SB3317 99TH GENERAL ASSEMBLY

LRB099 20237 EFG 44707 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB3317

Introduced 2/19/2016, by Sen. Dan Duffy

SYNOPSIS AS INTRODUCED:

See Index

Amends the Illinois Pension Code. Moves the investment power for eligible downstate police and downstate firefighter pension funds to the Illinois State Board of Investment. Reduces the amount of training required for trustees of those pension funds. Makes conforming changes. Changes all downstate police and firefighter pension funds to a fiscal year beginning May 1. Doubles the annual compliance fee paid by the funds to the Department of Insurance. Requires the Department of Insurance to impose penalties of up to $2,000 per day for noncompliance with certain provisions relating to the transfer of investment assets. Authorizes emergency rulemaking and amends the Illinois Administrative Procedure Act to add a conforming provision. Amends the State Mandates Act to require implementation without reimbursement.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

A BILL FOR

AN ACT concerning public employee benefits.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 3. The Illinois Administrative Procedure Act is amended by changing Section 5-45 as follows:

(5 ILCS 100/5-45) (from Ch. 127, par. 1005-45)

Sec. 5-45. Emergency rulemaking.

(a) "Emergency" means the existence of any situation that any agency finds reasonably constitutes a threat to the public interest, safety, or welfare.

(b) If any agency finds that an emergency exists that requires adoption of a rule upon fewer days than is required by Section 5-40 and states in writing its reasons for that finding, the agency may adopt an emergency rule without prior notice or hearing upon filing a notice of emergency rulemaking with the Secretary of State under Section 5-70. The notice shall include the text of the emergency rule and shall be published in the Illinois Register. Consent orders or other court orders adopting settlements negotiated by an agency may be adopted under this Section. Subject to applicable constitutional or statutory provisions, an emergency rule becomes effective immediately upon filing under Section 5-65 or at a stated date less than 10 days thereafter. The agency's finding and a statement of the specific reasons for the finding shall be filed with the rule. The agency shall take reasonable and appropriate measures to make emergency rules known to the persons who may be affected by them.

(c) An emergency rule may be effective for a period of not longer than 150 days, but the agency's authority to adopt an identical rule under Section 5-40 is not precluded. No emergency rule may be adopted more than once in any 24 month period, except that this limitation on the number of emergency rules that may be adopted in a 24 month period does not apply to (i) emergency rules that make additions to and deletions from the Drug Manual under Section 5-5.16 of the Illinois Public Aid Code or the generic drug formulary under Section 3.14 of the Illinois Food, Drug and Cosmetic Act, (ii) emergency rules adopted by the Pollution Control Board before July 1, 1997 to implement portions of the Livestock Management Facilities Act, (iii) emergency rules adopted by the Illinois Department of Public Health under subsections (a) through (i) of Section 2 of the Department of Public Health Act when necessary to protect the public's health, (iv) emergency rules adopted pursuant to subsection (n) of this Section, (v) emergency rules adopted pursuant to subsection (o) of this Section, or (vi) emergency rules adopted pursuant to subsection (c-5) of this Section. Two or more emergency rules having substantially the same purpose and effect shall be deemed to be a single rule for purposes of this Section.

(c-5) To facilitate the maintenance of the program of group health benefits provided to annuitants, survivors, and retired employees under the State Employees Group Insurance Act of 1971, rules to alter the contributions to be paid by the State, annuitants, survivors, retired employees, or any combination of those entities, for that program of group health benefits, shall be adopted as emergency rules. The adoption of those rules shall be considered an emergency and necessary for the public interest, safety, and welfare.

(d) In order to provide for the expeditious and timely implementation of the State's fiscal year 1999 budget, emergency rules to implement any provision of Public Act 90-587 or 90-588 or any other budget initiative for fiscal year 1999 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (d). The adoption of emergency rules authorized by this subsection (d) shall be deemed to be necessary for the public interest, safety, and welfare.

(e) In order to provide for the expeditious and timely implementation of the State's fiscal year 2000 budget, emergency rules to implement any provision of Public Act 91-24 this amendatory Act of the 91st General Assembly or any other budget initiative for fiscal year 2000 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (e). The adoption of emergency rules authorized by this subsection (e) shall be deemed to be necessary for the public interest, safety, and welfare.

(f) In order to provide for the expeditious and timely implementation of the State's fiscal year 2001 budget, emergency rules to implement any provision of Public Act 91-712 this amendatory Act of the 91st General Assembly or any other budget initiative for fiscal year 2001 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (f). The adoption of emergency rules authorized by this subsection (f) shall be deemed to be necessary for the public interest, safety, and welfare.

(g) In order to provide for the expeditious and timely implementation of the State's fiscal year 2002 budget, emergency rules to implement any provision of Public Act 92-10 this amendatory Act of the 92nd General Assembly or any other budget initiative for fiscal year 2002 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (g). The adoption of emergency rules authorized by this subsection (g) shall be deemed to be necessary for the public interest, safety, and welfare.

(h) In order to provide for the expeditious and timely implementation of the State's fiscal year 2003 budget, emergency rules to implement any provision of Public Act 92-597 this amendatory Act of the 92nd General Assembly or any other budget initiative for fiscal year 2003 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (h). The adoption of emergency rules authorized by this subsection (h) shall be deemed to be necessary for the public interest, safety, and welfare.

(i) In order to provide for the expeditious and timely implementation of the State's fiscal year 2004 budget, emergency rules to implement any provision of Public Act 93-20 this amendatory Act of the 93rd General Assembly or any other budget initiative for fiscal year 2004 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (i). The adoption of emergency rules authorized by this subsection (i) shall be deemed to be necessary for the public interest, safety, and welfare.

(j) In order to provide for the expeditious and timely implementation of the provisions of the State's fiscal year 2005 budget as provided under the Fiscal Year 2005 Budget Implementation (Human Services) Act, emergency rules to implement any provision of the Fiscal Year 2005 Budget Implementation (Human Services) Act may be adopted in accordance with this Section by the agency charged with administering that provision, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (j). The Department of Public Aid may also adopt rules under this subsection (j) necessary to administer the Illinois Public Aid Code and the Children's Health Insurance Program Act. The adoption of emergency rules authorized by this subsection (j) shall be deemed to be necessary for the public interest, safety, and welfare.

(k) In order to provide for the expeditious and timely implementation of the provisions of the State's fiscal year 2006 budget, emergency rules to implement any provision of Public Act 94-48 this amendatory Act of the 94th General Assembly or any other budget initiative for fiscal year 2006 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative, except that the 24-month limitation on the adoption of emergency rules and the provisions of Sections 5-115 and 5-125 do not apply to rules adopted under this subsection (k). The Department of Healthcare and Family Services may also adopt rules under this subsection (k) necessary to administer the Illinois Public Aid Code, the Senior Citizens and Persons with Disabilities Property Tax Relief Act, the Senior Citizens and Disabled Persons Prescription Drug Discount Program Act (now the Illinois Prescription Drug Discount Program Act), and the Children's Health Insurance Program Act. The adoption of emergency rules authorized by this subsection (k) shall be deemed to be necessary for the public interest, safety, and welfare.

(l) In order to provide for the expeditious and timely implementation of the provisions of the State's fiscal year 2007 budget, the Department of Healthcare and Family Services may adopt emergency rules during fiscal year 2007, including rules effective July 1, 2007, in accordance with this subsection to the extent necessary to administer the Department's responsibilities with respect to amendments to the State plans and Illinois waivers approved by the federal Centers for Medicare and Medicaid Services necessitated by the requirements of Title XIX and Title XXI of the federal Social Security Act. The adoption of emergency rules authorized by this subsection (l) shall be deemed to be necessary for the public interest, safety, and welfare.

(m) In order to provide for the expeditious and timely implementation of the provisions of the State's fiscal year 2008 budget, the Department of Healthcare and Family Services may adopt emergency rules during fiscal year 2008, including rules effective July 1, 2008, in accordance with this subsection to the extent necessary to administer the Department's responsibilities with respect to amendments to the State plans and Illinois waivers approved by the federal Centers for Medicare and Medicaid Services necessitated by the requirements of Title XIX and Title XXI of the federal Social Security Act. The adoption of emergency rules authorized by this subsection (m) shall be deemed to be necessary for the public interest, safety, and welfare.

(n) In order to provide for the expeditious and timely implementation of the provisions of the State's fiscal year 2010 budget, emergency rules to implement any provision of Public Act 96-45 this amendatory Act of the 96th General Assembly or any other budget initiative authorized by the 96th General Assembly for fiscal year 2010 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative. The adoption of emergency rules authorized by this subsection (n) shall be deemed to be necessary for the public interest, safety, and welfare. The rulemaking authority granted in this subsection (n) shall apply only to rules promulgated during Fiscal Year 2010.

