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90_SB1536
40 ILCS 5/1-112.1 new
40 ILCS 5/1-113 from Ch. 108 1/2, par. 1-113
Amends the Illinois Pension Code. Authorizes investment
of up to 25% of certain pension fund assets in economically
targeted investments in Illinois, of which an amount up to
10% of the assets of the fund may be invested in economically
targeted investments that are targeted specifically to low or
moderate income communities. Declares it to be public policy
to encourage these investments and sets goals for the major
retirement systems. Requires certain retirement systems to
make an annual report of these investments. Effective
immediately.
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1 AN ACT to amend the Illinois Pension Code by changing
2 Section 1-113 and adding Section 1-112.1.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Pension Code is amended by
6 changing Section 1-113 and adding Section 1-112.1 as follows:
7 (40 ILCS 5/1-112.1 new)
8 Sec. 1-112.1. Economically targeted investments.
9 (a) For the purposes of this Code, "economically
10 targeted investments" means investments that are designed to
11 create an economic benefit for a targeted geographic area,
12 economic sector, or group of people within this State, while
13 producing a competitive rate of return commensurate with the
14 risk of the investment.
15 (b) In making economically targeted investments,
16 trustees and fiduciaries must comply with the relevant
17 requirements and restrictions set forth in Sections 1-109,
18 1-109.1, 1-109.2, 1-110, and 1-111 of this Code, as well as
19 the limitations of Section 1-113 if the retirement system is
20 subject to that Section. However, an economically targeted
21 investment that otherwise complies with the requirements of
22 this Code shall not be deemed to be imprudent solely because
23 it is targeted at a low-income, economically disadvantaged,
24 or otherwise higher-risk group or community.
25 (c) It is hereby declared to be the public policy of the
26 State of Illinois to encourage the trustees of public
27 employee retirement systems to include appropriate
28 economically targeted investments within the range of their
29 investments, subject to the limits of their investment
30 authority.
31 It is hereby recommended to the Illinois State Board of
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1 Investment and the boards of trustees of retirement systems
2 that are not subject to Section 1-113 or Article 3 or 4 of
3 this Code that it would be an appropriate investment goal to
4 increase the number of economically targeted investments over
5 the next 5 years so that by the year 2004 approximately 25%
6 of the assets of each such retirement system are invested in
7 economically targeted investments, including an amount equal
8 to approximately 10% of the assets of the retirement system
9 invested in economically targeted investments targeted
10 specifically to low or moderate income urban, suburban, or
11 rural communities with Illinois.
12 (d) The Illinois State Board of Investment and the board
13 of trustees of each pension fund or retirement system subject
14 to this Code (other than the pension funds established under
15 Articles 3 and 4) shall prepare an annual report to be
16 submitted to the Governor, the General Assembly, and the
17 Pension Laws Commission by September 1 of each year. The
18 report shall (i) identify the economically targeted
19 investments that the retirement system has made, (ii)
20 identify the percentage of the system's assets included in
21 such investments, and (iii) include an evaluation of the
22 effectiveness of the targeted investments in creating the
23 economic benefits intended.
24 (40 ILCS 5/1-113) (from Ch. 108 1/2, par. 1-113)
25 Sec. 1-113. Investment authority of certain pension
26 funds, not including those established under Article 3 or 4.
27 The investment authority of a board of trustees of a
28 retirement system or pension fund established under this Code
29 shall, if so provided in the Article establishing such
30 retirement system or pension fund, embrace the following
31 investments:
32 (1) Bonds, notes and other direct obligations of the
33 United States Government; bonds, notes and other obligations
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1 of any United States Government agency or instrumentality,
2 whether or not guaranteed; and obligations the principal and
3 interest of which are guaranteed unconditionally by the
4 United States Government or by an agency or instrumentality
5 thereof.
6 (2) Obligations of the Inter-American Development Bank,
7 the International Bank for Reconstruction and Development,
8 the African Development Bank, the International Finance
9 Corporation, and the Asian Development Bank.
10 (3) Obligations of any state, or of any political
11 subdivision in Illinois, or of any county or city in any
12 other state having a population as shown by the last federal
13 census of not less than 30,000 inhabitants provided that such
14 political subdivision is not permitted by law to become
15 indebted in excess of 10% of the assessed valuation of
16 property therein and has not defaulted for a period longer
17 than 30 days in the payment of interest and principal on any
18 of its general obligations or indebtedness during a period of
19 10 calendar years immediately preceding such investment.
20 (4) Nonconvertible bonds, debentures, notes and other
21 corporate obligations of any corporation created or existing
22 under the laws of the United States or any state, district or
23 territory thereof, provided there has been no default on the
24 obligations of the corporation or its predecessor(s) during
25 the 5 calendar years immediately preceding the purchase. Up
26 to 5% of the assets of a pension fund established under
27 Article 9 of this Code may be invested in nonconvertible
28 bonds, debentures, notes, and other corporate obligations of
29 corporations created or existing under the laws of a foreign
30 country, provided there has been no default on the
31 obligations of the corporation or its predecessors during the
32 5 calendar years immediately preceding the date of purchase.
