Rep. Arthur Turner

Filed: 5/23/2014

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 452

2    AMENDMENT NO. ______. Amend Senate Bill 452 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Pension Code is amended by
5changing Sections 1-109.1 and 1-109.3 and by adding 1-113.21 as
6follows:
 
7    (40 ILCS 5/1-109.1)  (from Ch. 108 1/2, par. 1-109.1)
8    Sec. 1-109.1. Allocation and Delegation of Fiduciary
9Duties.
10    (1) Subject to the provisions of Section 22A-113 of this
11Code and subsections (2) and (3) of this Section, the board of
12trustees of a retirement system or pension fund established
13under this Code may:
14        (a) Appoint one or more investment managers as
15    fiduciaries to manage (including the power to acquire and
16    dispose of) any assets of the retirement system or pension

 

 

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1    fund; and
2        (b) Allocate duties among themselves and designate
3    others as fiduciaries to carry out specific fiduciary
4    activities other than the management of the assets of the
5    retirement system or pension fund.
6    (2) The board of trustees of a pension fund established
7under Article 5, 6, 8, 9, 10, 11, 12 or 17 of this Code may not
8transfer its investment authority, nor transfer the assets of
9the fund to any other person or entity for the purpose of
10consolidating or merging its assets and management with any
11other pension fund or public investment authority, unless the
12board resolution authorizing such transfer is submitted for
13approval to the contributors and pensioners of the fund at
14elections held not less than 30 days after the adoption of such
15resolution by the board, and such resolution is approved by a
16majority of the votes cast on the question in both the
17contributors election and the pensioners election. The
18election procedures and qualifications governing the election
19of trustees shall govern the submission of resolutions for
20approval under this paragraph, insofar as they may be made
21applicable.
22    (3) Pursuant to subsections (h) and (i) of Section 6 of
23Article VII of the Illinois Constitution, the investment
24authority of boards of trustees of retirement systems and
25pension funds established under this Code is declared to be a
26subject of exclusive State jurisdiction, and the concurrent

 

 

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1exercise by a home rule unit of any power affecting such
2investment authority is hereby specifically denied and
3preempted.
4    (4) For the purposes of this Code, "emerging investment
5manager" means a qualified investment adviser that manages an
6investment portfolio of at least $10,000,000 but less than
7$10,000,000,000 and is a "minority owned business", "female
8owned business" or "business owned by a person with a
9disability" as those terms are defined in the Business
10Enterprise for Minorities, Females, and Persons with
11Disabilities Act.
12    It is hereby declared to be the public policy of the State
13of Illinois to encourage the trustees of public employee
14retirement systems, pension funds, and investment boards to use
15emerging investment managers in managing their system's
16assets, encompassing all asset classes, and increase the
17racial, ethnic, and gender diversity of its fiduciaries, to the
18greatest extent feasible within the bounds of financial and
19fiduciary prudence, and to take affirmative steps to remove any
20barriers to the full participation in investment opportunities
21afforded by those retirement systems, pension funds, and
22investment boards.
23    On or before January 1, 2010, a retirement system, pension
24fund, or investment board subject to this Code, except those
25whose investments are restricted by Section 1-113.2 of this
26Code, shall adopt a policy that sets forth goals for

 

 

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1utilization of emerging investment managers. This policy shall
2include quantifiable goals for the management of assets in
3specific asset classes by emerging investment managers. The
4retirement system, pension fund, or investment board shall
5establish 3 separate goals for: (i) emerging investment
6managers that are minority owned businesses; (ii) emerging
7investment managers that are female owned businesses; and (iii)
8emerging investment managers that are businesses owned by a
9person with a disability. The goals established shall be based
10on the percentage of total dollar amount of investment service
11contracts let to minority owned businesses, female owned
12businesses, and businesses owned by a person with a disability,
13as those terms are defined in the Business Enterprise for
14Minorities, Females, and Persons with Disabilities Act. The
15retirement system, pension fund, or investment board shall
16annually review the goals established under this subsection.
17    If in any case an emerging investment manager meets the
18criteria established by a board for a specific search and meets
19the criteria established by a consultant for that search, then
20that emerging investment manager shall receive an invitation by
21the board of trustees, or an investment committee of the board
22of trustees, to present his or her firm for final consideration
23of a contract. In the case where multiple emerging investment
24managers meet the criteria of this Section, the staff may
25choose the most qualified firm or firms to present to the
26board.