(o) In order to provide for the expeditious and timely implementation of the provisions of the State's fiscal year 2011 budget, emergency rules to implement any provision of Public Act 96-958 this amendatory Act of the 96th General Assembly or any other budget initiative authorized by the 96th General Assembly for fiscal year 2011 may be adopted in accordance with this Section by the agency charged with administering that provision or initiative. The adoption of emergency rules authorized by this subsection (o) is deemed to be necessary for the public interest, safety, and welfare. The rulemaking authority granted in this subsection (o) applies only to rules promulgated on or after the effective date of Public Act 96-958 this amendatory Act of the 96th General Assembly through June 30, 2011.

(p) In order to provide for the expeditious and timely implementation of the provisions of Public Act 97-689, emergency rules to implement any provision of Public Act 97-689 may be adopted in accordance with this subsection (p) by the agency charged with administering that provision or initiative. The 150-day limitation of the effective period of emergency rules does not apply to rules adopted under this subsection (p), and the effective period may continue through June 30, 2013. The 24-month limitation on the adoption of emergency rules does not apply to rules adopted under this subsection (p). The adoption of emergency rules authorized by this subsection (p) is deemed to be necessary for the public interest, safety, and welfare.

(q) In order to provide for the expeditious and timely implementation of the provisions of Articles 7, 8, 9, 11, and 12 of Public Act 98-104 this amendatory Act of the 98th General Assembly, emergency rules to implement any provision of Articles 7, 8, 9, 11, and 12 of Public Act 98-104 this amendatory Act of the 98th General Assembly may be adopted in accordance with this subsection (q) by the agency charged with administering that provision or initiative. The 24-month limitation on the adoption of emergency rules does not apply to rules adopted under this subsection (q). The adoption of emergency rules authorized by this subsection (q) is deemed to be necessary for the public interest, safety, and welfare.

(r) In order to provide for the expeditious and timely implementation of the provisions of Public Act 98-651 this amendatory Act of the 98th General Assembly, emergency rules to implement Public Act 98-651 this amendatory Act of the 98th General Assembly may be adopted in accordance with this subsection (r) by the Department of Healthcare and Family Services. The 24-month limitation on the adoption of emergency rules does not apply to rules adopted under this subsection (r). The adoption of emergency rules authorized by this subsection (r) is deemed to be necessary for the public interest, safety, and welfare.

(s) In order to provide for the expeditious and timely implementation of the provisions of Sections 5-5b.1 and 5A-2 of the Illinois Public Aid Code, emergency rules to implement any provision of Section 5-5b.1 or Section 5A-2 of the Illinois Public Aid Code may be adopted in accordance with this subsection (s) by the Department of Healthcare and Family Services. The rulemaking authority granted in this subsection (s) shall apply only to those rules adopted prior to July 1, 2015. Notwithstanding any other provision of this Section, any emergency rule adopted under this subsection (s) shall only apply to payments made for State fiscal year 2015. The adoption of emergency rules authorized by this subsection (s) is deemed to be necessary for the public interest, safety, and welfare.

(t) In order to provide for the expeditious and timely implementation of the provisions of Article II of Public Act 99-6 this amendatory Act of the 99th General Assembly, emergency rules to implement the changes made by Article II of Public Act 99-6 this amendatory Act of the 99th General Assembly to the Emergency Telephone System Act may be adopted in accordance with this subsection (t) by the Department of State Police. The rulemaking authority granted in this subsection (t) shall apply only to those rules adopted prior to July 1, 2016. The 24-month limitation on the adoption of emergency rules does not apply to rules adopted under this subsection (t). The adoption of emergency rules authorized by this subsection (t) is deemed to be necessary for the public interest, safety, and welfare.

(u) (t) In order to provide for the expeditious and timely implementation of the provisions of the Burn Victims Relief Act, emergency rules to implement any provision of the Act may be adopted in accordance with this subsection (u) (t) by the Department of Insurance. The rulemaking authority granted in this subsection (u) (t) shall apply only to those rules adopted prior to December 31, 2015. The adoption of emergency rules authorized by this subsection (u) (t) is deemed to be necessary for the public interest, safety, and welfare.

(v) In order to provide for the expeditious and timely implementation of the provisions of this amendatory Act of the 99th General Assembly, emergency rules to implement this amendatory Act may be adopted in accordance with this subsection (v) by the Illinois State Board of Investment. The 24-month limitation on the adoption of emergency rules does not apply to rules adopted under this subsection (v). The adoption of emergency rules authorized by this subsection (v) is deemed to be necessary for the public interest, safety, and welfare.

(Source: P.A. 98-104, eff. 7-22-13; 98-463, eff. 8-16-13; 98-651, eff. 6-16-14; 99-2, eff. 3-26-15; 99-6, eff. 1-1-16; 99-143, eff. 7-27-15; 99-455, eff. 1-1-16; revised 10-15-15.)

Section 5. The Illinois Pension Code is amended by changing Sections 1-109.3, 1-113.1, 1-113.2, 1-113.3, 1-113.4, 1-113.4a, 1-113.5, 1-113.6, 1-113.7, 1A-112, 1A-113, 3-125, 3-127, 3-132, 3-135, 4-118, 4-120, 4-123, 4-128, 22A-113, 22A-113.1, 22A-115, and by adding Sections 1-101.6, 1-101.7, 1-113.05, 1-136, 3-135.1, 3-135.2, 4-123.1, 4-128.1, 4-128.2, 22A-110.1, 22A-113.4, and 22A-115.1 as follows:

(40 ILCS 5/1-101.6 new)

Sec. 1-101.6. Eligible pension fund. "Eligible pension fund" means a pension fund established pursuant to Article 3 or Article 4 of this Code that has net assets in trust that exceed the threshold amount defined in Section 1-101.7 of this Code. The status of "eligible pension fund", once established, continues in effect without regard to subsequent variations in the net assets of the pension fund.

(40 ILCS 5/1-101.7 new)

Sec. 1-101.7. Threshold amount. "Threshold amount", when used in relation to the financial assets of a pension fund established under Article 3 or Article 4 of this Code, means an amount equal to 3 months of current liabilities of the pension fund, including benefit payments owed to annuitants and beneficiaries of the pension fund and reasonable operational expenses.

(40 ILCS 5/1-109.3)

Sec. 1-109.3. Training requirement for Article 3 and Article 4 pension trustees.

(a) All elected and appointed trustees under Article 3 and 4 of this Code must participate in a mandatory trustee certification training seminar that consists of at least 8 32 hours of initial trustee certification at a training seminar facility that is accredited and affiliated with a State of Illinois certified college or university or approved by the Illinois Department of Insurance. This training must include without limitation both all of the following:

(1) Duties and liabilities of a fiduciary under Article 1 of the Illinois Pension Code.

(2) Duties of a pension board trustee under Article 3 or Article 4, as applicable, of the Illinois Pension Code. Adjudication of pension claims.

(3) Basic accounting and actuarial training.

(4) Trustee ethics.

(5) The Illinois Open Meetings Act.

(6) The Illinois Freedom of Information Act.

The training required under this subsection (a) must be completed within the first year that a trustee is elected or appointed under an Article 3 or 4 pension fund. The elected and appointed trustees of an Article 3 or 4 pension fund who are police officers (as defined in Section 3-106 of this Code) or firefighters (as defined in Section 4-106 of this Code) or are employed by the municipality shall be permitted time away from their duties to attend such training without reduction of accrued leave or benefit time. Active or appointed trustees serving on the effective date of this amendatory Act of the 96th General Assembly shall not be required to attend the training required under this subsection (a).

(b) In addition to the initial trustee certification training required under subsection (a), all elected and appointed trustees under Article 3 and 4 of this Code, including trustees serving on the effective date of this amendatory Act of the 99th 96th General Assembly, shall also participate in a minimum of 4 16 hours of continuing trustee education each year after the first year that the trustee is elected or appointed. The continuing trustee education training must include without limitation both of the following:

(1) Duties and liabilities of a fiduciary under Article 1 of the Illinois Pension Code.

(2) Duties of a pension board trustee under Article 3 or Article 4, as applicable, of the Illinois Pension Code.

(c) The training required under this Section shall be paid for by the pension fund.

(d) Any board member who does not timely complete the training required under this Section is not eligible to serve on the board of trustees of an Article 3 or 4 pension fund, unless the board member completes the missed training within 6 months after the date the member failed to complete the required training. In the event of a board member's failure to complete the required training, a successor shall be appointed or elected, as applicable, for the unexpired term. A successor who is elected under such circumstances must be elected at a special election called by the board and conducted in the same manner as a regular election under Article 3 or 4, as applicable.

