The system must be configured to operate in a security mode.
When operating in standard mode, account passwords are stored in the /etc/passwd file, which is world readable. By operating in either Trusted Mode or Standard Mode with Security Extensions, the system security posture is enhanced thru the addition of a secure, non-world readable password container other than /etc/passwd.
How this relates to the STIG checklist: STIG vs SCAP benchmark.