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1 | AN ACT concerning public employee benefits.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Illinois Pension Code is amended by changing | ||||||||||||||||||||||||||||||||||||||||||||||
5 | Sections 1-109.1, 1-113.2, 1-113.3, 1-109.1, 1-110, 1-110.6, | ||||||||||||||||||||||||||||||||||||||||||||||
6 | 1-113.1, 1-113.4, 1-113.4a, 1-113.14, 1-113.16, 1-113.20, | ||||||||||||||||||||||||||||||||||||||||||||||
7 | 1-150, and 4-128 as follows:
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8 | (40 ILCS 5/1-109.1) (from Ch. 108 1/2, par. 1-109.1)
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9 | Sec. 1-109.1. Allocation and delegation of fiduciary | ||||||||||||||||||||||||||||||||||||||||||||||
10 | duties.
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11 | (1) Subject to the provisions of Section 22A-113 of this | ||||||||||||||||||||||||||||||||||||||||||||||
12 | Code and
subsections (2) and (3) of this Section, the board of | ||||||||||||||||||||||||||||||||||||||||||||||
13 | trustees of a
retirement system or pension fund established | ||||||||||||||||||||||||||||||||||||||||||||||
14 | under this Code may:
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15 | (a) Appoint one or more investment managers as | ||||||||||||||||||||||||||||||||||||||||||||||
16 | fiduciaries to manage
(including the power to acquire and | ||||||||||||||||||||||||||||||||||||||||||||||
17 | dispose of) any assets of the
retirement system or pension | ||||||||||||||||||||||||||||||||||||||||||||||
18 | fund; and
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19 | (b) Allocate duties among themselves and designate | ||||||||||||||||||||||||||||||||||||||||||||||
20 | others as fiduciaries
to carry out specific fiduciary | ||||||||||||||||||||||||||||||||||||||||||||||
21 | activities other than the management of the
assets of the | ||||||||||||||||||||||||||||||||||||||||||||||
22 | retirement system or pension fund.
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23 | (2) The board of trustees of a pension fund established |
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| |||||||
1 | under Article 5, 6,
8, 9, 10, 11, 12 or 17 of this Code may not | ||||||
2 | transfer its investment authority,
nor transfer the assets of | ||||||
3 | the fund to any other person or entity for the
purpose of | ||||||
4 | consolidating or merging its assets and management with any | ||||||
5 | other
pension fund or public investment authority, unless the | ||||||
6 | board resolution
authorizing such transfer is submitted for | ||||||
7 | approval to the contributors and
pensioners of the fund at | ||||||
8 | elections held not less than 30 days after the
adoption of such | ||||||
9 | resolution by the board, and such resolution is approved by a
| ||||||
10 | majority of the votes cast on the question in both the | ||||||
11 | contributors election
and the pensioners election. The | ||||||
12 | election procedures and qualifications
governing the election | ||||||
13 | of trustees shall govern the submission of resolutions
for | ||||||
14 | approval under this paragraph, insofar as they may be made | ||||||
15 | applicable.
| ||||||
16 | (3) Pursuant to subsections (h) and (i) of Section 6 of | ||||||
17 | Article VII of
the Illinois Constitution, the investment | ||||||
18 | authority of boards of trustees
of retirement systems and | ||||||
19 | pension funds established under this Code is declared
to be a | ||||||
20 | subject of exclusive State jurisdiction, and the concurrent | ||||||
21 | exercise
by a home rule unit of any power affecting such | ||||||
22 | investment authority is
hereby specifically denied and | ||||||
23 | preempted.
| ||||||
24 | (4) For the purposes of this Code, "emerging investment | ||||||
25 | manager" means a
qualified investment adviser that manages an | ||||||
26 | investment portfolio of at
least $10,000,000 but less than |
| |||||||
| |||||||
1 | $10,000,000,000 and is a
"minority-owned business", | ||||||
2 | "women-owned business" or "business owned by a person with a | ||||||
3 | disability" as those terms are
defined in the Business | ||||||
4 | Enterprise for Minorities, Women, and Persons with | ||||||
5 | Disabilities Act.
| ||||||
6 | It is hereby declared to be the public policy of the State | ||||||
7 | of Illinois to
encourage the trustees of public employee | ||||||
8 | retirement systems, pension funds, and investment boards
to use | ||||||
9 | emerging investment managers in managing their system's | ||||||
10 | assets, encompassing all asset classes, and increase the | ||||||
11 | racial, ethnic, and gender diversity of its fiduciaries, to the
| ||||||
12 | greatest extent feasible within the bounds of financial and | ||||||
13 | fiduciary
prudence, and to take affirmative steps to remove any | ||||||
14 | barriers to the full
participation in investment opportunities
| ||||||
15 | afforded by those retirement systems, pension funds, and | ||||||
16 | investment boards.
| ||||||
17 | A On or before January 1, 2010, a retirement system, | ||||||
18 | pension fund, or investment board subject to this Code, except | ||||||
19 | those under Article 3 or 4 whose investments are restricted by | ||||||
20 | Section 1-113.2 of this Code , shall adopt a policy that sets | ||||||
21 | forth goals for utilization of emerging investment managers. | ||||||
22 | This policy shall include quantifiable goals for the management | ||||||
23 | of assets in specific asset classes by emerging investment | ||||||
24 | managers. The retirement system, pension fund, or investment | ||||||
25 | board shall establish 3 separate goals for: (i) emerging | ||||||
26 | investment managers that are minority-owned businesses; (ii) |
| |||||||
| |||||||
1 | emerging investment managers that are women-owned businesses; | ||||||
2 | and (iii) emerging investment managers that are businesses | ||||||
3 | owned by a person with a disability. The goals established | ||||||
4 | shall be based on the percentage of total dollar amount of | ||||||
5 | investment service contracts let to minority-owned businesses, | ||||||
6 | women-owned businesses, and businesses owned by a person with a | ||||||
7 | disability, as those terms are defined in the Business | ||||||
8 | Enterprise for Minorities, Women, and Persons with | ||||||
9 | Disabilities Act. The retirement system, pension fund, or | ||||||
10 | investment board shall annually review the goals established | ||||||
11 | under this subsection. | ||||||
12 | If in any case an emerging investment manager meets the | ||||||
13 | criteria established by a board for a specific search and meets | ||||||
14 | the criteria established by a consultant for that search, then | ||||||
15 | that emerging investment manager shall receive an invitation by | ||||||
16 | the board of trustees, or an investment committee of the board | ||||||
17 | of trustees, to present his or her firm for final consideration | ||||||
18 | of a contract. In the case where multiple emerging investment | ||||||
19 | managers meet the criteria of this Section, the staff may | ||||||
20 | choose the most qualified firm or firms to present to the | ||||||
21 | board.