(Source: P.A. 96-429, eff. 8-13-09.)

(40 ILCS 5/1-113.05 new)

Sec. 1-113.05. Transfer of investment authority of certain pension funds established under Article 3 or 4. Upon receiving a certified investment asset list from the Department of Insurance pursuant to Section 3-135.1 or Section 4-128.1 of this Code, the board of trustees of an eligible pension fund established under Article 3 or 4 of this Code shall cease investment activities and shall transfer all investment assets of the pension fund to the Illinois State Board of Investment in the manner prescribed by rules adopted by the Illinois State Board of Investment. Upon completion of that transfer, the investment authority of the board of trustees shall terminate.

(40 ILCS 5/1-113.1)

Sec. 1-113.1. Investment authority of certain pension funds established under Article 3 or 4.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (b) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

This Section continues to apply to any pension fund established under Article 3 or 4 that is not an eligible pension fund as defined in Section 1-101.6.

(b) The board of trustees of a police pension fund established under Article 3 of this Code or firefighter pension fund established under Article 4 of this Code shall draw pension funds from the treasurer of the municipality and, beginning January 1, 1998, invest any part thereof in the name of the board in the items listed in Sections 1-113.2 through 1-113.4 according to the limitations and requirements of this Article. These investments shall be made with the care, skill, prudence, and diligence that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of like character with like aims.

Interest and any other income from the investments shall be credited to the pension fund.

For the purposes of Sections 1-113.2 through 1-113.11, the "net assets" of a pension fund include both the cash and invested assets of the pension fund.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/1-113.2)

Sec. 1-113.2. List of permitted investments for certain all Article 3 or 4 pension funds.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (b) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(b) Except as provided in subsection (a), any Any pension fund established under Article 3 or 4 may invest in the following items:

(1) Interest bearing direct obligations of the United States of America.

(2) Interest bearing obligations to the extent that they are fully guaranteed or insured as to payment of principal and interest by the United States of America.

(3) Interest bearing bonds, notes, debentures, or other similar obligations of agencies of the United States of America. For the purposes of this Section, "agencies of the United States of America" includes: (i) the Federal National Mortgage Association and the Student Loan Marketing Association; (ii) federal land banks, federal intermediate credit banks, federal farm credit banks, and any other entity authorized to issue direct debt obligations of the United States of America under the Farm Credit Act of 1971 or amendments to that Act; (iii) federal home loan banks and the Federal Home Loan Mortgage Corporation; and (iv) any agency created by Act of Congress that is authorized to issue direct debt obligations of the United States of America.

(4) Interest bearing savings accounts or certificates of deposit, issued by federally chartered banks or savings and loan associations, to the extent that the deposits are insured by agencies or instrumentalities of the federal government.

(5) Interest bearing savings accounts or certificates of deposit, issued by State of Illinois chartered banks or savings and loan associations, to the extent that the deposits are insured by agencies or instrumentalities of the federal government.

(6) Investments in credit unions, to the extent that the investments are insured by agencies or instrumentalities of the federal government.

(7) Interest bearing bonds of the State of Illinois.

(8) Pooled interest bearing accounts managed by the Illinois Public Treasurer's Investment Pool in accordance with the Deposit of State Moneys Act, interest bearing funds or pooled accounts of the Illinois Metropolitan Investment Funds, and interest bearing funds or pooled accounts managed, operated, and administered by banks, subsidiaries of banks, or subsidiaries of bank holding companies in accordance with the laws of the State of Illinois.

(9) Interest bearing bonds or tax anticipation warrants of any county, township, or municipal corporation of the State of Illinois.

(10) Direct obligations of the State of Israel, subject to the conditions and limitations of item (5.1) of Section 1-113.

(11) Money market mutual funds managed by investment companies that are registered under the federal Investment Company Act of 1940 and the Illinois Securities Law of 1953 and are diversified, open-ended management investment companies; provided that the portfolio of the money market mutual fund is limited to the following:

(i) bonds, notes, certificates of indebtedness, treasury bills, or other securities that are guaranteed by the full faith and credit of the United States of America as to principal and interest;

(ii) bonds, notes, debentures, or other similar obligations of the United States of America or its agencies; and

(iii) short term obligations of corporations organized in the United States with assets exceeding $400,000,000, provided that (A) the obligations mature no later than 180 days from the date of purchase, (B) at the time of purchase, the obligations are rated by at least 2 standard national rating services at one of their 3 highest classifications, and (C) the obligations held by the mutual fund do not exceed 10% of the corporation's outstanding obligations.

(12) General accounts of life insurance companies authorized to transact business in Illinois.

(13) Any combination of the following, not to exceed 10% of the pension fund's net assets:

(i) separate accounts that are managed by life insurance companies authorized to transact business in Illinois and are comprised of diversified portfolios consisting of common or preferred stocks, bonds, or money market instruments;

(ii) separate accounts that are managed by insurance companies authorized to transact business in Illinois, and are comprised of real estate or loans upon real estate secured by first or second mortgages; and

(iii) mutual funds that meet the following requirements:

(A) the mutual fund is managed by an investment company as defined and registered under the federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953;

(B) the mutual fund has been in operation for at least 5 years;

(C) the mutual fund has total net assets of $250 million or more; and

(D) the mutual fund is comprised of diversified portfolios of common or preferred stocks, bonds, or money market instruments.

(14) Corporate bonds managed through an investment advisor must meet all of the following requirements:

(1) The bonds must be rated as investment grade by one of the 2 largest rating services at the time of purchase.

(2) If subsequently downgraded below investment grade, the bonds must be liquidated from the portfolio within 90 days after being downgraded by the manager.

(Source: P.A. 96-1495, eff. 1-1-11.)

(40 ILCS 5/1-113.3)

Sec. 1-113.3. List of additional permitted investments for certain pension funds with net assets of $2,500,000 or more.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-5) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-5) Except as provided in subsection (a), in (a) In addition to the items in Section 3-113.2, a pension fund established under Article 3 or 4 that has net assets of at least $2,500,000 may invest a portion of its net assets in the following items:

(1) Separate accounts that are managed by life insurance companies authorized to transact business in Illinois and are comprised of diversified portfolios consisting of common or preferred stocks, bonds, or money market instruments.

(2) Mutual funds that meet the following requirements:

(i) the mutual fund is managed by an investment company as defined and registered under the federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953;

(ii) the mutual fund has been in operation for at least 5 years;

(iii) the mutual fund has total net assets of $250 million or more; and

(iv) the mutual fund is comprised of diversified portfolios of common or preferred stocks, bonds, or money market instruments.

(b) A pension fund's total investment in the items authorized under this Section shall not exceed 35% of the market value of the pension fund's net present assets stated in its most recent annual report on file with the Illinois Department of Insurance.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/1-113.4)

Sec. 1-113.4. List of additional permitted investments for certain pension funds with net assets of $5,000,000 or more.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-5) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-5) Except as provided in subsection (a), in (a) In addition to the items in Sections 1-113.2 and 1-113.3, a pension fund established under Article 3 or 4 that has net assets of at least $5,000,000 and has appointed an investment adviser under Section 1-113.5 may, through that investment adviser, invest a portion of its assets in common and preferred stocks authorized for investments of trust funds under the laws of the State of Illinois. The stocks must meet all of the following requirements:

(1) The common stocks are listed on a national securities exchange or board of trade (as defined in the federal Securities Exchange Act of 1934 and set forth in Section 3.G of the Illinois Securities Law of 1953) or quoted in the National Association of Securities Dealers Automated Quotation System National Market System (NASDAQ NMS).

(2) The securities are of a corporation created or existing under the laws of the United States or any state, district, or territory thereof and the corporation has been in existence for at least 5 years.

(3) The corporation has not been in arrears on payment of dividends on its preferred stock during the preceding 5 years.

(4) The market value of stock in any one corporation does not exceed 5% of the cash and invested assets of the pension fund, and the investments in the stock of any one corporation do not exceed 5% of the total outstanding stock of that corporation.

(5) The straight preferred stocks or convertible preferred stocks are issued or guaranteed by a corporation whose common stock qualifies for investment by the board.

(6) The issuer of the stocks has been subject to the requirements of Section 12 of the federal Securities Exchange Act of 1934 and has been current with the filing requirements of Sections 13 and 14 of that Act during the preceding 3 years.