 

 

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1    The use of an emerging investment manager does not
2constitute a transfer of investment authority for the purposes
3of subsection (2) of this Section.
4    (5) Each retirement system, pension fund, or investment
5board subject to this Code, except those whose investments are
6restricted by Section 1-113.2 of this Code, shall establish a
7policy that sets forth goals for increasing the racial, ethnic,
8and gender diversity of its fiduciaries, including its
9consultants and senior staff. Each system, fund, and investment
10board shall annually review the goals established under this
11subsection.
12    (6) On or before January 1, 2010, a retirement system,
13pension fund, or investment board subject to this Code, except
14those whose investments are restricted by Section 1-113.2 of
15this Code, shall adopt a policy that sets forth goals for
16utilization of businesses owned by minorities, females, and
17persons with disabilities for all contracts and services. The
18goals established shall be based on the percentage of total
19dollar amount of all contracts let to minority owned
20businesses, female owned businesses, and businesses owned by a
21person with a disability, as those terms are defined in the
22Business Enterprise for Minorities, Females, and Persons with
23Disabilities Act. The retirement system, pension fund, or
24investment board shall annually review the goals established
25under this subsection.
26    (7) On or before January 1, 2010, a retirement system,

 

 

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

 

 

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1(6) of this Section; and (iv) the policy adopted under
2subsection (7) of this Section, including specific actions
3undertaken to increase the use of minority broker-dealers; and
4(v) the policy adopted under subsection (9) of this Section.
5    (9) On or before February 1, 2015, a retirement system,
6pension fund, or investment board subject to this Code, except
7those whose investments are restricted by Section 1-113.2 of
8this Code, shall adopt a policy that sets forth goals for
9increasing the utilization of minority investment managers.
10For the purposes of this Code, "minority investment manager"
11means a qualified investment manager that manages an investment
12portfolio and meets the definition of "minority owned
13business", "female owned business", or "business owned by a
14person with a disability", as those terms are defined in the
15Business Enterprise for Minorities, Females, and Persons with
16Disabilities Act.
17    It is hereby declared to be the public policy of the State
18of Illinois to encourage the trustees of public employee
19retirement systems, pension funds, and investment boards to use
20minority investment managers in managing their systems'
21assets, encompassing all asset classes, and to increase the
22racial, ethnic, and gender diversity of their fiduciaries, to
23the greatest extent feasible within the bounds of financial and
24fiduciary prudence, and to take affirmative steps to remove any
25barriers to the full participation in investment opportunities
26afforded by those retirement systems, pension funds, and

 

 

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1investment boards.
2    The retirement system, pension fund, or investment board
3shall establish 3 separate goals for: (i) minority investment
4managers that are minority owned businesses; (ii) minority
5investment managers that are female owned businesses; and (iii)
6minority investment managers that are businesses owned by a
7person with a disability. The retirement system, pension fund,
8or investment board shall annually review the goals established
9under this Section.
10    If in any case a minority investment manager meets the
11criteria established by a board for a specific search and meets
12the criteria established by a consultant for that search, then
13that minority investment manager shall receive an invitation by
14the board of trustees, or an investment committee of the board
15of trustees, to present his or her firm for final consideration
16of a contract. In the case where multiple minority investment
17managers meet the criteria of this Section, the staff may
18choose the most qualified firm or firms to present to the
19board.
20    The use of a minority investment manager does not
21constitute a transfer of investment authority for the purposes
22of subsection (2) of this Section.
23(Source: P.A. 96-6, eff. 4-3-09.)
 
24    (40 ILCS 5/1-109.3)
25    Sec. 1-109.3. Training requirement for pension trustees

 

 

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1and managers.
2    (a) All elected and appointed trustees under Article 3 and
34 of this Code must participate in a mandatory trustee
4certification training seminar that consists of at least 32
5hours of initial trustee certification at a training facility
6that is accredited and affiliated with a State of Illinois
7certified college or university. This training must include
8without limitation all of the following:
9        (1) Duties and liabilities of a fiduciary under Article
10    1 of the Illinois Pension Code.
11        (2) Adjudication of pension claims.
12        (3) Basic accounting and actuarial training.
13        (4) Trustee ethics.
14        (5) The Illinois Open Meetings Act.
15        (6) The Illinois Freedom of Information Act.
16    The training required under this subsection (a) must be
17completed within the first year that a trustee is elected or
18appointed under an Article 3 or 4 pension fund. The elected and
19appointed trustees of an Article 3 or 4 pension fund who are
20police officers (as defined in Section 3-106 of this Code) or
21firefighters (as defined in Section 4-106 of this Code) or are
22employed by the municipality shall be permitted time away from
23their duties to attend such training without reduction of
24accrued leave or benefit time. Active or appointed trustees
25serving on the effective date of this amendatory Act of the
2696th General Assembly shall not be required to attend the