33 (5) Obligations guaranteed by the Government of Canada,
34 or by any Province of Canada, or by any Canadian city with a
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1 population of not less than 150,000 inhabitants, provided (a)
2 they are payable in United States currency and are exempt
3 from any Canadian withholding tax; (b) the investment in any
4 one issue of bonds shall not exceed 10% of the amount
5 outstanding; and (c) the total investments at book value in
6 Canadian securities shall be limited to 5% of the total
7 investment account of the board at book value.
8 (5.1) Direct obligations of the State of Israel for the
9 payment of money, or obligations for the payment of money
10 which are guaranteed as to the payment of principal and
11 interest by the State of Israel, or common or preferred stock
12 or notes issued by a bank owned or controlled in whole or in
13 part by the State of Israel, on the following conditions:
14 (a) The total investments in such obligations shall
15 not exceed 5% of the book value of the aggregate
16 investments owned by the board;
17 (b) The State of Israel shall not be in default in
18 the payment of principal or interest on any of its direct
19 general obligations on the date of such investment;
20 (c) The bonds, stock or notes, and interest thereon
21 shall be payable in currency of the United States;
22 (d) The bonds shall (1) contain an option for the
23 redemption thereof after 90 days from date of purchase or
24 (2) either become due 5 years from the date of their
25 purchase or be subject to redemption 120 days after the
26 date of notice for redemption;
27 (e) The investment in these obligations has been
28 approved in writing by investment counsel employed by the
29 board, which counsel shall be a national or state bank or
30 trust company authorized to do a trust business in the
31 State of Illinois, or an investment advisor qualified
32 under the Federal Investment Advisors Act of 1940 and
33 registered under the Illinois Securities Act of 1953;
34 (f) The fund or system making the investment shall
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1 have at least $5,000,000 of net present assets.
2 (6) Notes secured by mortgages under Sections 203, 207,
3 220 and 221 of the National Housing Act which are insured by
4 the Federal Housing Commissioner, or his successor assigns,
5 or debentures issued by such Commissioner, which are
6 guaranteed as to principal and interest by the Federal
7 Housing Administration, or agency of the United States
8 Government, provided the aggregate investment shall not
9 exceed 20% of the total investment account of the board at
10 book value, and provided further that the investment in such
11 notes under Sections 220 and 221 shall in no event exceed
12 one-half of the maximum investment in notes under this
13 paragraph.
14 (7) Loans to veterans guaranteed in whole or part by the
15 United States Government pursuant to Title III of the Act of
16 Congress known as the "Servicemen's Readjustment Act of
17 1944," 58 Stat. 284, 38 U.S.C. 693, as amended or
18 supplemented from time to time, provided such guaranteed
19 loans are liens upon real estate.
20 (8) Common and preferred stocks and convertible debt
21 securities authorized for investment of trust funds under the
22 laws of the State of Illinois, provided:
23 (a) the common stocks, except as provided in
24 subparagraph (g), are listed on a national securities
25 exchange or board of trade, as defined in the federal
26 Securities Exchange Act of 1934, or quoted in the
27 National Association of Securities Dealers Automated
28 Quotation System (NASDAQ);
29 (b) the securities are of a corporation created or
30 existing under the laws of the United States or any
31 state, district or territory thereof, except that up to
32 5% of the assets of a pension fund established under
33 Article 9 of this Code may be invested in securities
34 issued by corporations created or existing under the laws
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1 of a foreign country, if those securities are otherwise
2 in conformance with this paragraph (8);
3 (c) the corporation is not in arrears on payment of
4 dividends on its preferred stock;
5 (d) the total book value of all stocks and
6 convertible debt owned by any pension fund or retirement
7 system shall not exceed 40% of the aggregate book value
8 of all investments of such pension fund or retirement
9 system, except for a pension fund or retirement system
10 governed by Article 9, 13, or 17, where the total of all
11 stocks and convertible debt shall not exceed 50% of the
12 aggregate book value of all fund investments;
13 (e) the book value of stock and convertible debt
14 investments in any one corporation shall not exceed 5% of
15 the total investment account at book value in which such
16 securities are held, determined as of the date of the
17 investment, and the investments in the stock of any one
18 corporation shall not exceed 5% of the total outstanding
19 stock of such corporation, and the investments in the
20 convertible debt of any one corporation shall not exceed
21 5% of the total amount of such debt that may be
22 outstanding;
23 (f) the straight preferred stocks or convertible
24 preferred stocks and convertible debt securities are
25 issued or guaranteed by a corporation whose common stock
26 qualifies for investment by the board; and
27 (g) that any common stocks not listed or quoted as
28 provided in subdivision 8(a) above be limited to the
29 following types of institutions: (a) any bank which is a
30 member of the Federal Deposit Insurance Corporation
31 having capital funds represented by capital stock,
32 surplus and undivided profits of at least $20,000,000;
33 (b) any life insurance company having capital funds
34 represented by capital stock, special surplus funds and
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1 unassigned surplus totalling at least $50,000,000; and
2 (c) any fire or casualty insurance company, or a
3 combination thereof, having capital funds represented by
4 capital stock, net surplus and voluntary reserves of at
5 least $50,000,000.