(b) A pension fund's total investment in the items authorized under this Section and Section 1-113.3 shall not exceed 35% of the market value of the pension fund's net present assets stated in its most recent annual report on file with the Illinois Department of Insurance.

(c) A pension fund that invests funds under this Section shall electronically file with the Division any reports of its investment activities that the Division may require, at the times and in the format required by the Division.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/1-113.4a)

Sec. 1-113.4a. List of additional permitted investments for certain Article 3 and 4 pension funds with net assets of $10,000,000 or more.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-5) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-5) Except as provided in subsection (a), in (a) In addition to the items in Sections 1-113.2 and 1-113.3, a pension fund established under Article 3 or 4 that has net assets of at least $10,000,000 and has appointed an investment adviser, as defined under Sections 1-101.4 and 1-113.5, may, through that investment adviser, invest an additional portion of its assets in common and preferred stocks and mutual funds.

(b) The stocks must meet all of the following requirements:

(1) The common stocks must be listed on a national securities exchange or board of trade (as defined in the Federal Securities Exchange Act of 1934 and set forth in paragraph G of Section 3 of the Illinois Securities Law of 1953) or quoted in the National Association of Securities Dealers Automated Quotation System National Market System.

(2) The securities must be of a corporation in existence for at least 5 years.

(3) The market value of stock in any one corporation may not exceed 5% of the cash and invested assets of the pension fund, and the investments in the stock of any one corporation may not exceed 5% of the total outstanding stock of that corporation.

(4) The straight preferred stocks or convertible preferred stocks must be issued or guaranteed by a corporation whose common stock qualifies for investment by the board.

(c) The mutual funds must meet the following requirements:

(1) The mutual fund must be managed by an investment company registered under the Federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953.

(2) The mutual fund must have been in operation for at least 5 years.

(3) The mutual fund must have total net assets of $250,000,000 or more.

(4) The mutual fund must be comprised of a diversified portfolio of common or preferred stocks, bonds, or money market instruments.

(d) A pension fund's total investment in the items authorized under this Section and Section 1-113.3 shall not exceed 50% effective July 1, 2011 and 55% effective July 1, 2012 of the market value of the pension fund's net present assets stated in its most recent annual report on file with the Department of Insurance.

(e) A pension fund that invests funds under this Section shall electronically file with the Division any reports of its investment activities that the Division may require, at the time and in the format required by the Division.

(Source: P.A. 96-1495, eff. 1-1-11.)

(40 ILCS 5/1-113.5)

Sec. 1-113.5. Investment advisers and investment services for certain all Article 3 or 4 pension funds.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-1) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-1) Except as provided in subsection (a), the (a) The board of trustees of a pension fund established under Article 3 or 4 of this Code may appoint investment advisers as defined in Section 1-101.4. The board of any pension fund investing in common or preferred stock under Section 1-113.4 shall appoint an investment adviser before making such investments.

The investment adviser or consultant shall be a fiduciary, as defined in Section 1-101.2, with respect to the pension fund and shall be one of the following:

(1) an investment adviser registered under the federal Investment Advisers Act of 1940 and the Illinois Securities Law of 1953;

(2) a bank or trust company authorized to conduct a trust business in Illinois;

(3) a life insurance company authorized to transact business in Illinois; or

(4) an investment company as defined and registered under the federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953.

(a-5) Notwithstanding any other provision of law, a person or entity that provides consulting services (referred to as a "consultant" in this Section) to a pension fund with respect to the selection of fiduciaries may not be awarded a contract to provide those consulting services that is more than 5 years in duration. No contract to provide such consulting services may be renewed or extended. At the end of the term of a contract, however, the contractor is eligible to compete for a new contract. No person shall attempt to avoid or contravene the restrictions of this subsection by any means. All offers from responsive offerors shall be accompanied by disclosure of the names and addresses of the following:

(1) The offeror.

(2) Any entity that is a parent of, or owns a controlling interest in, the offeror.

(3) Any entity that is a subsidiary of, or in which a controlling interest is owned by, the offeror.

Beginning on July 1, 2008, a person, other than a trustee or an employee of a pension fund or retirement system, may not act as a consultant under this Section unless that person is at least one of the following: (i) registered as an investment adviser under the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.); (ii) registered as an investment adviser under the Illinois Securities Law of 1953; (iii) a bank, as defined in the Investment Advisers Act of 1940; or (iv) an insurance company authorized to transact business in this State.

(b) All investment advice and services provided by an investment adviser or a consultant appointed under this Section shall be rendered pursuant to a written contract between the investment adviser and the board, and in accordance with the board's investment policy.

The contract shall include all of the following:

(1) acknowledgement in writing by the investment adviser that he or she is a fiduciary with respect to the pension fund;

(2) the board's investment policy;

(3) full disclosure of direct and indirect fees, commissions, penalties, and any other compensation that may be received by the investment adviser, including reimbursement for expenses; and

(4) a requirement that the investment adviser submit periodic written reports, on at least a quarterly basis, for the board's review at its regularly scheduled meetings. All returns on investment shall be reported as net returns after payment of all fees, commissions, and any other compensation.

(b-5) Each contract described in subsection (b) shall also include (i) full disclosure of direct and indirect fees, commissions, penalties, and other compensation, including reimbursement for expenses, that may be paid by or on behalf of the investment adviser or consultant in connection with the provision of services to the pension fund and (ii) a requirement that the investment adviser or consultant update the disclosure promptly after a modification of those payments or an additional payment.

Within 30 days after the effective date of this amendatory Act of the 95th General Assembly, each investment adviser and consultant providing services on the effective date or subject to an existing contract for the provision of services must disclose to the board of trustees all direct and indirect fees, commissions, penalties, and other compensation paid by or on behalf of the investment adviser or consultant in connection with the provision of those services and shall update that disclosure promptly after a modification of those payments or an additional payment.

A person required to make a disclosure under subsection (d) is also required to disclose direct and indirect fees, commissions, penalties, or other compensation that shall or may be paid by or on behalf of the person in connection with the rendering of those services. The person shall update the disclosure promptly after a modification of those payments or an additional payment.

The disclosures required by this subsection shall be in writing and shall include the date and amount of each payment and the name and address of each recipient of a payment.

(c) Within 30 days after appointing an investment adviser or consultant, the board shall submit a copy of the contract to the Division of Insurance of the Department of Financial and Professional Regulation.

(d) Investment services provided by a person other than an investment adviser appointed under this Section, including but not limited to services provided by the kinds of persons listed in items (1) through (4) of subsection (a), shall be rendered only after full written disclosure of direct and indirect fees, commissions, penalties, and any other compensation that shall or may be received by the person rendering those services.

(e) The board of trustees of each pension fund shall retain records of investment transactions in accordance with the rules of the Department of Financial and Professional Regulation.

(f) Upon the initial transfer of assets and investment authority of an eligible pension fund under subsection (b) of Section 3-135 or subsection (b) of Section 4-128 of this Code, and thereafter in perpetuity, the Illinois State Board of Investment shall provide all investment services for that eligible pension fund.

The Illinois State Board of Investment shall not be held liable by or indemnify any individual annuitant or beneficiary of any eligible pension fund established under Article 3 or Article 4 of this Code for nonpayment of benefits by the eligible pension fund.

(Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)

(40 ILCS 5/1-113.6)

Sec. 1-113.6. Investment policies.

(a) Except as provided in subsection (b), every Every board of trustees of a pension fund shall adopt a written investment policy and file a copy of that policy with the Department of Insurance within 30 days after its adoption. Whenever a board changes its investment policy, it shall file a copy of the new policy with the Department within 30 days.

(b) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or upon the transfer of its investment authority under Section 1-113.05, whichever occurs first, the requirement to maintain and file an investment policy under subsection (a) ceases to apply to the board of trustees of an eligible pension fund established under Article 3 or Article 4 of this Code.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/1-113.7)

Sec. 1-113.7. Registration of investments; custody and safekeeping.

This Section does not apply to investments that have been transferred under Section 1-113.05.

The board of trustees may register the investments of its pension fund in the name of the pension fund, in the nominee name of a bank or trust company authorized to conduct a trust business in Illinois, or in the nominee name of the Illinois Public Treasurer's Investment Pool.

The assets of the pension fund and ownership of its investments shall be protected through third-party custodial safekeeping. The board of trustees may appoint as custodian of the investments of its pension fund the treasurer of the municipality, a bank or trust company authorized to conduct a trust business in Illinois, or the Illinois Public Treasurer's Investment Pool.

