Full Text of SB0452 98th General Assembly
SB0452ham001 98TH GENERAL ASSEMBLY | Rep. Arthur Turner Filed: 5/20/2014
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| 1 | | AMENDMENT TO SENATE BILL 452
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 452 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Illinois Pension Code is amended by | 5 | | changing Sections 1-109.1 and 1-109.3 and by adding 1-113.21 as | 6 | | follows:
| 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 | 9 | | Duties.
| 10 | | (1) Subject to the provisions of Section 22A-113 of this | 11 | | Code and
subsections (2) and (3) of this Section, the board of | 12 | | trustees of a
retirement system or pension fund established | 13 | | under 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 | 7 | | under Article 5, 6,
8, 9, 10, 11, 12 or 17 of this Code may not | 8 | | transfer its investment authority,
nor transfer the assets of | 9 | | the fund to any other person or entity for the
purpose of | 10 | | consolidating or merging its assets and management with any | 11 | | other
pension fund or public investment authority, unless the | 12 | | board resolution
authorizing such transfer is submitted for | 13 | | approval to the contributors and
pensioners of the fund at | 14 | | elections held not less than 30 days after the
adoption of such | 15 | | resolution by the board, and such resolution is approved by a
| 16 | | majority of the votes cast on the question in both the | 17 | | contributors election
and the pensioners election. The | 18 | | election procedures and qualifications
governing the election | 19 | | of trustees shall govern the submission of resolutions
for | 20 | | approval under this paragraph, insofar as they may be made | 21 | | applicable.
| 22 | | (3) Pursuant to subsections (h) and (i) of Section 6 of | 23 | | Article VII of
the Illinois Constitution, the investment | 24 | | authority of boards of trustees
of retirement systems and | 25 | | pension funds established under this Code is declared
to be a | 26 | | subject of exclusive State jurisdiction, and the concurrent |
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| 1 | | exercise
by a home rule unit of any power affecting such | 2 | | investment authority is
hereby specifically denied and | 3 | | preempted.
| 4 | | (4) For the purposes of this Code, "emerging investment | 5 | | manager" means a
qualified investment adviser that manages an | 6 | | investment portfolio of at
least $10,000,000 but less than | 7 | | $10,000,000,000 and is a
"minority owned business", "female | 8 | | owned business" or "business owned by a person with a | 9 | | disability" as those terms are
defined in the Business | 10 | | Enterprise for Minorities,
Females, and Persons with | 11 | | Disabilities Act.
| 12 | | It is hereby declared to be the public policy of the State | 13 | | of Illinois to
encourage the trustees of public employee | 14 | | retirement systems, pension funds, and investment boards
to use | 15 | | emerging investment managers in managing their system's | 16 | | assets, encompassing all asset classes, and increase the | 17 | | racial, ethnic, and gender diversity of its fiduciaries, to the
| 18 | | greatest extent feasible within the bounds of financial and | 19 | | fiduciary
prudence, and to take affirmative steps to remove any | 20 | | barriers to the full
participation in investment opportunities
| 21 | | afforded by those retirement systems, pension funds, and | 22 | | investment boards.
| 23 | | On or before January 1, 2010, a retirement system, pension | 24 | | fund, or investment board subject to this Code, except those | 25 | | whose investments are restricted by Section 1-113.2 of this | 26 | | Code, shall adopt a policy that sets forth goals for |
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| 1 | | utilization of emerging investment managers. This policy shall | 2 | | include quantifiable goals for the management of assets in | 3 | | specific asset classes by emerging investment managers. The | 4 | | retirement system, pension fund, or investment board shall | 5 | | establish 3 separate goals for: (i) emerging investment | 6 | | managers that are minority owned businesses; (ii) emerging | 7 | | investment managers that are female owned businesses; and (iii) | 8 | | emerging investment managers that are businesses owned by a | 9 | | person with a disability. The goals established shall be based | 10 | | on the percentage of total dollar amount of investment service | 11 | | contracts let to minority owned businesses, female owned | 12 | | businesses, and businesses owned by a person with a disability, | 13 | | as those terms are defined in the Business Enterprise for | 14 | | Minorities, Females, and Persons with Disabilities Act. The | 15 | | retirement system, pension fund, or investment board shall | 16 | | annually review the goals established under this subsection. | 17 | | If in any case an emerging investment manager meets the | 18 | | criteria established by a board for a specific search and meets | 19 | | the criteria established by a consultant for that search, then | 20 | | that emerging investment manager shall receive an invitation by | 21 | | the board of trustees, or an investment committee of the board | 22 | | of trustees, to present his or her firm for final consideration | 23 | | of a contract. In the case where multiple emerging investment | 24 | | managers meet the criteria of this Section, the staff may | 25 | | choose the most qualified firm or firms to present to the | 26 | | board.