| ||||||
22 | The use of an emerging investment manager does not | ||||||
23 | constitute a transfer
of investment authority for the purposes | ||||||
24 | of subsection (2) of this Section.
| ||||||
25 | (5) Each retirement system, pension fund, or investment | ||||||
26 | board subject to this Code, except those under Article 3 or 4 |
| |||||||
| |||||||
1 | whose investments are restricted by Section 1-113.2 of this | ||||||
2 | Code , shall establish a policy that sets forth goals for | ||||||
3 | increasing the racial, ethnic, and gender diversity of its | ||||||
4 | fiduciaries, including its consultants and senior staff. Each | ||||||
5 | retirement system, pension fund, or
investment board shall make | ||||||
6 | its best efforts to ensure that
the racial and ethnic makeup of | ||||||
7 | its senior administrative
staff represents the racial and | ||||||
8 | ethnic makeup of its
membership. Each system, fund, and | ||||||
9 | investment board shall annually review the goals established | ||||||
10 | under this subsection. | ||||||
11 | (6) A On or before January 1, 2010, a retirement system, | ||||||
12 | pension fund, or investment board subject to this Code, except | ||||||
13 | those under Article 3 or 4 whose investments are restricted by | ||||||
14 | Section 1-113.2 of this Code , shall adopt a policy that sets | ||||||
15 | forth goals for utilization of businesses owned by minorities, | ||||||
16 | women, and persons with disabilities for all contracts and | ||||||
17 | services. The goals established shall be based on the | ||||||
18 | percentage of total dollar amount of all contracts let to | ||||||
19 | minority-owned businesses, women-owned businesses, and | ||||||
20 | businesses owned by a person with a disability, as those terms | ||||||
21 | are defined in the Business Enterprise for Minorities, Women, | ||||||
22 | and Persons with Disabilities Act. The retirement system, | ||||||
23 | pension fund, or investment board shall annually review the | ||||||
24 | goals established under this subsection. | ||||||
25 | (7) A On or before January 1, 2010, a retirement system, | ||||||
26 | pension fund, or investment board subject to this Code, except |
| |||||||
| |||||||
1 | those under Article 3 or 4 whose investments are restricted by | ||||||
2 | Section 1-113.2 of this Code , shall adopt a policy that sets | ||||||
3 | forth goals for increasing the utilization of minority | ||||||
4 | broker-dealers. For the purposes of this Code, "minority | ||||||
5 | broker-dealer" means a qualified broker-dealer who meets the | ||||||
6 | definition of "minority-owned business", "women-owned | ||||||
7 | business", or "business owned by a person with a disability", | ||||||
8 | as those terms are defined in the Business Enterprise for | ||||||
9 | Minorities, Women, and Persons with Disabilities Act. The | ||||||
10 | retirement system, pension fund, or investment board shall | ||||||
11 | annually review the goals established under this Section. | ||||||
12 | (8) Each retirement system, pension fund, and investment | ||||||
13 | board subject to this Code, except those under Article 3 or 4 | ||||||
14 | whose investments are restricted by Section 1-113.2 of this | ||||||
15 | Code , shall submit a report to the Governor and the General | ||||||
16 | Assembly by January 1 of each year that includes the following: | ||||||
17 | (i) the policy adopted under subsection (4) of this Section, | ||||||
18 | including the names and addresses of the emerging investment | ||||||
19 | managers used, percentage of the assets under the investment | ||||||
20 | control of emerging investment managers for the 3 separate | ||||||
21 | goals, and the actions it has undertaken to increase the use of | ||||||
22 | emerging investment managers, including encouraging other | ||||||
23 | investment managers to use emerging investment managers as | ||||||
24 | subcontractors when the opportunity arises; (ii) the policy | ||||||
25 | adopted under subsection (5) of this Section; (iii) the policy | ||||||
26 | adopted under subsection (6) of this Section; (iv) the policy |
| |||||||
| |||||||
1 | adopted under subsection (7) of this Section, including | ||||||
2 | specific actions undertaken to increase the use of minority | ||||||
3 | broker-dealers; and (v) the policy adopted under subsection (9) | ||||||
4 | of this Section. | ||||||
5 | (9) A On or before February 1, 2015, a retirement system, | ||||||
6 | pension fund, or investment board subject to this Code, except | ||||||
7 | those under Article 3 or 4 whose investments are restricted by | ||||||
8 | Section 1-113.2 of this Code , shall adopt a policy that sets | ||||||
9 | forth goals for increasing the utilization of minority | ||||||
10 | investment managers. For the purposes of this Code, "minority | ||||||
11 | investment manager" means a qualified investment manager that | ||||||
12 | manages an investment portfolio and meets the definition of | ||||||
13 | "minority-owned business", "women-owned business", or | ||||||
14 | "business owned by a person with a disability", as those terms | ||||||
15 | are defined in the Business Enterprise for Minorities, Women, | ||||||
16 | and Persons with Disabilities Act. | ||||||
17 | It is hereby declared to be the public policy of the State | ||||||
18 | of Illinois to
encourage the trustees of public employee | ||||||
19 | retirement systems, pension funds, and investment boards
to use | ||||||
20 | minority investment managers in managing their systems' | ||||||
21 | assets, encompassing all asset classes, and to increase the | ||||||
22 | racial, ethnic, and gender diversity of their fiduciaries, to | ||||||
23 | the
greatest extent feasible within the bounds of financial and | ||||||
24 | fiduciary
prudence, and to take affirmative steps to remove any | ||||||
25 | barriers to the full
participation in investment opportunities
| ||||||
26 | afforded by those retirement systems, pension funds, and |
| |||||||
| |||||||
1 | investment boards. | ||||||
2 | The retirement system, pension fund, or investment board | ||||||
3 | shall establish 3 separate goals for: (i) minority investment | ||||||
4 | managers that are minority-owned businesses; (ii) minority | ||||||
5 | investment managers that are women-owned businesses; and (iii) | ||||||