6 (9) Withdrawable accounts of State chartered and federal
7 chartered savings and loan associations insured by the
8 Federal Savings and Loan Insurance Corporation; deposits or
9 certificates of deposit in State and national banks insured
10 by the Federal Deposit Insurance Corporation; and share
11 accounts or share certificate accounts in a State or federal
12 credit union, the accounts of which are insured as required
13 by The Illinois Credit Union Act or the Federal Credit Union
14 Act, as applicable.
15 No bank or savings and loan association shall receive
16 investment funds as permitted by this subsection (9), unless
17 it has complied with the requirements established pursuant to
18 Section 6 of the Public Funds Investment Act.
19 (10) Trading, purchase or sale of listed options on
20 underlying securities owned by the board.
21 (11) Contracts and agreements supplemental thereto
22 providing for investments in the general account of a life
23 insurance company authorized to do business in Illinois.
24 (12) Conventional mortgage pass-through securities which
25 are evidenced by interests in Illinois owner-occupied
26 residential mortgages, having not less than an "A" rating
27 from at least one national securities rating service. Such
28 mortgages may have loan-to-value ratios up to 95%, provided
29 that any amount over 80% is insured by private mortgage
30 insurance. The pool of such mortgages shall be insured by
31 mortgage guaranty or equivalent insurance, in accordance with
32 industry standards.
33 (13) Pooled or commingled funds managed by a national or
34 State bank which is authorized to do a trust business in the
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1 State of Illinois, shares of registered investment companies
2 as defined in the federal Investment Company Act of 1940
3 which are registered under that Act, and separate accounts of
4 a life insurance company authorized to do business in
5 Illinois, where such pooled or commingled funds, shares, or
6 separate accounts are comprised of common or preferred
7 stocks, bonds, or money market instruments.
8 (14) Pooled or commingled funds managed by a national or
9 state bank which is authorized to do a trust business in the
10 State of Illinois, separate accounts managed by a life
11 insurance company authorized to do business in Illinois, and
12 commingled group trusts managed by an investment adviser
13 registered under the federal Investment Advisors Act of 1940
14 (15 U.S.C. 80b-1 et seq.) and under the Illinois Securities
15 Law of 1953, where such pooled or commingled funds, separate
16 accounts or commingled group trusts are comprised of real
17 estate or loans upon real estate secured by first or second
18 mortgages. The total investment in such pooled or commingled
19 funds, commingled group trusts and separate accounts shall
20 not exceed 10% of the aggregate book value of all investments
21 owned by the fund.
22 (15) Investment companies which (a) are registered as
23 such under the Investment Company Act of 1940, (b) are
24 diversified, open-end management investment companies and (c)
25 invest only in money market instruments.
26 (16) Up to 25% of the assets of the fund may be invested
27 in economically targeted investments as defined in Section
28 1-112.1, of which an amount up to 10% of the assets of the
29 fund may be invested in economically targeted investments
30 that are targeted specifically to low or moderate income
31 urban, suburban, or rural communities.
32 (17) Up to 10% of the assets of the fund may be invested
33 in investments not included in paragraphs (1) through (16)
34 (15) of this Section, provided that such investments comply
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1 with the requirements and restrictions set forth in Sections
2 1-109, 1-109.1, 1-109.2, 1-110 and 1-111 of this Code.
3 The board shall have the authority to enter into such
4 agreements and to execute such documents as it determines to
5 be necessary to complete any investment transaction.
6 Any limitations herein set forth shall be applicable only
7 at the time of purchase and shall not require the liquidation
8 of any investment at any time.
9 All investments shall be clearly held and accounted for
10 to indicate ownership by such board. Such board may direct
11 the registration of securities in its own name or in the name
12 of a nominee created for the express purpose of registration
13 of securities by a national or state bank or trust company
14 authorized to conduct a trust business in the State of
15 Illinois.
16 Investments shall be carried at cost or at a value
17 determined in accordance with generally accepted accounting
18 principles and accounting procedures approved by such board.
19 (Source: P.A. 90-12, eff. 6-13-97; 90-507, eff. 8-22-97;
20 90-511, eff. 8-22-97; revised 11-17-97.)
21 Section 99. Effective date. This Act takes effect upon
22 becoming law.
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