It is a “hybrid” plan in that it is fundamentally a Defined Benefit (DB) plan, but it expresses benefits in the form of a guaranteed account, rather than a guaranteed benefit at retirement. It has the following features:
The maximum benefit that can be paid follows the normal rules for Defined Benefit Plans.
The plan provides for a fixed annual credit, and a fixed annual interest credit on the account. For example, a plan might say that the annual credit for Shareholders is $100,000, and the annual interest credit is 5%.
Participants receive easily understandable statements showing the value of their account.
The actual required contribution differs from the fixed credit because of differences in the actual investment rates and the fixed crediting rates.