Illinois General Assembly - Full Text of HB0232
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Full Text of HB0232  102nd General Assembly

HB0232enr 102ND GENERAL ASSEMBLY

  
  
  

 


 
HB0232 EnrolledLRB102 05177 RPS 15198 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
5changing Section 1-110.16 and by adding Section 1-110.17 as
6follows:
 
7    (40 ILCS 5/1-110.16)
8    Sec. 1-110.16. Transactions prohibited by retirement
9systems; companies that boycott Israel, for-profit companies
10that contract to shelter migrant children, Iran-restricted
11companies, Sudan-restricted companies, and expatriated
12entities.
13    (a) As used in this Section:
14        "Boycott Israel" means engaging in actions that are
15    politically motivated and are intended to penalize,
16    inflict economic harm on, or otherwise limit commercial
17    relations with the State of Israel or companies based in
18    the State of Israel or in territories controlled by the
19    State of Israel.
20        "Company" means any sole proprietorship, organization,
21    association, corporation, partnership, joint venture,
22    limited partnership, limited liability partnership,
23    limited liability company, or other entity or business

 

 

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1    association, including all wholly owned subsidiaries,
2    majority-owned subsidiaries, parent companies, or
3    affiliates of those entities or business associations,
4    that exist for the purpose of making profit.
5        "Contract to shelter migrant children" means entering
6    into a contract with the federal government to shelter
7    migrant children under the federal Unaccompanied Alien
8    Children Program or a substantially similar federal
9    program.
10        "Illinois Investment Policy Board" means the board
11    established under subsection (b) of this Section.
12        "Direct holdings" in a company means all publicly
13    traded securities of that company that are held directly
14    by the retirement system in an actively managed account or
15    fund in which the retirement system owns all shares or
16    interests.
17        "Expatriated entity" has the meaning ascribed to it in
18    Section 1-15.120 of the Illinois Procurement Code.
19        "Indirect holdings" in a company means all securities
20    of that company that are held in an account or fund, such
21    as a mutual fund, managed by one or more persons not
22    employed by the retirement system, in which the retirement
23    system owns shares or interests together with other
24    investors not subject to the provisions of this Section or
25    that are held in an index fund.
26        "Iran-restricted company" means a company that meets

 

 

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1    the qualifications under Section 1-110.15 of this Code.
2        "Private market fund" means any private equity fund,
3    private equity funds of funds, venture capital fund, hedge
4    fund, hedge fund of funds, real estate fund, or other
5    investment vehicle that is not publicly traded.
6        "Restricted companies" means companies that boycott
7    Israel, for-profit companies that contract to shelter
8    migrant children, Iran-restricted companies,
9    Sudan-restricted companies, and expatriated entities.
10        "Retirement system" means a retirement system
11    established under Article 2, 14, 15, 16, or 18 of this Code
12    or the Illinois State Board of Investment.
13        "Sudan-restricted company" means a company that meets
14    the qualifications under Section 1-110.6 of this Code.
15    (b) There shall be established an Illinois Investment
16Policy Board. The Illinois Investment Policy Board shall
17consist of 7 members. Each board of a pension fund or
18investment board created under Article 15, 16, or 22A of this
19Code shall appoint one member, and the Governor shall appoint
204 members.
21    (c) Notwithstanding any provision of law to the contrary,
22beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
23Code shall be administered in accordance with this Section.
24    (d) By April 1, 2016, the Illinois Investment Policy Board
25shall make its best efforts to identify all Iran-restricted
26companies, Sudan-restricted companies, and companies that

 

 

HB0232 Enrolled- 4 -LRB102 05177 RPS 15198 b

1boycott Israel and assemble those identified companies into a
2list of restricted companies, to be distributed to each
3retirement system.
4    These efforts shall include the following, as appropriate
5in the Illinois Investment Policy Board's judgment:
6        (1) reviewing and relying on publicly available
7    information regarding Iran-restricted companies,
8    Sudan-restricted companies, and companies that boycott
9    Israel, including information provided by nonprofit
10    organizations, research firms, and government entities;
11        (2) contacting asset managers contracted by the
12    retirement systems that invest in Iran-restricted
13    companies, Sudan-restricted companies, and companies that
14    boycott Israel;
15        (3) contacting other institutional investors that have
16    divested from or engaged with Iran-restricted companies,
17    Sudan-restricted companies, and companies that boycott
18    Israel; and
19        (4) retaining an independent research firm to identify
20    Iran-restricted companies, Sudan-restricted companies,
21    and companies that boycott Israel.
22    The Illinois Investment Policy Board shall review the list
23of restricted companies on a quarterly basis based on evolving
24information from, among other sources, those listed in this
25subsection (d) and distribute any updates to the list of
26restricted companies to the retirement systems and the State

