see why this option is the defining characteristic of hybrid plans.