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| 1 | | The use of an emerging investment manager does not | 2 | | constitute a transfer
of investment authority for the purposes | 3 | | of subsection (2) of this Section.
| 4 | | (5) Each retirement system, pension fund, or investment | 5 | | board subject to this Code, except those whose investments are | 6 | | restricted by Section 1-113.2 of this Code, shall establish a | 7 | | policy that sets forth goals for increasing the racial, ethnic, | 8 | | and gender diversity of its fiduciaries, including its | 9 | | consultants and senior staff. Each system, fund, and investment | 10 | | board shall annually review the goals established under this | 11 | | subsection. | 12 | | (5.1) Each retirement system, pension fund, and investment | 13 | | board established under this Code shall set annual goals | 14 | | regarding the utilization of Illinois-based financial service | 15 | | businesses, including businesses that are minority owned and | 16 | | female owned. Each retirement system, pension fund, and | 17 | | investment board shall maintain information on and report to | 18 | | the Governor and the General Assembly on its utilization of | 19 | | in-state and out-of-state financial service businesses. | 20 | | (6) On or before January 1, 2010, a retirement system, | 21 | | pension fund, or investment board subject to this Code, except | 22 | | those whose investments are restricted by Section 1-113.2 of | 23 | | this Code, shall adopt a policy that sets forth goals for | 24 | | utilization of businesses owned by minorities, females, and | 25 | | persons with disabilities for all contracts and services. The | 26 | | goals established shall be based on the percentage of total |
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| 1 | | dollar amount of all contracts let to minority owned | 2 | | businesses, female owned businesses, and businesses owned by a | 3 | | person with a disability, as those terms are defined in the | 4 | | Business Enterprise for Minorities, Females, and Persons with | 5 | | Disabilities Act. The retirement system, pension fund, or | 6 | | investment board shall annually review the goals established | 7 | | under this subsection. | 8 | | (7) On or before January 1, 2010, a retirement system, | 9 | | pension fund, or investment board subject to this Code, except | 10 | | those whose investments are restricted by Section 1-113.2 of | 11 | | this Code, shall adopt a policy that sets forth goals for | 12 | | increasing the utilization of minority broker-dealers. For the | 13 | | purposes of this Code, "minority broker-dealer" means a | 14 | | qualified broker-dealer who meets the definition of "minority | 15 | | owned business", "female owned business", or "business owned by | 16 | | a person with a disability", as those terms are defined in the | 17 | | Business Enterprise for Minorities, Females, and Persons with | 18 | | Disabilities Act. The retirement system, pension fund, or | 19 | | investment board shall annually review the goals established | 20 | | under this Section. | 21 | | (8) Each retirement system, pension fund, and investment | 22 | | board subject to this Code, except those whose investments are | 23 | | restricted by Section 1-113.2 of this Code, shall submit a | 24 | | report to the Governor and the General Assembly by January 1 of | 25 | | each year that includes the following: (i) the policy adopted | 26 | | under subsection (4) of this Section, including the names and |
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| 1 | | addresses of the emerging investment managers used, percentage | 2 | | of the assets under the investment control of emerging | 3 | | investment managers for the 3 separate goals, and the actions | 4 | | it has undertaken to increase the use of emerging investment | 5 | | managers, including encouraging other investment managers to | 6 | | use emerging investment managers as subcontractors when the | 7 | | opportunity arises; (ii) the policy adopted under subsection | 8 | | (5) of this Section; (iii) the policy adopted under subsection | 9 | | (6) of this Section; and (iv) the policy adopted under | 10 | | subsection (7) of this Section, including specific actions | 11 | | undertaken to increase the use of minority broker-dealers. | 12 | | (9) On or before January 1, 2016, a retirement system, | 13 | | pension fund, or investment board subject to this Code, except | 14 | | those whose investments are restricted by Section 1-113.2 of | 15 | | this Code, shall adopt a policy that sets forth goals for | 16 | | increasing the utilization of minority investment managers. | 17 | | For the purposes of this Code, "minority investment manager" | 18 | | means a qualified investment manager that manages an investment | 19 | | portfolio and meets the definition of "minority owned | 20 | | business", "female owned business", or "business owned by a | 21 | | person with a disability", as those terms are defined in the | 22 | | Business Enterprise for Minorities, Females, and Persons with | 23 | | Disabilities Act. The retirement system, pension fund, or | 24 | | investment board shall establish 3 separate goals for: (i) | 25 | | minority investment managers that are minority owned | 26 | | businesses; (ii) minority investment managers that are female |
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| 1 | | owned businesses; and (iii) minority investment managers that | 2 | | are businesses owned by a person with a disability. The | 3 | | retirement system, pension fund, or investment board shall | 4 | | annually review the goals established under this Section. | 5 | | (Source: P.A. 96-6, eff. 4-3-09.)
