SB0452 EnrolledLRB098 04664 EFG 34692 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Section 1-109.1 and by adding Section 1-113.21 as follows:
 
6    (40 ILCS 5/1-109.1)  (from Ch. 108 1/2, par. 1-109.1)
7    Sec. 1-109.1. Allocation and Delegation of Fiduciary
8Duties.
9    (1) Subject to the provisions of Section 22A-113 of this
10Code and subsections (2) and (3) of this Section, the board of
11trustees of a retirement system or pension fund established
12under this Code may:
13        (a) Appoint one or more investment managers as
14    fiduciaries to manage (including the power to acquire and
15    dispose of) any assets of the retirement system or pension
16    fund; and
17        (b) Allocate duties among themselves and designate
18    others as fiduciaries to carry out specific fiduciary
19    activities other than the management of the assets of the
20    retirement system or pension fund.
21    (2) The board of trustees of a pension fund established
22under Article 5, 6, 8, 9, 10, 11, 12 or 17 of this Code may not
23transfer its investment authority, nor transfer the assets of

 

 

SB0452 Enrolled- 2 -LRB098 04664 EFG 34692 b

1the fund to any other person or entity for the purpose of
2consolidating or merging its assets and management with any
3other pension fund or public investment authority, unless the
4board resolution authorizing such transfer is submitted for
5approval to the contributors and pensioners of the fund at
6elections held not less than 30 days after the adoption of such
7resolution by the board, and such resolution is approved by a
8majority of the votes cast on the question in both the
9contributors election and the pensioners election. The
10election procedures and qualifications governing the election
11of trustees shall govern the submission of resolutions for
12approval under this paragraph, insofar as they may be made
13applicable.
14    (3) Pursuant to subsections (h) and (i) of Section 6 of
15Article VII of the Illinois Constitution, the investment
16authority of boards of trustees of retirement systems and
17pension funds established under this Code is declared to be a
18subject of exclusive State jurisdiction, and the concurrent
19exercise by a home rule unit of any power affecting such
20investment authority is hereby specifically denied and
21preempted.
22    (4) For the purposes of this Code, "emerging investment
23manager" means a qualified investment adviser that manages an
24investment portfolio of at least $10,000,000 but less than
25$10,000,000,000 and is a "minority owned business", "female
26owned business" or "business owned by a person with a

 

 

SB0452 Enrolled- 3 -LRB098 04664 EFG 34692 b

1disability" as those terms are defined in the Business
2Enterprise for Minorities, Females, and Persons with
3Disabilities Act.
4    It is hereby declared to be the public policy of the State
5of Illinois to encourage the trustees of public employee
6retirement systems, pension funds, and investment boards to use
7emerging investment managers in managing their system's
8assets, encompassing all asset classes, and increase the
9racial, ethnic, and gender diversity of its fiduciaries, to the
10greatest extent feasible within the bounds of financial and
11fiduciary prudence, and to take affirmative steps to remove any
12barriers to the full participation in investment opportunities
13afforded by those retirement systems, pension funds, and
14investment boards.
15    On or before January 1, 2010, a retirement system, pension
16fund, or investment board subject to this Code, except those
17whose investments are restricted by Section 1-113.2 of this
18Code, shall adopt a policy that sets forth goals for
19utilization of emerging investment managers. This policy shall
20include quantifiable goals for the management of assets in
21specific asset classes by emerging investment managers. The
22retirement system, pension fund, or investment board shall
23establish 3 separate goals for: (i) emerging investment
24managers that are minority owned businesses; (ii) emerging
25investment managers that are female owned businesses; and (iii)
26emerging investment managers that are businesses owned by a

 

 

SB0452 Enrolled- 4 -LRB098 04664 EFG 34692 b

1person with a disability. The goals established shall be based
2on the percentage of total dollar amount of investment service
3contracts let to minority owned businesses, female owned
4businesses, and businesses owned by a person with a disability,
5as those terms are defined in the Business Enterprise for
6Minorities, Females, and Persons with Disabilities Act. The
7retirement system, pension fund, or investment board shall
8annually review the goals established under this subsection.
9    If in any case an emerging investment manager meets the
10criteria established by a board for a specific search and meets
11the criteria established by a consultant for that search, then
12that emerging investment manager shall receive an invitation by
13the board of trustees, or an investment committee of the board
14of trustees, to present his or her firm for final consideration
15of a contract. In the case where multiple emerging investment
16managers meet the criteria of this Section, the staff may
17choose the most qualified firm or firms to present to the
18board.
19    The use of an emerging investment manager does not
20constitute a transfer of investment authority for the purposes
21of subsection (2) of this Section.
22    (5) Each retirement system, pension fund, or investment
23board subject to this Code, except those whose investments are
24restricted by Section 1-113.2 of this Code, shall establish a
25policy that sets forth goals for increasing the racial, ethnic,
26and gender diversity of its fiduciaries, including its