6 | minority investment managers that are businesses owned by a | ||||||
7 | person with a disability. The retirement system, pension fund, | ||||||
8 | or investment board shall annually review the goals established | ||||||
9 | under this Section. | ||||||
10 | If in any case a minority investment manager meets the | ||||||
11 | criteria established by a board for a specific search and meets | ||||||
12 | the criteria established by a consultant for that search, then | ||||||
13 | that minority investment manager shall receive an invitation by | ||||||
14 | the board of trustees, or an investment committee of the board | ||||||
15 | of trustees, to present his or her firm for final consideration | ||||||
16 | of a contract. In the case where multiple minority investment | ||||||
17 | managers meet the criteria of this Section, the staff may | ||||||
18 | choose the most qualified firm or firms to present to the | ||||||
19 | board. | ||||||
20 | The use of a minority investment manager does not | ||||||
21 | constitute a transfer
of investment authority for the purposes | ||||||
22 | of subsection (2) of this Section. | ||||||
23 | (10) It Beginning January 1, 2016, it shall be the | ||||||
24 | aspirational goal for a retirement system, pension fund, or | ||||||
25 | investment board subject to this Code to use emerging | ||||||
26 | investment managers for not less than 20% of the total funds |
| |||||||
| |||||||
1 | under management. Furthermore, it shall be the aspirational | ||||||
2 | goal that not less than 20% of investment advisors be | ||||||
3 | minorities, women, and persons with disabilities as those terms | ||||||
4 | are defined in the Business Enterprise for Minorities, Women, | ||||||
5 | and Persons with Disabilities Act. It shall be the aspirational | ||||||
6 | goal to utilize businesses owned by minorities, women, and | ||||||
7 | persons with disabilities for not less than 20% of contracts | ||||||
8 | awarded for "information technology services", "accounting | ||||||
9 | services", "insurance brokers", "architectural and engineering | ||||||
10 | services", and "legal services" as those terms are defined in | ||||||
11 | the Act. | ||||||
12 | (Source: P.A. 99-462, eff. 8-25-15; 100-391, eff. 8-25-17; | ||||||
13 | 100-902, eff. 8-17-18.)
| ||||||
14 | (40 ILCS 5/1-110) (from Ch. 108 1/2, par. 1-110)
| ||||||
15 | Sec. 1-110. Prohibited Transactions.
| ||||||
16 | (a) A fiduciary with respect to a retirement system, | ||||||
17 | pension fund, or investment board shall
not cause the | ||||||
18 | retirement system or pension fund to engage in a transaction if
| ||||||
19 | he or she knows or should know that such transaction | ||||||
20 | constitutes a direct or
indirect:
| ||||||
21 | (1) Sale or exchange, or leasing of any property from | ||||||
22 | the retirement
system
or pension fund to a party in | ||||||
23 | interest for less than adequate consideration,
or from a | ||||||
24 | party in interest to a retirement system or pension fund | ||||||
25 | for more
than adequate consideration.
|
| |||||||
| |||||||
1 | (2) Lending of money or other extension of credit from | ||||||
2 | the retirement
system or pension fund to a party in | ||||||
3 | interest without the receipt of adequate
security and a | ||||||
4 | reasonable rate of interest, or from a party in interest to
| ||||||
5 | a retirement system or pension fund with the provision of | ||||||
6 | excessive security
or an unreasonably high rate of | ||||||
7 | interest.
| ||||||
8 | (3) Furnishing of goods, services or facilities from | ||||||
9 | the retirement
system or pension fund to a party in | ||||||
10 | interest for less than adequate
consideration, or from a | ||||||
11 | party in interest to a retirement system or
pension fund | ||||||
12 | for more than adequate consideration.
| ||||||
13 | (4) Transfer to, or use by or for the benefit of, a | ||||||
14 | party in interest
of any assets of a retirement system or | ||||||
15 | pension fund for less than adequate
consideration.
| ||||||
16 | (b) A fiduciary with respect to a retirement system or | ||||||
17 | pension fund
established under this Code shall not:
| ||||||
18 | (1) Deal with the assets of the retirement system or | ||||||
19 | pension fund in his
own interest or for his own account;
| ||||||
20 | (2) In his individual or any other capacity act in any | ||||||
21 | transaction
involving the retirement system or pension | ||||||
22 | fund on behalf of a party whose
interests are adverse to | ||||||
23 | the interests of the retirement system or pension fund
or | ||||||
24 | the interests of its participants or beneficiaries; or
| ||||||
25 | (3) Receive any consideration for his own personal | ||||||
26 | account from any party
dealing with the retirement system |
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| |||||||
1 | or pension fund in connection with a
transaction involving | ||||||
2 | the assets of the retirement system or pension
fund.
| ||||||
3 | (c) Nothing in this Section shall be construed to prohibit | ||||||
4 | any trustee from:
| ||||||
5 | (1) Receiving any benefit to which he may be entitled | ||||||
6 | as a participant
or beneficiary in the retirement system or | ||||||
7 | pension fund.
| ||||||
8 | (2) Receiving any reimbursement of expenses properly | ||||||
9 | and actually incurred
in the performance of his duties with | ||||||
10 | the retirement system or pension fund.
| ||||||
11 | (3) Serving as a trustee in addition to being an | ||||||
12 | officer, employee, agent
or other representative of a party | ||||||
13 | in interest.
| ||||||
14 | (d) A fiduciary of a pension fund established under Article | ||||||
15 | 3 or 4 shall
not knowingly cause or advise the pension fund to | ||||||
16 | engage in an investment transaction when the fiduciary (i) has | ||||||
17 | any direct interest in
the income, gains, or profits of the | ||||||
18 | investment adviser through which the investment transaction is | ||||||
19 | made or (ii) has a business relationship with that investment | ||||||
20 | adviser that would result in a pecuniary benefit to the | ||||||
21 | fiduciary as a result of the investment transaction. | ||||||
22 | Violation of this subsection (d) is a Class 4 felony.
