What You Can’t See Can Hurt You: Best Practices for Managing Participant Risk in Pension Plans

By: Ryk Tierney, The Berwyn Group 

_{Pension fund members can learn that maintaining up-to-date participant information is essential for ensuring the stability and accuracy of their plans. By implementing proactive governance strategies—such as routine data checks, regular communication, and systematic death audits—administrators can reduce fiduciary risks, improve compliance, and safeguard long-term pension sustainability.} 

This is an excerpt from NCPERS Spring 2025 issue of PERSist.

As a plan administrator, you juggle actuarial assumptions, investment policies, governance protocols, compliance audits, and reporting deadlines. But what about the variables you can't predict – like participants who move without updating their address, pass away without notice, or become unresponsive? 

These are the cracks where good governance can begin to falter – not because of negligence, but because life happens. 

In this article, we explore how even the most diligent governance frameworks can be disrupted by missing or unresponsive participants – and what proactive strategies plans can use to reduce their impact and safeguard long-term stability. 

Participants: The Overlooked Governance Risk

When pension governance practices focus primarily on investment portfolios, fiduciary oversight, and regulatory compliance, it's easy to overlook the human factor: the participants themselves. Yet, pension participants are crucial actors within the governance ecosystem. Their behaviors and circumstances – often beyond the administrator's control – can significantly affect plan outcomes. Address changes, beneficiary updates, and mortality reporting are all participant-driven actions that can profoundly impact your governance effectiveness. 

Unreported participant deaths or relocations result in pension plans continuing payments erroneously, skewing actuarial calculations, and complicating efforts toward pension risk transfers or plan termination. Such issues compromise the accuracy of financial disclosures and can create significant fiduciary and compliance risks. 

Proactive Measures for Uncontrollable Variables

Proactive governance requires administrators to move beyond reactive measures to structured, preventative practices embedded into regular plan management cycles. Here are best practices pension administrators can adopt: 

1. Routine Data Health Checks: Implement regular assessments of participant data quality. Periodic scans for incomplete, outdated, or inconsistent participant information help catch discrepancies before they become problematic. Healthy data means fewer surprises when actuarial assumptions and funding statuses are reviewed.

2. Regular Participant Communications: Create ongoing outreach strategies rather than relying solely on participant-initiated contact. Regular communications – via letters, emails, or portal alerts – serve not just as governance practices but also foster a culture of transparency and accountability, prompting participants to update critical information proactively.

3. Systematic Death Audit Programs: Integrate ongoing mortality monitoring into your governance protocol. Systematic death audits allow plans to promptly identify deceased participants, stopping unnecessary payments and recalibrating plan liabilities. Regular death audits minimize fiduciary risks and enhance financial accuracy. Engaging with a specialized vendor can bring refined data sources and validated methodologies to this process, providing greater confidence and defensibility in audit results.

4. Comprehensive Participant Locate Strategies: Include participant location activities in regular governance reviews. Structured locate strategies reconnect lost or unresponsive participants, enabling accurate benefit delivery, reduced escheatment issues, and improved fiduciary responsibility. Again, partnering with vendors who specialize in participant location can offer deeper investigative capabilities and improve outreach outcomes, particularly when internal resources are limited.

Regulatory Expectations Are Rising

Federal oversight agencies such as the Department of Labor (DOL) and Pension Benefit Guaranty Corporation (PBGC) have increasingly emphasized proactive governance regarding participant data accuracy. Recent DOL guidance explicitly underscores fiduciaries' responsibility to maintain current, complete participant records and actively locate missing or nonresponsive participants. 

Regulators recognize that unchecked, uncontrollable participant variables can materially impact a plan's fiscal health and overall compliance status. As these expectations continue to rise, proactive governance becomes not just prudent, but essential. 

Building Governance Resilience

A proactive approach to participant-related administrative challenges fundamentally enhances the resilience of your pension plan. By embedding participant monitoring and management into governance frameworks, administrators can confidently address the unexpected – participant relocations, deaths, and communication lapses – with minimal disruption. 

Administrators who anticipate and strategically mitigate the impact of uncontrollable variables protect their plan's stability, maintain regulatory compliance, and uphold fiduciary responsibilities. Effective governance isn't solely about controlling known variables – it's equally about preparing robustly for the unknown. 

In pension administration, uncertainty is inevitable. But uncertainty doesn't have to mean vulnerability. Proactive governance practices help manage even the most uncontrollable variables effectively, promoting sustainable and stable pensions for generations to come. 

Bio: Ryk Tierney is the General Manager of the Berwyn Group's pension team. Before joining Berwyn, he served as the Executive Director of The Educational Employees Supplementary Retirement System of Fairfax County in Virginia. He previously held executive leadership roles with the National IAM Benefit Trust Fund, Pension Fund, and 401(k) Fund, as well as the NYC and District Council of Carpenters' Benefit Funds. Additionally, Ryk held a leadership position at Associated Administrators, a third-party administrator (TPA) serving multiemployer funds.

Ryk holds the Certified Employee Benefit Specialist (CEBS) designation through the Wharton School of the University of Pennsylvania and the International Foundation of Employee Benefits.