A dealer may not maintain possession of or control over securities of a pension fund subject to the provisions of this Section unless it is registered as a broker-dealer with the U.S. Securities and Exchange Commission and is a member in good standing of the National Association of Securities Dealers, and (1) with respect to securities that are not issued only in book-entry form, (A) all such securities of each fund are either held in safekeeping in a place reasonably free from risk of destruction or held in custody by a securities depository that is a "clearing agency" registered with the U.S. Securities and Exchange Commission, (B) the dealer is a member of the Securities Investor Protection Corporation, (C) the dealer sends to each fund, no less frequently than each calendar quarter, an itemized statement showing the moneys and securities in the custody or possession of the dealer at the end of such period, and (D) an independent certified public accountant conducts an audit, no less frequently than each calendar year, that reviews the dealer's internal accounting controls and procedures for safeguarding securities; and (2) with respect to securities that are issued only in book-entry form, (A) all such securities of each fund are held either in a securities depository that is a "clearing agency" registered with the U.S. Securities and Exchange Commission or in a bank that is a member of the Federal Reserve System, (B) the dealer records the ownership interest of the funds in such securities on the dealer's books and records, (C) the dealer is a member of the Securities Investor Protection Corporation, (D) the dealer sends to each fund, no less frequently than each calendar quarter, an itemized statement showing the moneys and securities in the custody or possession of the dealer at the end of such period, and (E) the dealer's financial statement (which shall contain among other things a statement of the dealer's net capital and its required net capital computed in accordance with Rule 15c3-1 under the Securities Exchange Act of 1934) is audited annually by an independent certified public accountant, and the dealer's most recent audited financial statement is furnished to the fund. No broker-dealer serving as a custodian for any public pension fund as provided by this Act shall be authorized to serve as an investment advisor for that same public pension fund as described in Section 1-101.4 of this Code, to the extent that the investment advisor acquires or disposes of any asset of that same public pension fund. Notwithstanding the foregoing, in no event may a broker or dealer that is a natural person maintain possession of or control over securities or other assets of a pension fund subject to the provisions of this Section. In maintaining securities of a pension fund subject to the provisions of this Section, each dealer must maintain those securities in conformity with the provisions of Rule 15c3-3(b) of the Securities Exchange Act of 1934 (Physical Possession or Control of Securities). The Director of the Department of Insurance may adopt such rules and regulations as shall be necessary and appropriate in his or her judgment to effectuate the purposes of this Section.

A bank or trust company authorized to conduct a trust business in Illinois shall register, deposit, or hold investments for safekeeping, all in accordance with the obligations and subject to the limitations of the Securities in Fiduciary Accounts Act.

(Source: P.A. 92-651, eff. 7-11-02.)

(40 ILCS 5/1-136 new)

Sec. 1-136. Fiscal year for Article 3 and Article 4 pension funds. For every pension fund established under Article 3 or Article 4 of this Code, by April 30, 2017, the fiscal year of the fund shall be transitioned to a fiscal year ending April 30, 2017, so that the fund thereafter operates on a May 1st to April 30th fiscal year.

(40 ILCS 5/1A-112)

Sec. 1A-112. Fees.

(a) Every pension fund that is required to file an annual statement under Section 1A-109 shall pay to the Department an annual compliance fee. In the case of a pension fund under Article 3 or 4 of this Code, the annual compliance fee shall be 0.04% 0.02% (4 2 basis points) of the total assets of the pension fund, as reported in the most current annual statement of the fund, but not more than $16,000 $8,000. In the case of all other pension funds and retirement systems, the annual compliance fee shall be $16,000 $8,000.

(b) The annual compliance fee shall be due on June 30 for the following State fiscal year, except that the fee payable in 1997 for fiscal year 1998 shall be due no earlier than 30 days following the effective date of this amendatory Act of 1997.

(c) Any information obtained by the Division that is available to the public under the Freedom of Information Act and is either compiled in published form or maintained on a computer processible medium shall be furnished upon the written request of any applicant and the payment of a reasonable information services fee established by the Director, sufficient to cover the total cost to the Division of compiling, processing, maintaining, and generating the information. The information may be furnished by means of published copy or on a computer processed or computer processible medium.

No fee may be charged to any person for information that the Division is required by law to furnish to that person.

(d) Except as otherwise provided in this Section, all fees and penalties collected by the Department under this Code shall be deposited into the Public Pension Regulation Fund.

(e) Fees collected under subsection (c) of this Section and money collected under Section 1A-107 shall be deposited into the Department's Statistical Services Revolving Fund and credited to the account of the Public Pension Division. This income shall be used exclusively for the purposes set forth in Section 1A-107. Notwithstanding the provisions of Section 408.2 of the Illinois Insurance Code, no surplus funds remaining in this account shall be deposited in the Insurance Financial Regulation Fund. All money in this account that the Director certifies is not needed for the purposes set forth in Section 1A-107 of this Code shall be transferred to the Public Pension Regulation Fund.

(f) Nothing in this Code prohibits the General Assembly from appropriating funds from the General Revenue Fund to the Department for the purpose of administering or enforcing this Code.

(Source: P.A. 93-32, eff. 7-1-03.)

(40 ILCS 5/1A-113)

Sec. 1A-113. Penalties.

(a) A pension fund that fails, without just cause, to file its annual statement within the time prescribed under Section 1A-109 shall pay to the Department a penalty to be determined by the Department, which shall not exceed $100 for each day's delay.

(b) A pension fund that fails, without just cause, to file its actuarial statement within the time prescribed under Section 1A-110 or 1A-111 shall pay to the Department a penalty to be determined by the Department, which shall not exceed $100 for each day's delay.

(c) A pension fund that fails to pay a fee within the time prescribed under Section 1A-112 shall pay to the Department a penalty of 5% of the amount of the fee for each month or part of a month that the fee is late. The entire penalty shall not exceed 25% of the fee due.

(c-5) Whenever the Director determines that a pension fund is not in compliance with Section 3-132, 3-135, 3-135.2, 4-123, 4-128.1, or 4-128.2 of this Code:

(1) The Director shall notify the pension fund board of trustees in writing of the noncompliance.

(2) The board of trustees of the pension fund shall take immediate steps to come into compliance with the applicable provisions of the Code within 15 days of the date of the notice of noncompliance.

(3) If the pension fund does not come into compliance with the applicable provisions of the Code within 15 days of the notice, the Department shall assess a penalty of up to $2,000 per day of noncompliance, to be paid by the Fund within 21 days of the date of the order assessing the penalty.

(4) A board so notified and assessed may request a hearing on the noncompliance alleged in the notice within 15 days of the notice.

Any hearing held under this subsection (c-5) shall be held in accordance with the rules of the Illinois Department of Insurance.

(d) This subsection applies to any governmental unit or pension fund, as defined in Section 1A-102, that is subject to any law establishing a pension fund or retirement system for the benefit of employees of the governmental unit.

Whenever the Division determines by examination, investigation, or in any other manner that the governing body or any elected or appointed officer or official of a governmental unit has failed to comply with any provision of this Code that law:

(1) The Director shall notify in writing the governing body, officer, or official of the specific provision or provisions of the law with which the person has failed to comply.

(2) Upon receipt of the notice, the person notified shall take immediate steps to comply with the provisions of law specified in the notice.

(3) If the person notified fails to comply within a reasonable time after receiving the notice, the Director may hold a hearing at which the person notified may show cause for noncompliance with the law.

(4) If upon hearing the Director determines that good and sufficient cause for noncompliance has not been shown, the Director may order the person to submit evidence of compliance within a specified period of not less than 30 days.

(5) If evidence of compliance has not been submitted to the Director within the period of time prescribed in the order and no administrative appeal from the order has been initiated, the Director may assess a civil penalty of up to $2,000 against the governing body, officer, or official for each noncompliance with an order of the Director.

The Director shall develop by rule, with as much specificity as practicable, the standards and criteria to be used in assessing penalties and their amounts. The standards and criteria shall include, but need not be limited to, consideration of evidence of efforts made in good faith to comply with applicable legal requirements. This rulemaking is subject to the provisions of the Illinois Administrative Procedure Act.

If a penalty is not paid within 30 days of the date of assessment, the Director without further notice shall report the act of noncompliance to the Attorney General of this State. It shall be the duty of the Attorney General or, if the Attorney General so designates, the State's Attorney of the county in which the governmental unit is located to apply promptly by complaint on relation of the Director of Insurance in the name of the people of the State of Illinois, as plaintiff, to the circuit court of the county in which the governmental unit is located for enforcement of the penalty prescribed in this subsection or for such additional relief as the nature of the case and the interest of the employees of the governmental unit or the public may require.