| ||||||
23 | (e) A board member, employee, or consultant with respect to | ||||||
24 | a retirement system, pension fund, or investment board subject | ||||||
25 | to this Code, except those under Article 3 or 4 whose | ||||||
26 | investments are restricted by Section 1-113.2 , shall not |
| |||||||
| |||||||
1 | knowingly cause or advise the retirement system, pension fund, | ||||||
2 | or investment board to engage in an investment transaction with | ||||||
3 | an investment adviser when the board member, employee, | ||||||
4 | consultant, or their spouse (i) has any direct interest in the | ||||||
5 | income, gains, or profits of the investment adviser through | ||||||
6 | which the investment transaction is made or (ii) has a | ||||||
7 | relationship with that investment adviser that would result in | ||||||
8 | a pecuniary benefit to the board member, employee, or | ||||||
9 | consultant or spouse of such board member, employee, or | ||||||
10 | consultant as a result of the investment transaction. For | ||||||
11 | purposes of this subsection (e), a consultant includes an | ||||||
12 | employee or agent of a consulting firm who has greater than | ||||||
13 | 7.5% ownership of the consulting firm. | ||||||
14 | Violation of this subsection (e) is a Class 4 felony. | ||||||
15 | (Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)
| ||||||
16 | (40 ILCS 5/1-113.1)
| ||||||
17 | Sec. 1-113.1.
Investment authority of pension funds | ||||||
18 | established under
Article 3 or 4 . The board of trustees of a | ||||||
19 | police pension fund established
under Article 3 of this Code or | ||||||
20 | firefighter pension fund established under
Article 4 of this | ||||||
21 | Code shall draw pension funds from the treasurer of the
| ||||||
22 | municipality and, beginning January 1, 1998, invest any part | ||||||
23 | thereof in the
name of the board in the items listed in | ||||||
24 | Sections 1-113.2 through 1-113.4
according to the limitations | ||||||
25 | and requirements of this Article. These
investments shall be |
| |||||||
| |||||||
1 | made with the care, skill, prudence, and diligence that a
| ||||||
2 | prudent person acting in like capacity and familiar with such | ||||||
3 | matters would use
in the conduct of an enterprise of like | ||||||
4 | character with like aims.
| ||||||
5 | Interest and any other income from the investments shall be | ||||||
6 | credited to the
pension fund.
| ||||||
7 | For the purposes of Sections 1-113.2 through 1-113.11, the | ||||||
8 | "net assets" of a
pension fund include both the cash and | ||||||
9 | invested assets of the pension fund.
| ||||||
10 | (Source: P.A. 90-507, eff. 8-22-97.)
| ||||||
11 | (40 ILCS 5/1-113.2)
| ||||||
12 | Sec. 1-113.2.
List of permitted investments for all Article | ||||||
13 | 3 or 4 pension
funds. Any pension fund established under | ||||||
14 | Article 3 or 4 may invest in the
following items:
| ||||||
15 | (1) Interest bearing direct obligations of the United | ||||||
16 | States of America.
| ||||||
17 | (2) Interest bearing obligations to the extent that they | ||||||
18 | are fully
guaranteed or insured as to payment of principal and | ||||||
19 | interest by the United
States of America.
| ||||||
20 | (3) Interest bearing bonds, notes, debentures, or other | ||||||
21 | similar obligations
of agencies of the United States of | ||||||
22 | America. For the purposes of this Section,
"agencies of the | ||||||
23 | United States of America" includes: (i) the Federal National
| ||||||
24 | Mortgage Association and the Student Loan Marketing | ||||||
25 | Association; (ii) federal
land banks, federal intermediate |
| |||||||
| |||||||
1 | credit banks,
federal farm credit banks, and any other entity | ||||||
2 | authorized to
issue direct debt obligations of the United | ||||||
3 | States of America under the Farm
Credit Act of 1971 or | ||||||
4 | amendments to that Act; (iii) federal home loan banks and
the | ||||||
5 | Federal Home Loan Mortgage Corporation; and (iv) any agency | ||||||
6 | created
by Act of Congress that is authorized to issue direct | ||||||
7 | debt obligations of the
United States of America.
| ||||||
8 | (4) Interest bearing savings accounts or certificates of | ||||||
9 | deposit, issued by
federally chartered banks or savings and | ||||||
10 | loan associations, to the extent that
the deposits are insured | ||||||
11 | by agencies or instrumentalities of the federal
government.
| ||||||
12 | (5) Interest bearing savings accounts or certificates of | ||||||
13 | deposit, issued by
State of Illinois chartered banks or savings | ||||||
14 | and loan associations, to the
extent that the deposits are | ||||||
15 | insured by agencies or instrumentalities of the
federal | ||||||
16 | government.
| ||||||
17 | (6) Investments in credit unions, to the extent that the | ||||||
18 | investments are
insured by agencies or instrumentalities of the | ||||||
19 | federal government.
| ||||||
20 | (7) Interest bearing bonds of the State of Illinois.
| ||||||
21 | (8) Pooled interest bearing accounts managed by the | ||||||
22 | Illinois Public
Treasurer's Investment Pool in accordance with | ||||||
23 | the Deposit of State Moneys Act,
interest bearing funds or | ||||||
24 | pooled accounts of the Illinois Metropolitan Investment Funds, | ||||||
25 | and interest bearing funds or pooled accounts managed, | ||||||
26 | operated, and
administered by banks, subsidiaries of banks, or |
| |||||||
| |||||||
1 | subsidiaries of bank holding
companies in accordance with the | ||||||
2 | laws of the State of Illinois.
| ||||||
3 | (9) Interest bearing bonds or tax anticipation warrants of | ||||||
4 | any county,
township, or municipal corporation of the State of | ||||||
5 | Illinois.
| ||||||
6 | (10) Direct obligations of the State of Israel, subject to | ||||||
7 | the conditions
and limitations of item (5.1) of Section 1-113.
| ||||||
8 | (11) Money market mutual funds managed by investment | ||||||
9 | companies that are
registered under the federal Investment | ||||||
10 | Company Act of 1940 and the Illinois
Securities Law of 1953 and | ||||||
11 | are diversified, open-ended management investment
companies; | ||||||
12 | provided that the portfolio of the money market mutual fund is
| ||||||
13 | limited to the following:
| ||||||
14 | (i) bonds, notes, certificates of indebtedness, | ||||||
15 | treasury bills, or other
securities that are guaranteed by | ||||||
16 | the full faith and credit of the United
States of America | ||||||
17 | as to principal and interest;
| ||||||
18 | (ii) bonds, notes, debentures, or other similar | ||||||
19 | obligations of the United
States of America or its | ||||||
20 | agencies; and
| ||||||
21 | (iii) short term obligations of corporations organized | ||||||
22 | in the United
States with assets exceeding $400,000,000, | ||||||
23 | provided that (A) the obligations
mature no later than 180 | ||||||
24 | days from the date of purchase, (B) at the time of
| ||||||
25 | purchase, the obligations are rated by at least 2 standard | ||||||
26 | national rating
services at one of their 3 highest |
| |||||||
| |||||||
1 | classifications, and (C) the obligations
held by the mutual | ||||||
2 | fund do not exceed 10% of the corporation's outstanding
| ||||||
3 | obligations.
