Mitigating the Cyber Threat to Retirement Systems

The risk of account takeovers—where a cybercriminal, hacktivist or even a relative assumes the identity of a member in order to access and redirect funds—is real.

The potential in targeting retirement systems is obvious. According to the U.S. Census Bureau, state and local governments sponsor more than 5,500 retirement plans with roughly $4 trillion in assets and nearly 21 million members.

In the wake of the takeover of more than 100 accounts in the Iowa Public Employees' Retirement System in 2017 by cyber criminals who diverted hundreds of thousands of dollars in direct deposit payments, public retirement system administrators have made significant strides in strengthening their infrastructure and cybersecurity measures.

But last September, $4.2 million was stolen from the Oklahoma Law Enforcement Retirement System—a stark reminder that vulnerabilities still exist and pose a serious financial risk. With technology evolving at a rapid pace, bad actors have almost continuous access to new, virtual ways to steal member credentials.

These risks make it imperative for program leadership to identify cybersecurity as a fundamental fiduciary duty. Not only does the risk of a cyber breach have a potentially huge financial impact for members, it also impacts trust in the agency.

“Frictionless” Identity Management Solutions Improve Security and Service

One of the most effective ways that public retirement systems can protect pension funds is by employing improved identity access management (IAM) processes and tools that defend against account takeover attempts. A multi-pronged approach is essential, and there are five elements to keep in mind:

1. Review and refresh security standards. According to a survey sample of public retirement systems technology leaders at the PRISM 2019 conference, over 46% of respondents said they have never required members to update account passwords, and only 14% required annual updates. Similarly, only 50% of respondents said their systems required multi-authentication logins. Renewing the focus on elements like security trainings for employees, mandatory password updates and multi-factor authentication would help to improve overall security and minimize the possibility of stolen information. 
2. Access and analyze “fresher” data. Working with the most accurate, relevant and up-to-date information is essential. Member profiles—which include addresses and other contact information, linked accounts, beneficiaries and login challenge questions—should regularly be updated. Program leadership should consider initiating automatic email reminders to prompt users to update their personal information. Analyzing changes to account details and settings can help spot anomalies that are often indicators of fraudulent access.
3. Ensure digital identity access across all channels and devices. Members access their profiles from various devices like desktop PCs, mobile devices and landline phones. How members access the system and their typical pattern for doing so provides a behavioral profile that could be used to flag suspicious activity. Implementing security systems that validate digital identity footprints and interactions, device assessment attributes and geolocations can head off takeover attempts at the point of entry. This layer of security should be frictionless to the member in order to maintain a pleasant member experience.
4. Leverage technology and security expertise. Real-time threat prevention doesn’t happen using rote procedures or algorithms alone. Your approach must include the technology to monitor and manage systems and data across your enterprise. Cybersecurity expertise, whether in-house, via a technology partner, or through some combination of the two, can greatly improve security by investigating and interpreting anomalies and potential issues found by automation tools. A nimble technology partner that offers data-driven industry expertise and customizable solutions with up-to-date data on threats and protocols can help IT administrators adapt on-the-fly to increasingly sophisticated and dynamic cyber threats. Technology partners with expertise in cyber and digital identity fraud can also help government agencies analyze data to find patterns that pinpoint and eliminate risk. 
5. Balance security with fluidity. Public retirement system account members span a wide demographic range. Different audiences will want different experiences. A digital native may be able to use online tools seamlessly, but a retiree may feel more comfortable with a phone call. Digital identity and access management tools make it easier to strike a balance and offer members options that work best for them while maintaining the security of their account.  

Public retirement system administrators not only have a fiduciary duty to current and retired public sector workers, they also act as a steward of their members’ data. As such, it is incumbent on pension administrators to implement a multi-layered approach that considers both physical and digital identities, and prevents account takeovers. Only that will ensure that members’ assets are protected and retain trust in the system.