(e) Whoever knowingly makes a false certificate, entry, or memorandum upon any of the books or papers pertaining to any pension fund or upon any statement, report, or exhibit filed or offered for file with the Division or the Director of Insurance in the course of any examination, inquiry, or investigation, with intent to deceive the Director, the Division, or any of its employees is guilty of a Class A misdemeanor.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/3-125) (from Ch. 108 1/2, par. 3-125)

Sec. 3-125. Financing.

(a) The city council or the board of trustees of the municipality shall annually levy a tax upon all the taxable property of the municipality at the rate on the dollar which will produce an amount which, when added to the deductions from the salaries or wages of police officers, and revenues available from other sources, will equal a sum sufficient to meet the annual requirements of the police pension fund. The annual requirements to be provided by such tax levy are equal to (1) the normal cost of the pension fund for the year involved, plus (2) an amount sufficient to bring the total assets of the pension fund up to 90% of the total actuarial liabilities of the pension fund by the end of municipal fiscal year 2040, as annually updated and determined by an enrolled actuary employed by the Illinois Department of Insurance or by an enrolled actuary retained by the pension fund or the municipality. In making these determinations, the required minimum employer contribution shall be calculated each year as a level percentage of payroll over the years remaining up to and including fiscal year 2040 and shall be determined under the entry age normal projected unit credit actuarial cost method and utilizing the rate of return and asset total determined under Article 22A of this Code. The tax shall be levied and collected in the same manner as the general taxes of the municipality, and in addition to all other taxes now or hereafter authorized to be levied upon all property within the municipality, and shall be in addition to the amount authorized to be levied for general purposes as provided by Section 8-3-1 of the Illinois Municipal Code, approved May 29, 1961, as amended. The tax shall be forwarded directly to the treasurer of the board within 30 business days after receipt by the county.

(b) For purposes of determining the required employer contribution to a pension fund, the value of the pension fund's assets shall be equal to the actuarial value of the pension fund's assets, which shall be calculated as follows:

(1) On March 30, 2011, the actuarial value of a pension fund's assets shall be equal to the market value of the assets as of that date.

(2) In determining the actuarial value of the System's assets for fiscal years after March 30, 2011, any actuarial gains or losses from investment return incurred in a fiscal year shall be recognized in equal annual amounts over the 5-year period following that fiscal year.

(c) If a participating municipality fails to transmit to the fund contributions required of it under this Article for more than 90 days after the payment of those contributions is due, the fund may, after giving notice to the municipality, apply to the Director of the Illinois Department of Insurance for intercept. The Illinois Department of Insurance shall certify to the State Comptroller the amounts of the delinquent payments in accordance with any applicable rules of the Illinois Department of Insurance Comptroller, and the Comptroller must, beginning in fiscal year 2016, deduct and remit to the fund the certified amounts or a portion of those amounts from the following proportions of payments of State funds to the municipality:

(1) in fiscal year 2016, one-third of the total amount of any payments of State funds to the municipality;

(2) in fiscal year 2017, two-thirds of the total amount of any payments of State funds to the municipality; and

(3) in fiscal year 2018 and each fiscal year thereafter, the total amount of any payments of State funds to the municipality.

The State Comptroller may not deduct from any payments of State funds to the municipality more than the amount of delinquent payments certified to the State Comptroller by the fund.

(d) The police pension fund shall consist of the following moneys which shall be set apart by the treasurer of the municipality:

(1) All moneys derived from the taxes levied hereunder;

(2) Contributions by police officers under Section 3-125.1;

(3) All moneys accumulated by the municipality under any previous legislation establishing a fund for the benefit of disabled or retired police officers;

(4) Donations, gifts or other transfers authorized by this Article.

(e) The Commission on Government Forecasting and Accountability shall conduct a study of all funds established under this Article and shall report its findings to the General Assembly on or before January 1, 2013. To the fullest extent possible, the study shall include, but not be limited to, the following:

(1) fund balances;

(2) historical employer contribution rates for each fund;

(3) the actuarial formulas used as a basis for employer contributions, including the actual assumed rate of return for each year, for each fund;

(4) available contribution funding sources;

(5) the impact of any revenue limitations caused by PTELL and employer home rule or non-home rule status; and

(6) existing statutory funding compliance procedures and funding enforcement mechanisms for all municipal pension funds.

(Source: P.A. 99-8, eff. 7-9-15.)

(40 ILCS 5/3-127) (from Ch. 108 1/2, par. 3-127)

Sec. 3-127. Reserves.

(a) The board shall establish and maintain a reserve to insure the payment of all obligations incurred under this Article excluding retirement annuities established under Section 3-109.3. The reserve to be accumulated shall be equal to the estimated total actuarial requirements of the fund.

(b) In the case of an eligible pension fund that has transferred its investment authority to the Illinois State Board of Investment under Section 1-113.05 of this Code, the assets invested by the Illinois State Board of Investment on behalf of the pension fund, and the dividends and other investment earnings attributable thereto, shall be considered as part of the reserve for the purposes of this Section.

The Illinois State Board of Investment shall report to the board of each such fund at least annually the financial information on the invested assets and earnings attributable to that pension fund so that the board may make the determinations required under this Article.

(c) If a pension fund has a reserve of less than the accrued liabilities of the fund, the board of the pension fund, in making its annual report to the city council or board of trustees of the municipality, shall designate the amount, calculated as a level percentage of payroll, needed annually to insure the accumulation of the reserve to the level of the fund's accrued liabilities over a period of 40 years from July 1, 1993 for pension funds then in operation, or from the date of establishment in the case of a fund created thereafter, so that the necessary reserves will be attained over such a period.

(Source: P.A. 91-939, eff. 2-1-01.)

(40 ILCS 5/3-132) (from Ch. 108 1/2, par. 3-132)

Sec. 3-132. To control and manage the Pension Fund.

(a) In accordance with the applicable provisions of Articles 1 and 1A and this Article, the board of trustees of the pension fund shall have the authority to control and manage, exclusively, the following:

(1) the pension fund, and

(2) investment expenditures and income, including interest dividends, capital gains and other distributions on the investments, and

(2) (3) all money donated, paid, assessed, or provided by law for the pensioning of disabled and retired police officers, their surviving spouses, minor children, and dependent parents. All such money received or collected shall be credited by the treasurer of the municipality to the State Treasurer's account of the pension fund and held by the State for purposes of investment pursuant to Article 22A of this Code.

(b) Pursuant to rules adopted under Article 22A of this Code, the board of trustees of an eligible pension fund shall make periodic written application to the Illinois State Board of Investment for receipt and deposit of reserves into the pension fund. Reserves in the amount of 3 months' current liabilities, including annuity and benefit payments and operational expenses owed by the fund, shall be held by the treasurer of the municipality subject to the order and control of the board. The treasurer of the municipality shall maintain a record of all money received, transferred, and held for the account of the board.

(c) In case of any dispute that may arise between the board of trustees of the eligible pension fund and the Illinois State Board of Investment pursuant to subsection (b) of this Section, the board of trustees of the eligible pension fund shall appeal the dispute to the Director of the Illinois Department of Insurance. If the Director finds that there exists a good faith dispute between the parties, the Director may hold a hearing in accordance with the rules of the Illinois Department of Insurance.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/3-135) (from Ch. 108 1/2, par. 3-135)

Sec. 3-135. To invest, manage, and transfer funds.

(a) Except as provided in subsection (b), Beginning January 1, 1998, the board shall invest funds in accordance with Sections 1-113.1 through 1-113.10 of this Code.

Any pension fund that does not meet the definition of eligible pension fund under Section 1-101.6 of this Code shall retain the authority to control and manage investment expenditures and income, including interest, dividends, capital gains, and other distributions on the investments.

(b) The board of an eligible pension fund that receives a certified investment asset list under Section 3-135.1 shall cease investment activities upon receiving the certified investment asset list and shall transfer all investment assets, minus assets needed to comply with subsection (b) of Section 3-132, to the Illinois State Board of Investment in the manner prescribed by rules adopted by the Illinois State Board of Investment under Article 22A. Upon completion of the transfer described in this subsection, the investment authority of the board shall terminate.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/3-135.1 new)

Sec. 3-135.1. Certified investment asset list.

(a) Within 18 months of the effective date of this amendatory Act of the 99th General Assembly, the Department of Insurance shall audit the investment assets of each eligible pension fund established under this Article to determine a certified investment asset list. The audit shall be performed by a certified public accountant. The board of the pension fund shall defray the expense of the audit.

(b) Upon completion of the audit, the Department shall provide the certified investment asset list to the eligible pension fund and the Illinois State Board of Investment. The Department may adopt rules governing the g=creation and distribution of the certified investment asset list.