| ||||||
4 | (12) General accounts of life insurance companies | ||||||
5 | authorized to transact
business in Illinois.
| ||||||
6 | (13) Any combination of the following, not to exceed 10% of | ||||||
7 | the pension
fund's net assets:
| ||||||
8 | (i) separate accounts that are managed by life | ||||||
9 | insurance companies
authorized to transact business in | ||||||
10 | Illinois and are comprised of diversified
portfolios | ||||||
11 | consisting of common or preferred stocks, bonds, or money | ||||||
12 | market
instruments;
| ||||||
13 | (ii) separate accounts that are managed by insurance | ||||||
14 | companies authorized
to transact business in Illinois, and | ||||||
15 | are comprised of real estate
or loans upon real estate | ||||||
16 | secured by first or second mortgages; and
| ||||||
17 | (iii) mutual funds that meet the following | ||||||
18 | requirements:
| ||||||
19 | (A) the mutual fund is managed by an investment | ||||||
20 | company as defined and
registered under the federal | ||||||
21 | Investment Company Act of 1940 and registered
under the | ||||||
22 | Illinois Securities Law of 1953;
| ||||||
23 | (B) the mutual fund has been in operation for at | ||||||
24 | least 5 years;
| ||||||
25 | (C) the mutual fund has total net assets of $250 | ||||||
26 | million or more; and
|
| |||||||
| |||||||
1 | (D) the mutual fund is comprised of diversified | ||||||
2 | portfolios of
common or preferred stocks, bonds, or | ||||||
3 | money market instruments.
| ||||||
4 | (14) Corporate bonds managed through an investment advisor | ||||||
5 | must meet all of the following requirements: | ||||||
6 | (1) The bonds must be rated as investment grade by one | ||||||
7 | of the 2 largest rating services at the time of purchase. | ||||||
8 | (2) If subsequently downgraded below investment grade, | ||||||
9 | the bonds must be liquidated from the portfolio within 90 | ||||||
10 | days after being downgraded by the manager. | ||||||
11 | (Source: P.A. 96-1495, eff. 1-1-11.)
| ||||||
12 | (40 ILCS 5/1-113.3)
| ||||||
13 | Sec. 1-113.3.
List of additional permitted investments for | ||||||
14 | pension funds
with net assets of $2,500,000 or more.
| ||||||
15 | (a) In addition to the items in Section
3-113.2, a pension | ||||||
16 | fund established under Article 3 or 4 that has net assets of
at | ||||||
17 | least $2,500,000 may invest a portion of its net assets in the | ||||||
18 | following
items:
| ||||||
19 | (1) Separate accounts that are managed by life | ||||||
20 | insurance companies
authorized to transact business in | ||||||
21 | Illinois and are comprised of diversified
portfolios | ||||||
22 | consisting of common or preferred stocks, bonds, or money | ||||||
23 | market
instruments.
| ||||||
24 | (2) Mutual funds that meet the following requirements:
| ||||||
25 | (i) the mutual fund is managed by an investment |
| |||||||
| |||||||
1 | company as defined and
registered under the federal | ||||||
2 | Investment Company Act of 1940 and registered
under the | ||||||
3 | Illinois Securities Law of 1953;
| ||||||
4 | (ii) the mutual fund has been in operation for at | ||||||
5 | least 5 years;
| ||||||
6 | (iii) the mutual fund has total net assets of $250 | ||||||
7 | million or more; and
| ||||||
8 | (iv) the mutual fund is comprised of diversified | ||||||
9 | portfolios of common or
preferred stocks, bonds, or | ||||||
10 | money market instruments.
| ||||||
11 | (b) A pension fund's total investment in the items | ||||||
12 | authorized under this
Section shall not exceed 35% of the | ||||||
13 | market value of the pension fund's net
present assets stated in | ||||||
14 | its most recent annual report on file with the
Illinois | ||||||
15 | Department of Insurance.
| ||||||
16 | (Source: P.A. 90-507, eff. 8-22-97.)
| ||||||
17 | (40 ILCS 5/1-113.4)
| ||||||
18 | Sec. 1-113.4. List of additional permitted investments for | ||||||
19 | pension funds
with net assets of $5,000,000 or more. | ||||||
20 | (a) In addition to the items in Sections 1-113.2 and | ||||||
21 | 1-113.3, a pension fund
established under Article 3 or 4 that | ||||||
22 | has net assets of at least $5,000,000 and
has appointed an | ||||||
23 | investment adviser under Section 1-113.5 may, through that
| ||||||
24 | investment adviser, invest a portion of its assets in common | ||||||
25 | and preferred
stocks authorized for investments of trust funds |
| |||||||
| |||||||
1 | under the laws of the State
of Illinois. The stocks must meet | ||||||
2 | all of the following requirements:
| ||||||
3 | (1) The common stocks are listed on a national | ||||||
4 | securities exchange or
board of trade (as defined in the | ||||||
5 | federal Securities Exchange Act of 1934 and
set forth in | ||||||
6 | subdivision G of Section 3 of the Illinois Securities Law | ||||||
7 | of 1953) or quoted in
the National Association of | ||||||
8 | Securities Dealers Automated Quotation System
National | ||||||
9 | Market System (NASDAQ NMS).
| ||||||
10 | (2) The securities are of a corporation created or | ||||||
11 | existing under the laws
of the United States or any state, | ||||||
12 | district, or territory thereof and the
corporation has been | ||||||
13 | in existence for at least 5 years.
| ||||||
14 | (3) The corporation has not been in arrears on payment | ||||||
15 | of dividends on its
preferred stock during the preceding 5 | ||||||
16 | years.