| 6 | | (40 ILCS 5/1-109.3) | 7 | | Sec. 1-109.3. Training requirement for pension trustees | 8 | | and managers . | 9 | | (a) All elected and appointed trustees under Article 3 and | 10 | | 4 of this Code must participate in a mandatory trustee | 11 | | certification training seminar that consists of at least 32 | 12 | | hours of initial trustee certification at a training facility | 13 | | that is accredited and affiliated with a State of Illinois | 14 | | certified college or university. This training must include | 15 | | without limitation all of the following: | 16 | | (1) Duties and liabilities of a fiduciary under Article | 17 | | 1 of the Illinois Pension Code. | 18 | | (2) Adjudication of pension claims. | 19 | | (3) Basic accounting and actuarial training. | 20 | | (4) Trustee ethics. | 21 | | (5) The Illinois Open Meetings Act. | 22 | | (6) The Illinois Freedom of Information Act. | 23 | | The training required under this subsection (a) must be | 24 | | completed within the first year that a trustee is elected or | 25 | | appointed under an Article 3 or 4 pension fund. The elected and |
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| 1 | | appointed trustees of an Article 3 or 4 pension fund who are | 2 | | police officers (as defined in Section 3-106 of this Code) or | 3 | | firefighters (as defined in Section 4-106 of this Code) or are | 4 | | employed by the municipality shall be permitted time away from | 5 | | their duties to attend such training without reduction of | 6 | | accrued leave or benefit time. Active or appointed trustees | 7 | | serving on the effective date of this amendatory Act of the | 8 | | 96th General Assembly shall not be required to attend the | 9 | | training required under this subsection (a). | 10 | | (b) In addition to the initial trustee certification | 11 | | training required under subsection (a), all elected and | 12 | | appointed trustees under Article 3 and 4 of this Code, | 13 | | including trustees serving on the effective date of this | 14 | | amendatory Act of the 96th General Assembly, shall also | 15 | | participate in a minimum of 16 hours of continuing trustee | 16 | | education each year after the first year that the trustee is | 17 | | elected or appointed. | 18 | | (c) The training required under this Section shall be paid | 19 | | for by the pension fund. | 20 | | (d) Any board member who does not timely complete the | 21 | | training required under this Section is not eligible to serve | 22 | | on the board of trustees of an Article 3 or 4 pension fund, | 23 | | unless the board member completes the missed training within 6 | 24 | | months after the date the member failed to complete the | 25 | | required training. In the event of a board member's failure to | 26 | | complete the required training, a successor shall be appointed |
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| 1 | | or elected, as applicable, for the unexpired term. A successor | 2 | | who is elected under such circumstances must be elected at a | 3 | | special election called by the board and conducted in the same | 4 | | manner as a regular election under Article 3 or 4, as | 5 | | applicable.