(40 ILCS 5/3-135.2 new)

Sec. 3-135.2. To transfer investment funds. At each quarterly meeting of the Board, the Board of trustees of any eligible pension fund shall transfer any available funds for investment to the Illinois State Board of Investment in accordance with provisions of Article 22A of this Code. Each transfer shall be made within 30 days of the end of the fiscal year quarter and written notice of the transfer shall be given to the Illinois State Board of Investment.

(40 ILCS 5/4-118) (from Ch. 108 1/2, par. 4-118)

Sec. 4-118. Financing.

(a) The city council or the board of trustees of the municipality shall annually levy a tax upon all the taxable property of the municipality at the rate on the dollar which will produce an amount which, when added to the deductions from the salaries or wages of firefighters and revenues available from other sources, will equal a sum sufficient to meet the annual actuarial requirements of the pension fund, as determined by an enrolled actuary employed by the Illinois Department of Insurance or by an enrolled actuary retained by the pension fund or municipality. For the purposes of this Section, the annual actuarial requirements of the pension fund are equal to (1) the normal cost of the pension fund, or 17.5% of the salaries and wages to be paid to firefighters for the year involved, whichever is greater, plus (2) an annual amount sufficient to bring the total assets of the pension fund up to 90% of the total actuarial liabilities of the pension fund by the end of municipal fiscal year 2040, as annually updated and determined by an enrolled actuary employed by the Illinois Department of Insurance or by an enrolled actuary retained by the pension fund or the municipality. In making these determinations, the required minimum employer contribution shall be calculated each year as a level percentage of payroll over the years remaining up to and including fiscal year 2040 and shall be determined under the entry age normal projected unit credit actuarial cost method and utilizing the rate of return and asset total determined under Article 22A of this Code. The amount to be applied towards the amortization of the unfunded accrued liability in any year shall not be less than the annual amount required to amortize the unfunded accrued liability, including interest, as a level percentage of payroll over the number of years remaining in the 40 year amortization period.

(a-5) For purposes of determining the required employer contribution to a pension fund, the value of the pension fund's assets shall be equal to the actuarial value of the pension fund's assets, which shall be calculated as follows:

(1) On March 30, 2011, the actuarial value of a pension fund's assets shall be equal to the market value of the assets as of that date.

(2) In determining the actuarial value of the pension fund's assets for fiscal years after March 30, 2011, any actuarial gains or losses from investment return incurred in a fiscal year shall be recognized in equal annual amounts over the 5-year period following that fiscal year.

(b) The tax shall be levied and collected in the same manner as the general taxes of the municipality, and shall be in addition to all other taxes now or hereafter authorized to be levied upon all property within the municipality, and in addition to the amount authorized to be levied for general purposes, under Section 8-3-1 of the Illinois Municipal Code or under Section 14 of the Fire Protection District Act. The tax shall be forwarded directly to the treasurer of the board within 30 business days of receipt by the county (or, in the case of amounts added to the tax levy under subsection (f), used by the municipality to pay the employer contributions required under subsection (b-1) of Section 15-155 of this Code).

(b-5) If a participating municipality fails to transmit to the fund contributions required of it under this Article for more than 90 days after the payment of those contributions is due, the fund may, after giving notice to the municipality, apply to the Director of the Illinois Department of Insurance for intercept. The Illinois Department of Insurance shall certify to the State Comptroller the amounts of the delinquent payments in accordance with any applicable rules of the Illinois Department of Insurance Comptroller, and the Comptroller must, beginning in fiscal year 2016, deduct and remit to the fund the certified amounts or a portion of those amounts from the following proportions of payments of State funds to the municipality:

(1) in fiscal year 2016, one-third of the total amount of any payments of State funds to the municipality;

(2) in fiscal year 2017, two-thirds of the total amount of any payments of State funds to the municipality; and

(3) in fiscal year 2018 and each fiscal year thereafter, the total amount of any payments of State funds to the municipality.

The State Comptroller may not deduct from any payments of State funds to the municipality more than the amount of delinquent payments certified to the State Comptroller by the fund.

(c) The board shall make available to the membership and the general public for inspection and copying at reasonable times the most recent Actuarial Valuation Balance Sheet and Tax Levy Requirement issued to the fund by the Department of Insurance.

(d) The firefighters' pension fund shall consist of the following moneys which shall be set apart by the treasurer of the municipality: (1) all moneys derived from the taxes levied hereunder; (2) contributions by firefighters as provided under Section 4-118.1; (3) all rewards in money, fees, gifts, and emoluments that may be paid or given for or on account of extraordinary service by the fire department or any member thereof, except when allowed to be retained by competitive awards; and (4) any money, real estate or personal property received by the board.

(e) For the purposes of this Section, "enrolled actuary" means an actuary: (1) who is a member of the Society of Actuaries or the American Academy of Actuaries; and (2) who is enrolled under Subtitle C of Title III of the Employee Retirement Income Security Act of 1974, or who has been engaged in providing actuarial services to one or more public retirement systems for a period of at least 3 years as of July 1, 1983.

(f) The corporate authorities of a municipality that employs a person who is described in subdivision (d) of Section 4-106 may add to the tax levy otherwise provided for in this Section an amount equal to the projected cost of the employer contributions required to be paid by the municipality to the State Universities Retirement System under subsection (b-1) of Section 15-155 of this Code.

(g) The Commission on Government Forecasting and Accountability shall conduct a study of all funds established under this Article and shall report its findings to the General Assembly on or before January 1, 2013. To the fullest extent possible, the study shall include, but not be limited to, the following:

(1) fund balances;

(2) historical employer contribution rates for each fund;

(3) the actuarial formulas used as a basis for employer contributions, including the actual assumed rate of return for each year, for each fund;

(4) available contribution funding sources;

(5) the impact of any revenue limitations caused by PTELL and employer home rule or non-home rule status; and

(6) existing statutory funding compliance procedures and funding enforcement mechanisms for all municipal pension funds.

(Source: P.A. 99-8, eff. 7-9-15.)

(40 ILCS 5/4-120) (from Ch. 108 1/2, par. 4-120)

Sec. 4-120. Reserves.

(a) The board shall establish and maintain a reserve to insure the payment of all obligations incurred under this Article. The reserve to be accumulated shall be equal to the estimated total actuarial requirements of the Fund.

(b) In the case of an eligible pension fund that has transferred its investment authority to the Illinois State Board of Investment under Section 1-113.05 of this Code, the assets invested by the Illinois State Board of Investment on behalf of the pension fund, and the dividends and other investment earnings attributable thereto, shall be considered as part of the reserve for the purposes of this Section.

The Illinois State Board of Investment shall report to the board of each such fund at least annually the financial information on the invested assets and earnings to that pension fund so that the board may make the determinations required under this Article.

(Source: P.A. 83-1440.)

(40 ILCS 5/4-123) (from Ch. 108 1/2, par. 4-123)

Sec. 4-123. To control and manage the Pension Fund.

(a) In accordance with the applicable provisions of Articles 1 and 1A and this Article the board of trustees of the pension fund shall have the authority, to control and manage, exclusively, the following:

(1) the pension fund, and

(2) investment expenditures and income, including interest dividends, capital gains, and other distributions on the investments, and

(2) (3) all money donated, paid, assessed, or provided by law for the pensioning of disabled and retired firefighters, their surviving spouses, minor children, and dependent parents. All such money received or collected shall be credited by the treasurer of the municipality to the State Treasurer's account of the pension fund and held by the State for purposes of investment pursuant to Article 22A of this Code.

(b) Pursuant to rules adopted under Article 22A of this Code, the board of trustees of an eligible pension fund shall make periodic written application to the Illinois State Board of Investment for receipt and deposit of reserves into the pension fund. Reserves in the amount of 3 months' current liabilities, including annuity and benefit payments and operational expenses owed by the fund, shall be held by the treasurer of the municipality subject to the order and control of the board. The treasurer of the municipality shall maintain a record of all money received, transferred, and held for the account of the board.

(c) In case of any dispute that may arise between the board of trustees of any eligible pension fund and the Illinois State Board of Investment pursuant to subsection (b) of this Section, the board of trustees of the pension fund shall appeal the dispute to the Director of the Illinois Department of Insurance. If the Director finds good faith dispute between the parties, the Director may hold a hearing in accordance with the rules of the Illinois Department of Insurance.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128)

Sec. 4-128. To invest and transfer funds.

(a) Except as provided in subsection (b), Beginning January 1, 1998, the board shall invest funds in accordance with Sections 1-113.1 through 1-113.10 of this Code.