| ||||||
17 | (4) The market value of stock in any one corporation | ||||||
18 | does not exceed 5% of
the cash and invested assets of the | ||||||
19 | pension fund, and the investments in the
stock of any one | ||||||
20 | corporation do not exceed 5% of the total outstanding stock | ||||||
21 | of
that corporation.
| ||||||
22 | (5) The straight preferred stocks or convertible | ||||||
23 | preferred stocks are
issued or guaranteed by a corporation | ||||||
24 | whose common stock qualifies for
investment by the board.
| ||||||
25 | (6) The issuer of the stocks has been subject to the | ||||||
26 | requirements of
Section 12 of the federal Securities |
| |||||||
| |||||||
1 | Exchange Act of 1934 and has been current
with the filing | ||||||
2 | requirements of Sections 13 and 14 of that Act during the
| ||||||
3 | preceding 3 years.
| ||||||
4 | (b) A pension fund's total investment in the items | ||||||
5 | authorized under this
Section and Section 1-113.3 shall not | ||||||
6 | exceed 35% of the market value of the
pension fund's net | ||||||
7 | present assets stated in its most recent annual report on
file | ||||||
8 | with the Illinois Department of Insurance.
| ||||||
9 | (c) A pension fund that invests funds under this Section | ||||||
10 | shall
electronically file with the Division any reports of its | ||||||
11 | investment activities
that the Division may require, at the | ||||||
12 | times and in the format required by the
Division.
| ||||||
13 | (Source: P.A. 100-201, eff. 8-18-17.)
| ||||||
14 | (40 ILCS 5/1-113.4a) | ||||||
15 | Sec. 1-113.4a. List of additional permitted investments | ||||||
16 | for Article 3 and 4 pension funds with net assets of | ||||||
17 | $10,000,000 or more. | ||||||
18 | (a) In addition to the items in Sections 1-113.2 and | ||||||
19 | 1-113.3, a pension fund established under Article 3 or 4 that | ||||||
20 | has net assets of at least $10,000,000 and has appointed an | ||||||
21 | investment adviser, as defined under Sections 1-101.4 and | ||||||
22 | 1-113.5, may, through that investment adviser, invest an | ||||||
23 | additional portion of its assets in common and preferred stocks | ||||||
24 | and mutual funds. | ||||||
25 | (b) The stocks must meet all of the following requirements: |
| |||||||
| |||||||
1 | (1) The common stocks must be listed on a national | ||||||
2 | securities exchange or board of trade (as defined in the | ||||||
3 | Federal Securities Exchange Act of 1934 and set forth in | ||||||
4 | paragraph G of Section 3 of the Illinois Securities Law of | ||||||
5 | 1953) or quoted in the National Association of Securities | ||||||
6 | Dealers Automated Quotation System National Market System. | ||||||
7 | (2) The securities must be of a corporation in | ||||||
8 | existence for at least 5 years. | ||||||
9 | (3) The market value of stock in any one corporation | ||||||
10 | may not exceed 5% of the cash and invested assets of the | ||||||
11 | pension fund, and the investments in the stock of any one | ||||||
12 | corporation may not exceed 5% of the total outstanding | ||||||
13 | stock of that corporation. | ||||||
14 | (4) The straight preferred stocks or convertible | ||||||
15 | preferred stocks must be issued or guaranteed by a | ||||||
16 | corporation whose common stock qualifies for investment by | ||||||
17 | the board. | ||||||
18 | (c) The mutual funds must meet the following requirements: | ||||||
19 | (1) The mutual fund must be managed by an investment | ||||||
20 | company registered under the Federal Investment Company | ||||||
21 | Act of 1940 and registered under the Illinois Securities | ||||||
22 | Law of 1953. | ||||||
23 | (2) The mutual fund must have been in operation for at | ||||||
24 | least 5 years. | ||||||
25 | (3) The mutual fund must have total net assets of | ||||||
26 | $250,000,000 or more. |
| |||||||
| |||||||
1 | (4) The mutual fund must be comprised of a diversified | ||||||
2 | portfolio of common or preferred stocks, bonds, or money | ||||||
3 | market instruments. | ||||||
4 | (d) A pension fund's total investment in the items | ||||||
5 | authorized under this Section and Section 1-113.3 shall not | ||||||
6 | exceed 50% effective July 1, 2011 and 55% effective July 1, | ||||||
7 | 2012 of the market value of the pension fund's net present | ||||||
8 | assets stated in its most recent annual report on file with the | ||||||
9 | Department of Insurance. | ||||||
10 | (e) A pension fund that invests funds under this Section | ||||||
11 | shall electronically file with the Division any reports of its | ||||||
12 | investment activities that the Division may require, at the | ||||||
13 | time and in the format required by the Division.
| ||||||
14 | (Source: P.A. 96-1495, eff. 1-1-11.) | ||||||
15 | (40 ILCS 5/1-113.14)
| ||||||
16 | Sec. 1-113.14. Investment services for retirement systems, | ||||||
17 | pension funds, and investment boards, except those funds | ||||||
18 | established under Articles 3 and 4. | ||||||
19 | (a) For the purposes of this Section, "investment services" | ||||||
20 | means services provided by an investment adviser or a | ||||||
21 | consultant other than qualified fund-of-fund management | ||||||
22 | services as defined in Section 1-113.15. | ||||||
23 | (b) The selection and appointment of an investment adviser | ||||||
24 | or consultant for investment services by the board of a | ||||||
25 | retirement system, pension fund, or investment board subject to |
| |||||||
| |||||||
1 | this Code, except those under Article 3 or 4 whose investments | ||||||
2 | are restricted by Section 1-113.2 , shall be made and awarded in | ||||||
3 | accordance with this Section. All contracts for investment | ||||||
4 | services shall be awarded by the board using a competitive | ||||||
5 | process that is substantially similar to the process required | ||||||
6 | for the procurement of professional and artistic services under | ||||||
7 | Article 35 of the Illinois Procurement Code. Each board of | ||||||
8 | trustees shall adopt a policy in accordance with this | ||||||
9 | subsection (b) within 60 days after the effective date of this | ||||||
10 | amendatory Act of the 96th General Assembly. The policy shall | ||||||
11 | be posted on its web site and filed with the Illinois | ||||||
12 | Procurement Policy Board. Exceptions to this Section are | ||||||
13 | allowed for (i) sole source procurements, (ii) emergency | ||||||
14 | procurements, (iii) at the discretion of the pension fund, | ||||||
15 | retirement system, or board of investment, contracts that are | ||||||
16 | nonrenewable and one year or less in duration, so long as the | ||||||
17 | contract has a value of less than $20,000, and (iv) in the | ||||||
18 | discretion of the pension fund, retirement system, or | ||||||
19 | investment board, contracts for follow-on funds with the same | ||||||
20 | fund sponsor through closed-end funds.