| 6 | | (e) Beginning January 1, 2015, every current or incoming | 7 | | trustee, Chief Financial Officer, Chief Investment Officer, | 8 | | and Executive Director of any pension fund or retirement system | 9 | | established under any Article of this Code shall receive 10 | 10 | | hours of minority and female investment inclusion training, | 11 | | with the oversight of the Senate Public Pensions and State | 12 | | Investments Committee. | 13 | | (Source: P.A. 96-429, eff. 8-13-09.) | 14 | | (40 ILCS 5/1-113.21 new) | 15 | | Sec. 1-113.21. Contracts for services. | 16 | | (a) Beginning January 1, 2015, no contract for investment | 17 | | services, consulting services, or commitment to a private | 18 | | market fund shall be awarded by a retirement system, pension | 19 | | fund, or investment board established under this Code unless | 20 | | the investment advisor, consultant, or private market fund | 21 | | first discloses: | 22 | | (1) the number of its investment and senior staff and | 23 | | the percentage of its investment and senior staff who are | 24 | | (i) a minority person, (ii) a female, and (iii) a person | 25 | | with a disability; and |
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| 1 | | (2) the number of contracts for investment services, | 2 | | consulting services, and professional and artistic | 3 | | services that the investment advisor, consultant, or | 4 | | private market fund has with (i) a minority owned business, | 5 | | (ii) a female owned business, or (iii) a business owned by | 6 | | a person with a disability; and | 7 | | (3) the number of contracts for investment services, | 8 | | consulting services, and professional and artistic | 9 | | services the investment advisor, consultant, or private | 10 | | market fund has with a business other than (i) a minority | 11 | | owned business, (ii) a female owned business or (iii) a | 12 | | business owned by a person with a disability, if more than | 13 | | 50% of services performed pursuant to the contract are | 14 | | performed by (i) a minority person, (ii) a female, and | 15 | | (iii) a person with a disability; and | 16 | | (4) the total fees paid to each investment advisor, | 17 | | consultant, or private market fund with respect to each | 18 | | particular asset class, including fixed-income | 19 | | investments, alternative investments, direct investments, | 20 | | fund-of-fund investments, and any other pertinent class. | 21 | | (b) The disclosures required by this Section shall be | 22 | | considered, within the bounds of financial and fiduciary | 23 | | prudence, prior to the awarding of a contract for investment | 24 | | services, consulting services, or commitment to a private | 25 | | market fund. | 26 | | (c) For the purposes of this Section, the terms "minority |
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| 1 | | person", "female", "person
with a disability", "minority owned | 2 | | business", "female owned business", and
"business owned by a | 3 | | person with a disability" have the same meaning as those
terms | 4 | | have in the Business Enterprise for Minorities, Females, and | 5 | | Persons
with Disabilities Act. | 6 | | (d) For purposes of this Section, the term "private market | 7 | | fund" means any private equity fund, private equity fund of | 8 | | funds, venture capital fund, hedge fund, hedge fund of funds, | 9 | | real estate fund, or other investment vehicle that is not | 10 | | publicly traded.
| 11 | | Section 10. The Illinois Prepaid Tuition Act is amended by | 12 | | changing Section 30 as follows:
| 13 | | (110 ILCS 979/30)
| 14 | | Sec. 30. Investment Advisory Panel duties and | 15 | | responsibilities.
| 16 | | (a) Advice and review. The panel shall offer advice and | 17 | | counseling
regarding
the
investments of the Illinois prepaid | 18 | | tuition program with the objective of
obtaining the best | 19 | | possible return on investments consistent with actuarial
| 20 | | soundness of the
program. The panel is required to annually | 21 | | review and advise the Commission
on provisions of the strategic | 22 | | investment plan for the prepaid tuition program.
The panel is | 23 | | also charged with reviewing and advising the Commission with
| 24 | | regard to the annual report that describes the current |
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| 1 | | financial condition of
the program. The panel at its own | 2 | | discretion also may advise the Commission on
other aspects of | 3 | | the program.
| 4 | | (b) Investment plan. The Commission annually shall adopt
a | 5 | | comprehensive investment plan for purposes of this Section. The
| 6 | | comprehensive investment plan shall specify the investment | 7 | | policies to be
utilized by the Commission in its administration | 8 | | of the Illinois Prepaid
Tuition Trust
Fund created by Section | 9 | | 35. The Commission may direct that assets of those
Funds be | 10 | | placed in
savings accounts or may use the same to purchase | 11 | | fixed or variable life
insurance or annuity contracts, | 12 | | securities, evidence of indebtedness, or other
investment | 13 | | products pursuant to the comprehensive investment plan and in | 14 | | such
proportions as may be designated or approved under that | 15 | | plan.
The Commission shall invest such assets with the care, | 16 | | skill, prudence, and
diligence under the circumstances then | 17 | | prevailing that a prudent man acting in
a like capacity and | 18 | | familiar with such matters would use in the conduct of an
| 19 | | enterprise of a like character with like aims, and the | 20 | | Commission shall
diversify the investments of such assets so as | 21 | | to minimize the risk of large
losses, unless under the | 22 | | circumstances it is clearly prudent not to do so.
