What is a floor offset plan?

A type of "hybrid plan," a floor offset plan is essentially a defined contribution plan with a defined benefit floor. Benefits provided under the defined benefit plan are reduced, or offset, by the value of the individual's account in the defined contribution plan. The appeal of the floor offset arrangement, however, is that it shields employees from investment losses incurred by the defined contribution plan while allowing them to take advantage of investment gains that may produce a greater benefit than that provided under the defined benefit plan.

Under the floor offset plan, an employee who leaves employment before retirement age would receive the amount in the individual account. An employee who stays on until retirement, however, would receive the greater of the defined contribution accumulation or the promised defined benefit pension.

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What is a floor offset plan? A type of "hybrid plan," a floor offset plan is essentially a defined contribution plan with a defined benefit floor.