Any pension fund that does not meet the definition of eligible pension fund under Section 1-101.6 of this Code shall retain the authority to control and manage investment expenditures and income, including interest, dividends, capital gains, and other distributions on the investments.

(b) The board of an eligible pension fund that receives a certified investment asset list under Section 4-128.1 shall cease investment activities upon receiving the certified investment asset list and shall transfer all investment assets, minus assets needed to comply with subsection (b) of Section 4-123, to the Illinois State Board of Investment in the manner prescribed by rules adopted by the Illinois State Board of Investment under Article 22A. Upon completion of the transfer described in this subsection, the investment authority of the board shall terminate.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/4-128.1 new)

Sec. 4-128.1. Certified investment asset list.

(a) Within 18 months of the effective date of this amendatory Act of the 99th General Assembly, the Department of Insurance shall audit the investment assets of each eligible pension fund established under this Article to determine a certified investment asset list. The audit shall be performed by a certified public accountant. The board of the pension fund shall defray the expense of the audit.

(b) Upon completion of the audit, the Department shall provide the certified investment asset list to the eligible pension fund and the Illinois State Board of Investment. The Department may adopt rules governing the creation and distribution of the certified investment asset list.

(40 ILCS 5/4-128.2 new)

Sec. 4-128.2. To transfer investment funds. At each quarterly meeting of the Board, the Board of trustees of any eligible pension fund shall transfer any available funds for investment to the Illinois State Board of Investment in accordance with provisions of Article 22A of this Code. Each transfer shall be made within 30 days of the end of the fiscal year quarter and written notice of the transfer shall be given to the Illinois State Board of Investment.

(40 ILCS 5/22A-110.1 new)

Sec. 22A-110.1. Emergency rulemaking. In order to provide for the expeditious and timely implementation of the provisions of this amendatory Act of the 99th General Assembly, emergency rules to implement the changes made may be adopted by the Illinois State Board of Investment.

(40 ILCS 5/22A-113) (from Ch. 108 1/2, par. 22A-113)

Sec. 22A-113. Transfer of securities and investment functions. (a) As soon as possible or practicable following the enactment of this Article and prior to July 1, 1970, the trustees of the State Employees' Retirement System, the General Assembly Retirement System and the Judges Retirement System, shall transfer to this board for management and investment all of their securities or for which commitments have been made, and all funds, assets or moneys representing permanent or temporary investments, or cash reserves maintained for the purpose of obtaining income thereon.

(b) The board of trustees or retirement board of any pension fund or retirement system, other than those established under Article 3 or Article 4 of this Code, electing to come under the authority of the Illinois State Board of Investment for the management of its investments and the performance of investment functions previously performed by such board of that pension fund or retirement system shall effect a transfer of securities and other assets thereof not later than the first day of the 4th month next following the date of such election after completion of an audit by a certified public accountant of such securities and other assets as authorized by the Illinois State Board of Investment and approved by the Auditor General of the State, the expense of which shall be assumed by the pension fund or retirement system. Upon such transfer, the authority of The Illinois State Board of Investment in the case of such pension fund or retirement system is effective. These transfers shall be receipted for in detail by the Chairman and director of the board.

(c) The board of trustees or retirement board of any pension fund or retirement system, other than those established under Article 3 or Article 4 of this Code, authorized under the Illinois Pension Code to participate in any commingled investment fund or funds established and managed by the Illinois State Board of Investment under this Article may invest in such commingled investment fund or funds upon written notice to the Illinois State Board of Investment. The board of trustees of the Illinois Bank Examiners' Education Foundation is authorized to participate in any commingled investment fund or funds established and managed by the Illinois State Board of Investment upon providing written notice to the Illinois State Board of Investment. Any participation in a commingled fund and the management thereof shall be in accordance with the governing law and the rules, policies and directives of the Illinois State Board of Investment.

(Source: P.A. 84-1127.)

(40 ILCS 5/22A-113.1) (from Ch. 108 1/2, par. 22A-113.1)

Sec. 22A-113.1. Investable funds.

(a) Each retirement system under the management of the Illinois State Board of Investment, except those established pursuant to Articles 3 and 4 of this Code, shall report to the board from time to time the amounts of funds available for investment. These amounts shall be transferred immediately to the State Treasurer or his authorized agent for the account of the board to be applied for investment by the board. Notice to the Illinois State Board of Investment of each such transfer shall be given by the retirement system as the transfer occurs.

(b) Each pension fund established under Article 3 and 4 of this Code that is under the investment authority of the board shall report to the Illinois State Board of Investment, at the end of each quarter of the pension fund's fiscal year, the amount of funds available for investment. These amounts shall be transferred within 30 days of the end of the quarter to the Illinois State Board of Investment in a manner prescribed by the board. Notice to the Illinois State Board of Investment of each such transfer shall be given by the pension fund as the transfer occurs.

(Source: P.A. 78-646.)

(40 ILCS 5/22A-113.4 new)

Sec. 22A-113.4. Transfer from Article 3 or 4 fund.

(a) Upon receipt of a certified investment asset list provided under Section 3-135.1 or 4-128.1 of this Code for an eligible pension fund, the Illinois State Board of Investment shall, as soon as practicable, initiate the transfer of assets from the board of trustees of that fund, and the board shall transfer to the Illinois State Board of Investment for management and investment all of its securities including securities for which commitments have been made, and all funds, assets, or money representing permanent or temporary investments, and cash reserves maintained for the purpose of obtaining income thereon.

(b) Upon the transfer of securities and assets from a board of trustees under this Section, the custody and control of the Illinois State Board of Investment over the present and future assets of the pension fund shall take effect. The transfer shall be receipted for in detail by the Illinois State Board of Investment and the receipt shall be provided to the board of trustees of the pension fund within 30 days of the effective date of the transfer.

(40 ILCS 5/22A-115) (from Ch. 108 1/2, par. 22A-115)

Sec. 22A-115. Audits and reports.

(1) At least annually, the books, records, accounts and securities of the board shall be audited by a certified public accountant designated by the Auditor General of the State. The audit opinion shall be published as a part of the annual report of the board.

(2) For the quarterly periods ending September 30, December 31, and March 31, the board shall submit to each pension fund, retirement system or education fund under its jurisdiction, other than a pension fund established under Article 3 or 4 of this Code, a report embracing, among other things, the following information: (a) a full description of the investments acquired, showing average costs; (b) a full description of the securities sold or exchanged, showing average proceeds or other conditions of an exchange; (c) gains or losses realized during the period; (d) income from investments; (e) administrative expenses of the board; and (f) the proportion of administrative expenses allocable to each pension fund, retirement system or education fund.

(3) An annual report shall be prepared by the board for submission to each pension fund, retirement system or education fund under its jurisdiction within 6 months after the close of each fiscal year. A fiscal year shall date from July 1 of one year to June 30 of the year next following. This report shall embody full information concerning the results of investment operations of the board for the year, including the foregoing information and, in addition thereto, the following:

(a) a listing of the investments held by the board as at the end of the year showing their book values and market values and their income yields on market values;

(b) the amounts as determined under paragraph (a) above allocable to each pension fund or education fund managed by the board;

(c) comments on the pertinent factors affecting the operations of the board for the year;

(d) a review of the policies maintained by the board and any changes therein that occurred during the year;

(e) a copy of the audited financial statements for the year;

(f) recommendations for possible changes in the law governing the operations of the board; and

(g) a listing of the names of securities brokers and dealers dealt with during the year showing the total amount of commissions received by each on transactions with the board. A copy of the annual report shall be filed with the Illinois Department of Insurance, Public Pension Division.

(Source: P.A. 84-1127.)

(40 ILCS 5/22A-115.1 new)

Sec. 22A-115.1. Audit of transition. Within 6 months of the transfer of investment assets from an eligible pension fund established under Article 3 or 4 of this Code to the control of the Board, the books, records, accounts, and securities of the board shall be audited by a certified public accountant designated by the Illinois Auditor General. The audit shall include, but is not limited to, the following:

(i) a full description of the investments acquired, showing average costs;

(ii) a full description of the securities sold or exchanged, showing average proceeds or other conditions of an exchange;

(iii) gains or losses realized during the period;

(iv) income from investments;

(v) administrative expenses of the board; and

(vi) the proportion of administrative expenses allocable to each pension fund.

The audit report shall be published on the Board's website and filed with the Illinois Department of Insurance.

Section 90. The State Mandates Act is amended by adding Section 8.40 as follows:

(30 ILCS 805/8.40 new)

Sec. 8.40. Exempt mandate. Notwithstanding Sections 6 and 8 of this Act, no reimbursement by the State is required for the implementation of any mandate created by this amendatory Act of the 99th General Assembly.