 

 

SB0452 Enrolled- 5 -LRB098 04664 EFG 34692 b

1consultants and senior staff. Each system, fund, and investment
2board shall annually review the goals established under this
3subsection.
4    (6) On or before January 1, 2010, a retirement system,
5pension fund, or investment board subject to this Code, except
6those whose investments are restricted by Section 1-113.2 of
7this Code, shall adopt a policy that sets forth goals for
8utilization of businesses owned by minorities, females, and
9persons with disabilities for all contracts and services. The
10goals established shall be based on the percentage of total
11dollar amount of all contracts let to minority owned
12businesses, female owned businesses, and businesses owned by a
13person with a disability, as those terms are defined in the
14Business Enterprise for Minorities, Females, and Persons with
15Disabilities Act. The retirement system, pension fund, or
16investment board shall annually review the goals established
17under this subsection.
18    (7) On or before January 1, 2010, a retirement system,
19pension fund, or investment board subject to this Code, except
20those whose investments are restricted by Section 1-113.2 of
21this Code, shall adopt a policy that sets forth goals for
22increasing the utilization of minority broker-dealers. For the
23purposes of this Code, "minority broker-dealer" means a
24qualified broker-dealer who meets the definition of "minority
25owned business", "female owned business", or "business owned by
26a person with a disability", as those terms are defined in the

 

 

SB0452 Enrolled- 6 -LRB098 04664 EFG 34692 b

1Business Enterprise for Minorities, Females, and Persons with
2Disabilities Act. The retirement system, pension fund, or
3investment board shall annually review the goals established
4under this Section.
5    (8) Each retirement system, pension fund, and investment
6board subject to this Code, except those whose investments are
7restricted by Section 1-113.2 of this Code, shall submit a
8report to the Governor and the General Assembly by January 1 of
9each year that includes the following: (i) the policy adopted
10under subsection (4) of this Section, including the names and
11addresses of the emerging investment managers used, percentage
12of the assets under the investment control of emerging
13investment managers for the 3 separate goals, and the actions
14it has undertaken to increase the use of emerging investment
15managers, including encouraging other investment managers to
16use emerging investment managers as subcontractors when the
17opportunity arises; (ii) the policy adopted under subsection
18(5) of this Section; (iii) the policy adopted under subsection
19(6) of this Section; and (iv) the policy adopted under
20subsection (7) of this Section, including specific actions
21undertaken to increase the use of minority broker-dealers; and
22(v) the policy adopted under subsection (9) of this Section.
23    (9) On or before February 1, 2015, a retirement system,
24pension fund, or investment board subject to this Code, except
25those whose investments are restricted by Section 1-113.2 of
26this Code, shall adopt a policy that sets forth goals for

 

 

SB0452 Enrolled- 7 -LRB098 04664 EFG 34692 b

1increasing the utilization of minority investment managers.
2For the purposes of this Code, "minority investment manager"
3means a qualified investment manager that manages an investment
4portfolio and meets the definition of "minority owned
5business", "female owned business", or "business owned by a
6person with a disability", as those terms are defined in the
7Business Enterprise for Minorities, Females, and Persons with
8Disabilities Act.
9    It is hereby declared to be the public policy of the State
10of Illinois to encourage the trustees of public employee
11retirement systems, pension funds, and investment boards to use
12minority investment managers in managing their systems'
13assets, encompassing all asset classes, and to increase the
14racial, ethnic, and gender diversity of their fiduciaries, to
15the greatest extent feasible within the bounds of financial and
16fiduciary prudence, and to take affirmative steps to remove any
17barriers to the full participation in investment opportunities
18afforded by those retirement systems, pension funds, and
19investment boards.
20    The retirement system, pension fund, or investment board
21shall establish 3 separate goals for: (i) minority investment
22managers that are minority owned businesses; (ii) minority
23investment managers that are female owned businesses; and (iii)
24minority investment managers that are businesses owned by a
25person with a disability. The retirement system, pension fund,
26or investment board shall annually review the goals established

