Top of Mind Fiduciary Issues for 2023

Shareholder Advocate Winter 2023

January 30, 2023

Fiduciary Focus
Shareholder Advocate Winter 2023

With 2022 in the rearview mirror, public pension plans might be inclined to breathe a big sigh of relief. In a year when Pensions & Investments’ top story was the impact of inflation and interest rate hikes on market returns, public pension plans suffered along with other investors, ending a string of positive investment results that had propelled valuations and funding ratios. Time then to turn the page and think about some of the pressing issues pension fund leaders will face in 2023. To guide us, we asked executive directors and general counsel to identify the top challenges from a fiduciary perspective for their public pension systems in the new year.

People and Culture

The pandemic changed the work environment in the U.S. and pension plans were not excepted. Many systems faced hiring difficulties, struggling to fill vacancies ranging from call center positions to associate attorneys. The New York Times reports that while the labor market remains tight, many economists expect more layoffs and fewer job openings in the private sector in the coming months as corporations restructure their operations. This could prove beneficial to public pension plans as they seek to meet their hiring needs.

Post-pandemic, the phenomenon of remote work has become the “new normal.” Job applicants surveyed by the employment search site ZipRecruiter reported that, on average, they would take a 14% pay cut to work remotely. Some pension plans have responded by allowing entire call center operations to be conducted remotely as a way of boosting staff recruitment and retention. Others have allowed many departments to operate in a hybrid fashion, with staff in the office two to three days a week. Finally, there are certain departments for which leaders believe an ethical culture with a proper focus on fiduciary duty can best be maintained by the return of staff full-time in the office.

Issues articulated regarding people and culture were not limited to staffing. Some funds in 2023 will be transitioning to newly appointed or elected trustees, and the integration of these new trustees to the existing board is a chief concern. While new trustees may bring experience, skills and energy to a board, they may not be well versed in trust principles governing the operations of public pension plan and, as such, may not understand the critical importance of fiduciary duty. Appropriate onboarding and a thorough orientation program with a rigorous commitment to fiduciary education can go a long way in acclimating new trustees so that they may understand and be properly integrated into the public pension plan culture.


Cybersecurity continues to be a major concern for retirement plans and managing cybersecurity risk is at the forefront for executives and counsel. Cybersecurity risks are rising on both the benefits and investment sides of pension operations. Under benefits operations, plan participants’ financial and personally identifiable information maintained by pension systems are at risk from cyber attack. Investment operations also face risks from attack in their various processes, from capital calls to other aspects of investment transactions.

In 2021, the U.S. Department of Labor’s Employee Benefits Security Administration issued much-anticipated cybersecurity guidance for private sector employee retirement plans, indicating that responsible plan fiduciaries have an obligation to ensure proper mitigation of cybersecurity risks. And public pension systems may be at even more risk than their private plan peers. Bad actors may take advantage of data that is publicly available by virtue of participants’ government employment to further their attempts at identity theft. Public records and FOIA requests have already been used fraudulently. Some public pension plans offer more tempting targets due to antiquated IT systems and limited resources.

Fiduciaries should develop and document their due diligence in implementing cyber-risk-management strategies, including risk assessment and incident response plans and tools to manage cyber situations and crises.

Member Communication and Managing Expectations

Effective communication with plan members is critical to the successful operation of pension plans. One of the biggest challenges cited by one Executive Director is managing the expectations of active and retired system members. For example, retirees may expect or seek cost of living adjustments each year, without understanding that the plan may not be designed or authorized to accommodate such adjustments. Active members, who may have an unreasonable expectation that their pension alone will be sufficient to support them in retirement, need sufficient retirement education to plan adequately for their retirements well in advance. Front and center in 2023 will be the continuing focus of pension systems on how to efficiently interact with their members. We anticipate continuing to see redesigned websites created with members in mind and user-friendly portals that allow members to find information more easily. The best examples include navigation tools designed to offer members, retirees, and employers easy access to information, forms, and publications. Members report that videos and information on benefits planning are helpful tools, as are searchable forms and publications and websites that automatically adjust for use of a smartphone, tablet, or computer. While websites and portals are now the norm, a number of retirees remain committed to receiving print information, thus requiring plans to continue to send mail to members who request it.

Legislative and Regulatory Landscape

Finally, pension plan executives and counsel report being extremely concerned about the growing politicization of their operating environment. For example, the issue of so-called environmental, social, and governance investing seems to be the latest to divide “red” and “blue” states. But prudent fiduciaries know that there are no “red” or “blue” considerations in fiduciary duty. In 2023, trustees, executives, and counsel will need to remain laser-focused on their fiduciary duty to act for the exclusive benefit of members and beneficiaries without regard to the interests of other parties.


As we close the books on a year in which the investing environment was incredibly challenging, investors expect 2023 to be a turbulent year as well. This should not surprise anyone, as we are all aware of the ongoing difficulties in working in the public pension sector.