Certified Human Resource Professional (CHRP) Practice Exam

Which of the following is a feature of a hybrid pension plan?

1. It enables employees to contribute higher amounts for a higher pension

2. It blends the features of a defined-benefit plan and a defined-contribution plan

3. It enables employees to opt out temporarily and rejoin later

4. It gives employees more flexibility as to when they receive the benefit

The correct answer is: It blends the features of a defined-benefit plan and a defined-contribution plan

The correct answer pertains to the concept of a hybrid pension plan, which is characterized by its combination of features from both defined-benefit and defined-contribution plans. This means that a hybrid plan incorporates the stability and predictable income characteristic of defined-benefit plans, which provide a guaranteed payout based on factors such as salary history and years of service, while also allowing for some aspects of defined-contribution plans, which depend on individual contributions and investment performance. This blending approach provides a balanced solution to retirement planning, offering the security of a predictable benefit while also allowing for personal accountability in savings and investments. Employees typically appreciate hybrid plans as they mitigate some risks associated with each plan type while providing opportunities for growth in their retirement savings. The other options, while containing elements related to pension plans, do not specifically define the hybrid aspect. For example, while some plans may allow higher contributions or flexible benefit timings, these features do not represent the defining characteristic of a hybrid pension plan. The essence of a hybrid pension plan is in its integration of both defined-benefit and defined-contribution elements.