 

 

SB0452 Enrolled- 8 -LRB098 04664 EFG 34692 b

1under this Section.
2    If in any case a minority investment manager meets the
3criteria established by a board for a specific search and meets
4the criteria established by a consultant for that search, then
5that minority investment manager shall receive an invitation by
6the board of trustees, or an investment committee of the board
7of trustees, to present his or her firm for final consideration
8of a contract. In the case where multiple minority investment
9managers meet the criteria of this Section, the staff may
10choose the most qualified firm or firms to present to the
11board.
12    The use of a minority investment manager does not
13constitute a transfer of investment authority for the purposes
14of subsection (2) of this Section.
15(Source: P.A. 96-6, eff. 4-3-09.)
 
16    (40 ILCS 5/1-113.21 new)
17    Sec. 1-113.21. Contracts for services.
18    (a) Beginning January 1, 2015, no contract, oral or
19written, for investment services, consulting services, or
20commitment to a private market fund shall be awarded by a
21retirement system, pension fund, or investment board
22established under this Code unless the investment advisor,
23consultant, or private market fund first discloses:
24        (1) the number of its investment and senior staff and
25    the percentage of its investment and senior staff who are

 

 

SB0452 Enrolled- 9 -LRB098 04664 EFG 34692 b

1    (i) a minority person, (ii) a female, and (iii) a person
2    with a disability; and
3        (2) the number of contracts, oral or written, for
4    investment services, consulting services, and professional
5    and artistic services that the investment advisor,
6    consultant, or private market fund has with (i) a minority
7    owned business, (ii) a female owned business, or (iii) a
8    business owned by a person with a disability; and
9        (3) the number of contracts, oral or written, for
10    investment services, consulting services, and professional
11    and artistic services the investment advisor, consultant,
12    or private market fund has with a business other than (i) a
13    minority owned business, (ii) a female owned business or
14    (iii) a business owned by a person with a disability, if
15    more than 50% of services performed pursuant to the
16    contract are performed by (i) a minority person, (ii) a
17    female, and (iii) a person with a disability.
18    (b) The disclosures required by this Section shall be
19considered, within the bounds of financial and fiduciary
20prudence, prior to the awarding of a contract, oral or written,
21for investment services, consulting services, or commitment to
22a private market fund.
23    (c) For the purposes of this Section, the terms "minority
24person", "female", "person with a disability", "minority owned
25business", "female owned business", and "business owned by a
26person with a disability" have the same meaning as those terms

 

 

SB0452 Enrolled- 10 -LRB098 04664 EFG 34692 b

1have in the Business Enterprise for Minorities, Females, and
2Persons with Disabilities Act.
3    (d) For purposes of this Section, the term "private market
4fund" means any private equity fund, private equity fund of
5funds, venture capital fund, hedge fund, hedge fund of funds,
6real estate fund, or other investment vehicle that is not
7publicly traded.
 
8    Section 10. The Illinois Prepaid Tuition Act is amended by
9changing Section 30 as follows:
 
10    (110 ILCS 979/30)
11    Sec. 30. Investment Advisory Panel duties and
12responsibilities.
13    (a) Advice and review. The panel shall offer advice and
14counseling regarding the investments of the Illinois prepaid
15tuition program with the objective of obtaining the best
16possible return on investments consistent with actuarial
17soundness of the program. The panel is required to annually
18review and advise the Commission on provisions of the strategic
19investment plan for the prepaid tuition program. The panel is
20also charged with reviewing and advising the Commission with
21regard to the annual report that describes the current
22financial condition of the program. The panel at its own
23discretion also may advise the Commission on other aspects of
24the program.

 

 

SB0452 Enrolled- 11 -LRB098 04664 EFG 34692 b

1    (b) Investment plan. The Commission annually shall adopt a
2comprehensive investment plan for purposes of this Section. The
3comprehensive investment plan shall specify the investment
4policies to be utilized by the Commission in its administration
5of the Illinois Prepaid Tuition Trust Fund created by Section
635. The Commission may direct that assets of those Funds be
7placed in savings accounts or may use the same to purchase
8fixed or variable life insurance or annuity contracts,
9securities, evidence of indebtedness, or other investment
10products pursuant to the comprehensive investment plan and in
11such proportions as may be designated or approved under that
12plan. The Commission shall invest such assets with the care,
13skill, prudence, and diligence under the circumstances then
14prevailing that a prudent man acting in a like capacity and
15familiar with such matters would use in the conduct of an
16enterprise of a like character with like aims, and the
17Commission shall diversify the investments of such assets so as
18to minimize the risk of large losses, unless under the
19circumstances it is clearly prudent not to do so. Those
20insurance, annuity, savings, and investment products shall be
21underwritten and offered in compliance with applicable federal
22and State laws, rules, and regulations by persons who are
23authorized thereunder to provide those services. The
24Commission shall delegate responsibility for preparing the
25comprehensive investment plan to the Executive Director of the
26Commission. Nothing in this Section shall preclude the