Those | 23 | | insurance,
annuity, savings, and investment products shall be | 24 | | underwritten and offered in
compliance with applicable federal | 25 | | and State laws, rules, and regulations
by persons who are | 26 | | authorized thereunder to provide those services. The
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| 1 | | Commission shall delegate responsibility for preparing the | 2 | | comprehensive
investment plan to the Executive Director of the | 3 | | Commission. Nothing in this
Section shall
preclude the | 4 | | Commission from contracting with a private corporation or
| 5 | | institution to provide such services as may be a part of the | 6 | | comprehensive
investment plan or as may be deemed necessary for | 7 | | implementation of the
comprehensive investment plan, | 8 | | including, but not limited to, providing
consolidated billing, | 9 | | individual and collective record keeping and accounting,
and | 10 | | asset purchase, control, and safekeeping.
| 11 | | (b-5) Investment duties. Beginning January 1, 2015, with | 12 | | respect to any investments for which it is responsible under | 13 | | this Section or any other law, the Commission shall be subject | 14 | | to the same requirements as are imposed upon the board of | 15 | | trustees of a
retirement system under Sections 1-109.1(5.1), | 16 | | 1-109.1(9), 1-109.3(e), and 1-113.21 of the Illinois Pension | 17 | | Code, to the extent that those requirements are not in direct | 18 | | conflict with any other requirement of law to which the | 19 | | Commission is subject. | 20 | | (c) Program management. The Commission may not delegate its
| 21 | | management functions, but may arrange to compensate for | 22 | | personalized investment
advisory services rendered with | 23 | | respect to any or all of the investments under
its control an | 24 | | investment advisor registered under Section 8 of the Illinois
| 25 | | Securities Law of 1953 or any bank or other entity authorized | 26 | | by law to provide
those services. Nothing contained herein |
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| 1 | | shall preclude the Commission from
subscribing to general | 2 | | investment research services available for
purchase or use by | 3 | | others. The Commission also shall have authority to
compensate
| 4 | | for accounting, computing, and other necessary services.
| 5 | | (d) Annual report. The Commission shall annually prepare or | 6 | | cause to be
prepared a report setting forth in appropriate
| 7 | | detail an accounting of all Illinois prepaid tuition program | 8 | | funds and a
description of the financial condition of the | 9 | | program at the close of each
fiscal year. Included in this | 10 | | report shall be an evaluation by at least one
nationally | 11 | | recognized
actuary of the financial viability of the program. | 12 | | This report
shall be submitted to the Governor, the President | 13 | | of
the Senate, the Speaker of the House of Representatives, the | 14 | | Auditor General,
and the Board of Higher Education on or before | 15 | | March 1 of the subsequent fiscal
year. This report also shall | 16 | | be made available to purchasers of Illinois
prepaid tuition | 17 | | contracts and shall contain complete Illinois prepaid tuition
| 18 | | contract sales information,
including, but not limited to, | 19 | | projected postsecondary enrollment data for
qualified | 20 | | beneficiaries.
| 21 | | (e) Marketing plan. Selection of a marketing agent for the | 22 | | Illinois
prepaid tuition program must be approved by the | 23 | | Commission. At least once
every 3
years, the Commission shall | 24 | | solicit proposals
for marketing of the Illinois prepaid tuition | 25 | | program in accordance with the
Illinois Securities Law of 1953 | 26 | | and any applicable provisions of federal law.
The entity |
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| 1 | | designated pursuant to this paragraph shall serve as a | 2 | | centralized
marketing agent for the program and shall have | 3 | | exclusive responsibility for
marketing the program. No | 4 | | contract for marketing the Illinois prepaid tuition
program | 5 | | shall extend for longer than 3 years. Any materials produced | 6 | | for the
purpose of marketing the program shall be submitted to | 7 | | the Executive Director
of the Commission for approval before | 8 | | they are made public. Any eligible
institution may distribute | 9 | | marketing materials produced for the program, so
long as the | 10 | | Executive Director of the Commission approves the distribution | 11 | | in
advance. Neither
the State nor the Commission shall be | 12 | | liable for
misrepresentation of the program by a marketing | 13 | | agent.
| 14 | | (f) Accounting and audit. The Commission shall annually | 15 | | cause to be
prepared an accounting of the trust and shall | 16 | | transmit a copy of the accounting
to the Governor, the | 17 | | President of the Senate, the Speaker of the
House, and the | 18 | | minority leaders of the Senate and House of
Representatives. | 19 | | The Commission shall also make available this accounting of
the | 20 | | trust to any purchaser of an Illinois prepaid tuition contract, | 21 | | upon
request. The accounts of the Illinois prepaid tuition | 22 | | program shall be subject
to annual audits by the Auditor | 23 | | General or a certified public accountant
appointed by the | 24 | | Auditor General.
| 25 | | (Source: P.A. 96-1282, eff. 7-26-10.)".
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