All exceptions granted | ||||||
21 | under this Section must be published on the system's, fund's, | ||||||
22 | or board's web site, shall name the person authorizing the | ||||||
23 | procurement, and shall include a brief explanation of the | ||||||
24 | reason for the exception. | ||||||
25 | A person, other than a trustee or an employee of a | ||||||
26 | retirement system, pension fund, or investment board, may not |
| |||||||
| |||||||
1 | act as a consultant or investment adviser under this Section | ||||||
2 | unless that person is registered as an investment adviser under | ||||||
3 | the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, | ||||||
4 | et seq.) or a bank, as defined in the federal Investment | ||||||
5 | Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.). | ||||||
6 | (c) Investment services provided by an investment adviser | ||||||
7 | or a consultant appointed under this Section shall be rendered | ||||||
8 | pursuant to a written contract between the investment adviser | ||||||
9 | or consultant and the board. | ||||||
10 | The contract shall include all of the following: | ||||||
11 | (1) Acknowledgement in writing by the investment | ||||||
12 | adviser or consultant that he or she is a fiduciary with | ||||||
13 | respect to the pension fund or retirement system. | ||||||
14 | (2) The description of the board's investment policy | ||||||
15 | and notice that the policy is subject to change. | ||||||
16 | (3) (i) Full disclosure of direct and indirect fees, | ||||||
17 | commissions, penalties, and other compensation, including | ||||||
18 | reimbursement for expenses, that may be paid by or on | ||||||
19 | behalf of the consultant in connection with the provision | ||||||
20 | of services to the pension fund or retirement system and | ||||||
21 | (ii) a requirement that the consultant update the | ||||||
22 | disclosure promptly after a modification of those payments | ||||||
23 | or an additional payment. | ||||||
24 | (4) A requirement that the investment adviser or | ||||||
25 | consultant, in conjunction with the board's staff, submit | ||||||
26 | periodic written reports, on at least a quarterly basis, |
| |||||||
| |||||||
1 | for the board's review at its regularly scheduled meetings. | ||||||
2 | All returns on investment shall be reported as net returns | ||||||
3 | after payment of all fees, commissions, and any other | ||||||
4 | compensation. | ||||||
5 | (5) Disclosure of the names and addresses of (i) the | ||||||
6 | consultant or investment adviser; (ii) any entity that is a | ||||||
7 | parent of, or owns a controlling interest in, the | ||||||
8 | consultant or investment adviser; (iii) any entity that is | ||||||
9 | a subsidiary of, or in which a controlling interest is | ||||||
10 | owned by, the consultant or investment adviser; (iv) any | ||||||
11 | persons who have an ownership or distributive income share | ||||||
12 | in the consultant or investment adviser that is in excess | ||||||
13 | of 7.5%; or (v) serves as an executive officer of the | ||||||
14 | consultant or investment adviser. | ||||||
15 | (6) A disclosure of the names and addresses of all | ||||||
16 | subcontractors, if applicable, and the expected amount of | ||||||
17 | money each will receive under the contract, including an | ||||||
18 | acknowledgment that the contractor must promptly make | ||||||
19 | notification, in writing, if at any time during the term of | ||||||
20 | the contract a contractor adds or changes any | ||||||
21 | subcontractors. For purposes of this subparagraph (6), | ||||||
22 | "subcontractor" does not include non-investment related | ||||||
23 | professionals or professionals offering services that are | ||||||
24 | not directly related to the investment of assets, such as | ||||||
25 | legal counsel, actuary, proxy-voting services, services | ||||||
26 | used to track compliance with legal standards, and |
| |||||||
| |||||||
1 | investment fund of funds where the board has no direct | ||||||
2 | contractual relationship with the investment advisers or | ||||||
3 | partnerships. | ||||||
4 | (7) A description of service to be performed. | ||||||
5 | (8) A description of the need for the service. | ||||||
6 | (9) A description of the plan for post-performance | ||||||
7 | review. | ||||||
8 | (10) A description of the qualifications necessary. | ||||||
9 | (11) The duration of the contract. | ||||||
10 | (12) The method for charging and measuring cost. | ||||||
11 | (d) Notwithstanding any other provision of law, a | ||||||
12 | retirement system, pension fund, or investment board subject to | ||||||
13 | this Code, except those under Article 3 or 4 whose investments | ||||||
14 | are restricted by Section 1-113.2 of this Code , shall not enter | ||||||
15 | into a contract with a consultant that exceeds 5 years in | ||||||
16 | duration. No contract to provide consulting services may be | ||||||
17 | renewed or extended. At the end of the term of a contract, | ||||||
18 | however, the consultant is eligible to compete for a new | ||||||
19 | contract as provided in this Section. No retirement system, | ||||||
20 | pension fund, or investment board shall attempt to avoid or | ||||||
21 | contravene the restrictions of this subsection (d) by any | ||||||
22 | means. | ||||||
23 | (e) Within 60 days after the effective date of this | ||||||
24 | amendatory Act of the 96th General Assembly, each investment | ||||||
25 | adviser or consultant currently providing services or subject | ||||||
26 | to an existing contract for the provision of services must |
| |||||||
| |||||||
1 | disclose to the board of trustees all direct and indirect fees, | ||||||
2 | commissions, penalties, and other compensation paid by or on | ||||||
3 | behalf of the investment adviser or consultant in connection | ||||||
4 | with the provision of those services and shall update that | ||||||
5 | disclosure promptly after a modification of those payments or | ||||||
6 | an additional payment. The person shall update the disclosure | ||||||
7 | promptly after a modification of those payments or an | ||||||
8 | additional payment. The disclosures required by this | ||||||
9 | subsection (e) shall be in writing and shall include the date | ||||||
10 | and amount of each payment and the name and address of each | ||||||
11 | recipient of a payment. | ||||||
12 | (f) The retirement system, pension fund, or board of | ||||||
13 | investment shall develop uniform documents that shall be used | ||||||
14 | for the solicitation, review, and acceptance of all investment | ||||||
15 | services. The form shall include the terms contained in | ||||||
16 | subsection (c) of this Section. All such uniform documents | ||||||
17 | shall be posted on the retirement system's, pension fund's, or | ||||||
18 | investment board's web site. | ||||||
19 | (g) A description of every contract for investment services | ||||||
20 | shall be posted in a conspicuous manner on the web site of the | ||||||
21 | retirement system, pension fund, or investment board. The | ||||||
22 | description must include the name of the person or entity | ||||||
23 | awarded a contract, the total amount applicable to the | ||||||
24 | contract, the total fees paid or to be paid, and a disclosure | ||||||
25 | approved by the board describing the factors that contributed | ||||||
26 | to the selection of an investment adviser or consultant.