 

 

SB0452 Enrolled- 12 -LRB098 04664 EFG 34692 b

1Commission from contracting with a private corporation or
2institution to provide such services as may be a part of the
3comprehensive investment plan or as may be deemed necessary for
4implementation of the comprehensive investment plan,
5including, but not limited to, providing consolidated billing,
6individual and collective record keeping and accounting, and
7asset purchase, control, and safekeeping.
8    (b-5) Investment duties. Beginning January 1, 2015, with
9respect to any investments for which it is responsible under
10this Section or any other law, the Commission shall be subject
11to the same requirements as are imposed upon the board of
12trustees of a retirement system under Sections 1-109.1(5.1),
131-109.1(9), and 1-113.21 of the Illinois Pension Code, to the
14extent that those requirements are not in direct conflict with
15any other requirement of law to which the Commission is
16subject.
17    (c) Program management. The Commission may not delegate its
18management functions, but may arrange to compensate for
19personalized investment advisory services rendered with
20respect to any or all of the investments under its control an
21investment advisor registered under Section 8 of the Illinois
22Securities Law of 1953 or any bank or other entity authorized
23by law to provide those services. Nothing contained herein
24shall preclude the Commission from subscribing to general
25investment research services available for purchase or use by
26others. The Commission also shall have authority to compensate

 

 

SB0452 Enrolled- 13 -LRB098 04664 EFG 34692 b

1for accounting, computing, and other necessary services.
2    (d) Annual report. The Commission shall annually prepare or
3cause to be prepared a report setting forth in appropriate
4detail an accounting of all Illinois prepaid tuition program
5funds and a description of the financial condition of the
6program at the close of each fiscal year. Included in this
7report shall be an evaluation by at least one nationally
8recognized actuary of the financial viability of the program.
9This report shall be submitted to the Governor, the President
10of the Senate, the Speaker of the House of Representatives, the
11Auditor General, and the Board of Higher Education on or before
12March 1 of the subsequent fiscal year. This report also shall
13be made available to purchasers of Illinois prepaid tuition
14contracts and shall contain complete Illinois prepaid tuition
15contract sales information, including, but not limited to,
16projected postsecondary enrollment data for qualified
17beneficiaries.
18    (e) Marketing plan. Selection of a marketing agent for the
19Illinois prepaid tuition program must be approved by the
20Commission. At least once every 3 years, the Commission shall
21solicit proposals for marketing of the Illinois prepaid tuition
22program in accordance with the Illinois Securities Law of 1953
23and any applicable provisions of federal law. The entity
24designated pursuant to this paragraph shall serve as a
25centralized marketing agent for the program and shall have
26exclusive responsibility for marketing the program. No

 

 

SB0452 Enrolled- 14 -LRB098 04664 EFG 34692 b

1contract for marketing the Illinois prepaid tuition program
2shall extend for longer than 3 years. Any materials produced
3for the purpose of marketing the program shall be submitted to
4the Executive Director of the Commission for approval before
5they are made public. Any eligible institution may distribute
6marketing materials produced for the program, so long as the
7Executive Director of the Commission approves the distribution
8in advance. Neither the State nor the Commission shall be
9liable for misrepresentation of the program by a marketing
10agent.
11    (f) Accounting and audit. The Commission shall annually
12cause to be prepared an accounting of the trust and shall
13transmit a copy of the accounting to the Governor, the
14President of the Senate, the Speaker of the House, and the
15minority leaders of the Senate and House of Representatives.
16The Commission shall also make available this accounting of the
17trust to any purchaser of an Illinois prepaid tuition contract,
18upon request. The accounts of the Illinois prepaid tuition
19program shall be subject to annual audits by the Auditor
20General or a certified public accountant appointed by the
21Auditor General.
22(Source: P.A. 96-1282, eff. 7-26-10.)