 

 

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1training required under this subsection (a).
2    (b) In addition to the initial trustee certification
3training required under subsection (a), all elected and
4appointed trustees under Article 3 and 4 of this Code,
5including trustees serving on the effective date of this
6amendatory Act of the 96th General Assembly, shall also
7participate in a minimum of 16 hours of continuing trustee
8education each year after the first year that the trustee is
9elected or appointed.
10    (c) The training required under this Section shall be paid
11for by the pension fund.
12    (d) Any board member who does not timely complete the
13training required under this Section is not eligible to serve
14on the board of trustees of an Article 3 or 4 pension fund,
15unless the board member completes the missed training within 6
16months after the date the member failed to complete the
17required training. In the event of a board member's failure to
18complete the required training, a successor shall be appointed
19or elected, as applicable, for the unexpired term. A successor
20who is elected under such circumstances must be elected at a
21special election called by the board and conducted in the same
22manner as a regular election under Article 3 or 4, as
23applicable.
24    (e) Beginning January 1, 2015, every current or incoming
25trustee, Chief Financial Officer, Chief Investment Officer,
26and Executive Director of any pension fund or retirement system

 

 

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1established under any Article of this Code shall receive 10
2hours of minority and female investment inclusion training,
3with the oversight of the Senate Public Pensions and State
4Investments Committee.
5(Source: P.A. 96-429, eff. 8-13-09.)
 
6    (40 ILCS 5/1-113.21 new)
7    Sec. 1-113.21. Contracts for services.
8    (a) Beginning January 1, 2015, no contract, oral or
9written, for investment services, consulting services, or
10commitment to a private market fund shall be awarded by a
11retirement system, pension fund, or investment board
12established under this Code unless the investment advisor,
13consultant, or private market fund first discloses:
14        (1) the number of its investment and senior staff and
15    the percentage of its investment and senior staff who are
16    (i) a minority person, (ii) a female, and (iii) a person
17    with a disability; and
18        (2) the number of contracts, oral or written, for
19    investment services, consulting services, and professional
20    and artistic services that the investment advisor,
21    consultant, or private market fund has with (i) a minority
22    owned business, (ii) a female owned business, or (iii) a
23    business owned by a person with a disability; and
24        (3) the number of contracts, oral or written, for
25    investment services, consulting services, and professional

 

 

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1    and artistic services the investment advisor, consultant,
2    or private market fund has with a business other than (i) a
3    minority owned business, (ii) a female owned business or
4    (iii) a business owned by a person with a disability, if
5    more than 50% of services performed pursuant to the
6    contract are performed by (i) a minority person, (ii) a
7    female, and (iii) a person with a disability.
8    (b) The disclosures required by this Section shall be
9considered, within the bounds of financial and fiduciary
10prudence, prior to the awarding of a contract, oral or written,
11for investment services, consulting services, or commitment to
12a private market fund.
13    (c) For the purposes of this Section, the terms "minority
14person", "female", "person with a disability", "minority owned
15business", "female owned business", and "business owned by a
16person with a disability" have the same meaning as those terms
17have in the Business Enterprise for Minorities, Females, and
18Persons with Disabilities Act.
19    (d) For purposes of this Section, the term "private market
20fund" means any private equity fund, private equity fund of
21funds, venture capital fund, hedge fund, hedge fund of funds,
22real estate fund, or other investment vehicle that is not
23publicly traded.
 
24    Section 10. The Illinois Prepaid Tuition Act is amended by
25changing Section 30 as follows:
 

 

 

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1    (110 ILCS 979/30)
2    Sec. 30. Investment Advisory Panel duties and
3responsibilities.
4    (a) Advice and review. The panel shall offer advice and
5counseling regarding the investments of the Illinois prepaid
6tuition program with the objective of obtaining the best
7possible return on investments consistent with actuarial
8soundness of the program. The panel is required to annually
9review and advise the Commission on provisions of the strategic
10investment plan for the prepaid tuition program. The panel is
11also charged with reviewing and advising the Commission with
12regard to the annual report that describes the current
13financial condition of the program. The panel at its own
14discretion also may advise the Commission on other aspects of
15the program.
16    (b) Investment plan. The Commission annually shall adopt a
17comprehensive investment plan for purposes of this Section. The
18comprehensive investment plan shall specify the investment
19policies to be utilized by the Commission in its administration
20of the Illinois Prepaid Tuition Trust Fund created by Section
2135. The Commission may direct that assets of those Funds be
22placed in savings accounts or may use the same to purchase
23fixed or variable life insurance or annuity contracts,
24securities, evidence of indebtedness, or other investment
25products pursuant to the comprehensive investment plan and in