|
| |||||||
| |||||||
1 | (Source: P.A. 98-433, eff. 8-16-13.) | ||||||
2 | (40 ILCS 5/1-113.16)
| ||||||
3 | Sec. 1-113.16. Investment transparency. | ||||||
4 | (a) The purpose of this Section is to provide for | ||||||
5 | transparency in the investment of retirement or pension funds | ||||||
6 | and require the reporting of full and complete information | ||||||
7 | regarding the investments by pension funds, retirement | ||||||
8 | systems, and investment boards. | ||||||
9 | (b) A retirement system, pension fund, or investment board | ||||||
10 | subject to this Code and any committees established by such | ||||||
11 | system, fund, or board must comply with the Open Meetings Act. | ||||||
12 | (c) Any retirement system, pension fund, or investment | ||||||
13 | board subject to this Code that establishes a committee shall | ||||||
14 | ensure that the majority of the members on such committee are | ||||||
15 | board members. If any member of a committee is not a member of | ||||||
16 | the board for the system, fund, or board, then that committee | ||||||
17 | member shall be a fiduciary. | ||||||
18 | (d) A retirement system, pension fund, or investment board | ||||||
19 | subject to this Code, except those under Article 3 or 4 whose | ||||||
20 | investments are restricted by Section 1-113.2 , shall maintain | ||||||
21 | an official web site and make available in a clear and | ||||||
22 | conspicuous manner, and update at least quarterly, all of the | ||||||
23 | following information concerning the investment of funds: | ||||||
24 | (1) The total amount of funds held by the pension fund, | ||||||
25 | retirement system, or investment board. |
| |||||||
| |||||||
1 | (2) The asset allocation for the investments made by | ||||||
2 | the pension fund, retirement system, or investment board. | ||||||
3 | (3) Current and historic return information. | ||||||
4 | (4) A detailed listing of the investment advisers for | ||||||
5 | all asset classes. | ||||||
6 | (5) Performance of investments compared against | ||||||
7 | established benchmarks. | ||||||
8 | (6) A detailed list of all consultants doing business | ||||||
9 | with the retirement system, pension fund, or investment | ||||||
10 | board. | ||||||
11 | (7) A detailed list of all contractors, other than | ||||||
12 | investment advisers and consultants, doing business with | ||||||
13 | the retirement system, pension fund, or investment board. | ||||||
14 | (8) Any requests for investment services. | ||||||
15 | (9) The names and email addresses of all board members, | ||||||
16 | directors, and senior staff. | ||||||
17 | (10) The report required under Section 1-109.1 of this | ||||||
18 | Code, if applicable. | ||||||
19 | (11) The description of each contract required under | ||||||
20 | subsection (g) of Section 1-113.14 of this Code, if | ||||||
21 | applicable. | ||||||
22 | (e) A pension fund under Article 3 or 4 whose investments | ||||||
23 | are restricted by Section 1-113.2 of this Code shall make the | ||||||
24 | information required in subsection (d) of this Section | ||||||
25 | available on its web site or in a location that allows the | ||||||
26 | information to be available for inspection by the public. |
| |||||||
| |||||||
1 | (f) Nothing in this Section requires the pension fund, | ||||||
2 | retirement system, or investment board to make information | ||||||
3 | available on the Internet that is exempt from inspection and | ||||||
4 | copying under the Freedom of Information Act.
| ||||||
5 | (Source: P.A. 96-6, eff. 4-3-09.) | ||||||
6 | (40 ILCS 5/1-113.20) | ||||||
7 | Sec. 1-113.20. Investment strategies; explicit and | ||||||
8 | implicit costs. Every pension fund, retirement system, and | ||||||
9 | investment board created under this Code, except those under | ||||||
10 | Article 3 or 4 whose investments are restricted by Section | ||||||
11 | 1-113.2 of this Code , shall instruct the fund's, system's, or | ||||||
12 | board's investment advisors to utilize investment strategies | ||||||
13 | designed to ensure that all securities transactions are | ||||||
14 | executed in such a manner that the total explicit and implicit | ||||||
15 | costs and total proceeds in every transaction are the most | ||||||
16 | favorable under the circumstances.
| ||||||
17 | (Source: P.A. 96-753, eff. 8-25-09.) | ||||||
18 | (40 ILCS 5/1-150)
| ||||||
19 | Sec. 1-150. Approval of travel or educational mission. The | ||||||
20 | expenses for travel or educational missions of a board member | ||||||
21 | of a retirement system, pension fund, or investment board | ||||||
22 | created under this Code, except those under Article 3 or 4 | ||||||
23 | whose investments are restricted by Section 1-113.2 of this | ||||||
24 | Code , must be approved by a majority of the board prior to the |
| |||||||
| |||||||
1 | travel or educational mission.
| ||||||
2 | (Source: P.A. 96-6, eff. 4-3-09.)
| ||||||
3 | (40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128)
| ||||||
4 | Sec. 4-128. To invest funds. The board shall invest funds | ||||||
5 | with the care, skill, prudence, and diligence that a prudent | ||||||
6 | person acting in like capacity and familiar with such matters | ||||||
7 | would use in the conduct of an enterprise of like character | ||||||
8 | with like aims Beginning January 1, 1998, the board shall
| ||||||
9 | invest funds in accordance with Sections 1-113.1 through | ||||||
10 | 1-113.10 of this
Code .
| ||||||
11 | (Source: P.A. 90-507, eff. 8-22-97.)
| ||||||
12 | Section 99. Effective date. This Act takes effect upon | ||||||
13 | becoming law.
|