 

 

HB0232 Enrolled- 5 -LRB102 05177 RPS 15198 b

1Treasurer.
2    By April 1, 2018, the Illinois Investment Policy Board
3shall make its best efforts to identify all expatriated
4entities and include those companies in the list of restricted
5companies distributed to each retirement system and the State
6Treasurer. These efforts shall include the following, as
7appropriate in the Illinois Investment Policy Board's
8judgment:
9        (1) reviewing and relying on publicly available
10    information regarding expatriated entities, including
11    information provided by nonprofit organizations, research
12    firms, and government entities;
13        (2) contacting asset managers contracted by the
14    retirement systems that invest in expatriated entities;
15        (3) contacting other institutional investors that have
16    divested from or engaged with expatriated entities; and
17        (4) retaining an independent research firm to identify
18    expatriated entities.
19    By July 1, 2022, the Illinois Investment Policy Board
20shall make its best efforts to identify all for-profit
21companies that contract to shelter migrant children and
22include those companies in the list of restricted companies
23distributed to each retirement system. These efforts shall
24include the following, as appropriate in the Illinois
25Investment Policy Board's judgment:
26        (1) reviewing and relying on publicly available

 

 

HB0232 Enrolled- 6 -LRB102 05177 RPS 15198 b

1    information regarding for-profit companies that contract
2    to shelter migrant children, including information
3    provided by nonprofit organizations, research firms, and
4    government entities;
5        (2) contacting asset managers contracted by the
6    retirement systems that invest in for-profit companies
7    that contract to shelter migrant children;
8        (3) contacting other institutional investors that have
9    divested from or engaged with for-profit companies that
10    contract to shelter migrant children; and
11        (4) retaining an independent research firm to identify
12    for-profit companies that contract to shelter migrant
13    children.
14    (e) The Illinois Investment Policy Board shall adhere to
15the following procedures for companies on the list of
16restricted companies:
17        (1) For each company newly identified in subsection
18    (d), the Illinois Investment Policy Board shall send a
19    written notice informing the company of its status and
20    that it may become subject to divestment or shareholder
21    activism by the retirement systems.
22        (2) If, following the Illinois Investment Policy
23    Board's engagement pursuant to this subsection (e) with a
24    restricted company, that company ceases activity that
25    designates the company to be an Iran-restricted company, a
26    Sudan-restricted company, a company that boycotts Israel,

 

 

HB0232 Enrolled- 7 -LRB102 05177 RPS 15198 b

1    or an expatriated entity, or a for-profit company that
2    contracts to shelter migrant children, the company shall
3    be removed from the list of restricted companies and the
4    provisions of this Section shall cease to apply to it
5    unless it resumes such activities.
6    (f) Except as provided in subsection (f-1) of this Section
7the retirement system shall adhere to the following procedures
8for companies on the list of restricted companies:
9        (1) The retirement system shall identify those
10    companies on the list of restricted companies in which the
11    retirement system owns direct holdings and indirect
12    holdings.
13        (2) The retirement system shall instruct its
14    investment advisors to sell, redeem, divest, or withdraw
15    all direct holdings of restricted companies from the
16    retirement system's assets under management in an orderly
17    and fiduciarily responsible manner within 12 months after
18    the company's most recent appearance on the list of
19    restricted companies.
20        (3) The retirement system may not acquire securities
21    of restricted companies.
22        (4) The provisions of this subsection (f) do not apply
23    to the retirement system's indirect holdings or private
24    market funds. The Illinois Investment Policy Board shall
25    submit letters to the managers of those investment funds
26    containing restricted companies requesting that they

 

 

HB0232 Enrolled- 8 -LRB102 05177 RPS 15198 b

1    consider removing the companies from the fund or create a
2    similar actively managed fund having indirect holdings
3    devoid of the companies. If the manager creates a similar
4    fund, the retirement system shall replace all applicable
5    investments with investments in the similar fund in an
6    expedited timeframe consistent with prudent investing
7    standards.
8    (f-1) The retirement system shall adhere to the following
9procedures for restricted companies that are expatriated
10entities or for-profit companies that contract to shelter
11migrant children:
12        (1) To the extent that the retirement system believes
13    that shareholder activism would be more impactful than
14    divestment, the retirement system shall have the authority
15    to engage with a restricted company prior to divesting.
16        (2) Subject to any applicable State or Federal laws,
17    methods of shareholder activism utilized by the retirement
18    system may include, but are not limited to, bringing
19    shareholder resolutions and proxy voting on shareholder
20    resolutions.
21        (3) The retirement system shall report on its
22    shareholder activism and the outcome of such efforts to
23    the Illinois Investment Policy Board by April 1 of each
24    year.
25        (4) If the engagement efforts of the retirement system
26    are unsuccessful, then it shall adhere to the procedures