 

 

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1such proportions as may be designated or approved under that
2plan. The Commission shall invest such assets with the care,
3skill, prudence, and diligence under the circumstances then
4prevailing that a prudent man acting in a like capacity and
5familiar with such matters would use in the conduct of an
6enterprise of a like character with like aims, and the
7Commission shall diversify the investments of such assets so as
8to minimize the risk of large losses, unless under the
9circumstances it is clearly prudent not to do so. Those
10insurance, annuity, savings, and investment products shall be
11underwritten and offered in compliance with applicable federal
12and State laws, rules, and regulations by persons who are
13authorized thereunder to provide those services. The
14Commission shall delegate responsibility for preparing the
15comprehensive investment plan to the Executive Director of the
16Commission. Nothing in this Section shall preclude the
17Commission from contracting with a private corporation or
18institution to provide such services as may be a part of the
19comprehensive investment plan or as may be deemed necessary for
20implementation of the comprehensive investment plan,
21including, but not limited to, providing consolidated billing,
22individual and collective record keeping and accounting, and
23asset purchase, control, and safekeeping.
24    (b-5) Investment duties. Beginning January 1, 2015, with
25respect to any investments for which it is responsible under
26this Section or any other law, the Commission shall be subject

 

 

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1to the same requirements as are imposed upon the board of
2trustees of a retirement system under Sections 1-109.1(5.1),
31-109.1(9), 1-109.3(e), and 1-113.21 of the Illinois Pension
4Code, to the extent that those requirements are not in direct
5conflict with any other requirement of law to which the
6Commission is subject.
7    (c) Program management. The Commission may not delegate its
8management functions, but may arrange to compensate for
9personalized investment advisory services rendered with
10respect to any or all of the investments under its control an
11investment advisor registered under Section 8 of the Illinois
12Securities Law of 1953 or any bank or other entity authorized
13by law to provide those services. Nothing contained herein
14shall preclude the Commission from subscribing to general
15investment research services available for purchase or use by
16others. The Commission also shall have authority to compensate
17for accounting, computing, and other necessary services.
18    (d) Annual report. The Commission shall annually prepare or
19cause to be prepared a report setting forth in appropriate
20detail an accounting of all Illinois prepaid tuition program
21funds and a description of the financial condition of the
22program at the close of each fiscal year. Included in this
23report shall be an evaluation by at least one nationally
24recognized actuary of the financial viability of the program.
25This report shall be submitted to the Governor, the President
26of the Senate, the Speaker of the House of Representatives, the

 

 

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1Auditor General, and the Board of Higher Education on or before
2March 1 of the subsequent fiscal year. This report also shall
3be made available to purchasers of Illinois prepaid tuition
4contracts and shall contain complete Illinois prepaid tuition
5contract sales information, including, but not limited to,
6projected postsecondary enrollment data for qualified
7beneficiaries.
8    (e) Marketing plan. Selection of a marketing agent for the
9Illinois prepaid tuition program must be approved by the
10Commission. At least once every 3 years, the Commission shall
11solicit proposals for marketing of the Illinois prepaid tuition
12program in accordance with the Illinois Securities Law of 1953
13and any applicable provisions of federal law. The entity
14designated pursuant to this paragraph shall serve as a
15centralized marketing agent for the program and shall have
16exclusive responsibility for marketing the program. No
17contract for marketing the Illinois prepaid tuition program
18shall extend for longer than 3 years. Any materials produced
19for the purpose of marketing the program shall be submitted to
20the Executive Director of the Commission for approval before
21they are made public. Any eligible institution may distribute
22marketing materials produced for the program, so long as the
23Executive Director of the Commission approves the distribution
24in advance. Neither the State nor the Commission shall be
25liable for misrepresentation of the program by a marketing
26agent.

 

 

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1    (f) Accounting and audit. The Commission shall annually
2cause to be prepared an accounting of the trust and shall
3transmit a copy of the accounting to the Governor, the
4President of the Senate, the Speaker of the House, and the
5minority leaders of the Senate and House of Representatives.
6The Commission shall also make available this accounting of the
7trust to any purchaser of an Illinois prepaid tuition contract,
8upon request. The accounts of the Illinois prepaid tuition
9program shall be subject to annual audits by the Auditor
10General or a certified public accountant appointed by the
11Auditor General.
12(Source: P.A. 96-1282, eff. 7-26-10.)".