 

 

HB0232 Enrolled- 9 -LRB102 05177 RPS 15198 b

1    under subsection (f) of this Section.
2    (g) Upon request, and by April 1 of each year, each
3retirement system shall provide the Illinois Investment Policy
4Board with information regarding investments sold, redeemed,
5divested, or withdrawn in compliance with this Section.
6    (h) Notwithstanding any provision of this Section to the
7contrary, a retirement system may cease divesting from
8companies pursuant to subsection (f) if clear and convincing
9evidence shows that the value of investments in such companies
10becomes equal to or less than 0.5% of the market value of all
11assets under management by the retirement system. For any
12cessation of divestment authorized by this subsection (h), the
13retirement system shall provide a written notice to the
14Illinois Investment Policy Board in advance of the cessation
15of divestment, setting forth the reasons and justification,
16supported by clear and convincing evidence, for its decision
17to cease divestment under subsection (f).
18    (i) The cost associated with the activities of the
19Illinois Investment Policy Board shall be borne by the boards
20of each pension fund or investment board created under Article
2115, 16, or 22A of this Code.
22    (j) With respect to actions taken in compliance with this
23Section, including all good-faith determinations regarding
24companies as required by this Section, the retirement system
25and Illinois Investment Policy Board are exempt from any
26conflicting statutory or common law obligations, including any

 

 

HB0232 Enrolled- 10 -LRB102 05177 RPS 15198 b

1fiduciary duties under this Article and any obligations with
2respect to choice of asset managers, investment funds, or
3investments for the retirement system's securities portfolios.
4    (k) It is not the intent of the General Assembly in
5enacting this amendatory Act of the 99th General Assembly to
6cause divestiture from any company based in the United States
7of America. The Illinois Investment Policy Board shall
8consider this intent when developing or reviewing the list of
9restricted companies.
10    (l) If any provision of this amendatory Act of the 99th
11General Assembly or its application to any person or
12circumstance is held invalid, the invalidity of that provision
13or application does not affect other provisions or
14applications of this amendatory Act of the 99th General
15Assembly that can be given effect without the invalid
16provision or application.
17    (m) If any provision of Public Act 100-551 this amendatory
18Act of the 100th General Assembly or its application to any
19person or circumstance is held invalid, the invalidity of that
20provision or application does not affect other provisions or
21applications of Public Act 100-551 this amendatory Act of the
22100th General Assembly that can be given effect without the
23invalid provision or application.
24    If any provision of this amendatory Act of the 102nd
25General Assembly or its application to any person or
26circumstance is held invalid, the invalidity of that provision

 

 

HB0232 Enrolled- 11 -LRB102 05177 RPS 15198 b

1or application does not affect other provisions or
2applications of this amendatory Act of the 102nd General
3Assembly that can be given effect without the invalid
4provision or application.
5(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)
 
6    (40 ILCS 5/1-110.17 new)
7    Sec. 1-110.17. Expiration of prohibited transactions. If,
8at least 4 years after the effective date of an amendatory Act
9that initially establishes a prohibited transaction under this
10Article, the Illinois Investment Policy Board concludes that
11divestment is no longer necessary due to achievement of the
12underlying goals of the amendatory Act establishing the
13prohibited transaction, changes in status surrounding the
14prohibited transactions, or other verifiable reasons, the
15Illinois Investment Policy Board may cease actions to require
16divestment, identify restricted companies, or prohibit
17transactions by a majority vote of the Illinois Investment
18Policy Board if: (1) no less than one year prior to the change
19in policy, the Illinois Investment Policy Board notifies, in
20writing, the General Assembly of the change in policy and
21lists the reasons for changing the policy; and (2) the General
22Assembly does not, before the change in policy, adopt a House
23Resolution or a Senate Resolution instructing the Illinois
24Investment Policy Board to not change the policy.
 
25    Section 99. Effective date. This Act takes effect upon

 

 

HB0232 Enrolled- 12 -LRB102 05177 RPS 15198 b

1becoming law.