Full Text of HB5571 100th General Assembly
HB5571 100TH GENERAL ASSEMBLY |
| | 100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018 HB5571 Introduced , by Rep. Mark Batinick SYNOPSIS AS INTRODUCED: |
| 40 ILCS 5/1-113.2 | | 40 ILCS 5/1-113.4 | | 40 ILCS 5/1-113.4a | | 40 ILCS 5/1-113.5 | | 40 ILCS 5/1-113.3 rep. | |
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Amends the General Provisions Article of the Illinois Pension Code. Authorizes downstate police and downstate firefighter pension funds to invest in commingled accounts of the Illinois Metropolitan Investment Funds. Provides that a pension fund's total investment in certain life insurance accounts managed by insurance companies and mutual funds managed through an investment adviser, in combination with certain other investments, shall not exceed 65% of the pension fund's net present assets. Requires contracts between an investment adviser and the board of trustees of a downstate police or downstate firefighter pension fund to include a requirement that the investment adviser make annual reports to the board concerning net returns. Repeals a provision specifying additional permitted investments for pension funds with net assets of $2,500,000 or more. Makes conforming and other changes.
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| | FISCAL NOTE ACT MAY APPLY | | PENSION IMPACT NOTE ACT MAY APPLY |
| | A BILL FOR |
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| 1 | | AN ACT concerning public employee benefits.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Pension Code is amended by changing | 5 | | Sections 1-113.2, 1-113.4, 1-113.4a, and 1-113.5 as follows:
| 6 | | (40 ILCS 5/1-113.2)
| 7 | | Sec. 1-113.2.
List of permitted investments for all Article | 8 | | 3 or 4 pension
funds. Any pension fund established under | 9 | | Article 3 or 4 may invest in the
following items:
| 10 | | (1) Interest bearing direct obligations of the United | 11 | | States of America.
| 12 | | (2) Interest bearing obligations to the extent that | 13 | | they are fully
guaranteed or insured as to payment of | 14 | | principal and interest by the United
States of America.
| 15 | | (3) Interest bearing bonds, notes, debentures, or | 16 | | other similar obligations
of agencies of the United States | 17 | | of America. For the purposes of this Section,
"agencies of | 18 | | the United States of America" includes: (i) the Federal | 19 | | National
Mortgage Association and the Student Loan | 20 | | Marketing Association; (ii) federal
land banks, federal | 21 | | intermediate credit banks,
federal farm credit banks, and | 22 | | any other entity authorized to
issue direct debt | 23 | | obligations of the United States of America under the Farm
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| 1 | | Credit Act of 1971 or amendments to that Act; (iii) federal | 2 | | home loan banks and
the Federal Home Loan Mortgage | 3 | | Corporation; and (iv) any agency created
by Act of Congress | 4 | | that is authorized to issue direct debt obligations of the
| 5 | | United States of America.
| 6 | | (4) Interest bearing savings accounts or certificates | 7 | | of deposit, issued by State or
federally chartered banks or | 8 | | savings and loan associations, to the extent that
the | 9 | | deposits are insured by agencies or instrumentalities of | 10 | | the federal
government.
| 11 | | (5) (Blank). Interest bearing savings accounts or | 12 | | certificates of deposit, issued by
State of Illinois | 13 | | chartered banks or savings and loan associations, to the
| 14 | | extent that the deposits are insured by agencies or | 15 | | instrumentalities of the
federal government.
| 16 | | (6) Investments in credit unions, to the extent that | 17 | | the investments are
insured by agencies or | 18 | | instrumentalities of the federal government.
| 19 | | (7) Interest bearing bonds of the State of Illinois.
| 20 | | (8) Pooled interest bearing accounts managed by the | 21 | | Illinois Public
Treasurer's Investment Pool in accordance | 22 | | with the Deposit of State Moneys Act,
interest bearing | 23 | | funds or pooled or commingled accounts of the Illinois | 24 | | Metropolitan Investment Funds, and interest bearing funds | 25 | | or pooled accounts managed, operated, and
administered by | 26 | | banks, subsidiaries of banks, or subsidiaries of bank |
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| 1 | | holding
companies in accordance with the laws of the State | 2 | | of Illinois.
| 3 | | (9) Interest bearing bonds or tax anticipation | 4 | | warrants of any county,
township, or municipal corporation | 5 | | of the State of Illinois.
| 6 | | (10) Direct obligations of the State of Israel, subject | 7 | | to the conditions
and limitations of item (5.1) of Section | 8 | | 1-113.
| 9 | | (11) Money market mutual funds managed by investment | 10 | | companies that are
registered under the federal Investment | 11 | | Company Act of 1940 and the Illinois
Securities Law of 1953 | 12 | | and are diversified, open-ended management investment
| 13 | | companies; provided that the portfolio of the money market | 14 | | mutual fund is
limited to the following:
| 15 | | (i) bonds, notes, certificates of indebtedness, | 16 | | treasury bills, or other
securities that are | 17 | | guaranteed by the full faith and credit of the United
| 18 | | States of America as to principal and interest;
| 19 | | (ii) bonds, notes, debentures, or other similar | 20 | | obligations of the United
States of America or its | 21 | | agencies; and
| 22 | | (iii) short term obligations of corporations | 23 | | organized in the United
States with assets exceeding | 24 | | $400,000,000, provided that (A) the obligations
mature | 25 | | no later than 180 days from the date of purchase, (B) | 26 | | at the time of
purchase, the obligations are rated by |
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| 1 | | at least 2 standard national rating
services at one of | 2 | | their 3 highest classifications, and (C) the | 3 | | obligations
held by the mutual fund do not exceed 10% | 4 | | of the corporation's outstanding
obligations.
| 5 | | (12) General accounts of life insurance companies | 6 | | authorized to transact
business in Illinois.
| 7 | | (13) Any combination of the following, not to exceed | 8 | | 10% of the pension
fund's net assets:
| 9 | | (i) separate accounts that are managed by life | 10 | | insurance companies
authorized to transact business in | 11 | | Illinois and are comprised of diversified
portfolios | 12 | | consisting of common or preferred stocks, bonds, or | 13 | | money market
instruments; and
| 14 | | (ii) separate accounts that are managed by | 15 | | insurance companies authorized
to transact business in | 16 | | Illinois, and are comprised of real estate
or loans | 17 | | upon real estate secured by first or second mortgages . | 18 | | ; and
| 19 | | (iii) mutual funds that meet the following | 20 | | requirements:
| 21 | | (13.5) Mutual funds that are managed through an | 22 | | investment adviser, as defined under Section 1-101.4 and | 23 | | appointed under Section 1-113.5, and that meet all of the | 24 | | following requirements:
| 25 | | (i) (A) the mutual fund is managed by an investment | 26 | | company as defined and
registered under the federal |
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| 1 | | Investment Company Act of 1940 and registered
under the | 2 | | Illinois Securities Law of 1953;
| 3 | | (ii) (B) the mutual fund has been in operation for | 4 | | at least 5 years;
| 5 | | (iii) (C) the mutual fund has total net assets of | 6 | | $250 million or more; and
| 7 | | (iv) (D) the mutual fund is comprised of | 8 | | diversified portfolios of
common or preferred stocks, | 9 | | bonds, or money market instruments.
| 10 | | (14) Corporate bonds that are managed through an | 11 | | investment advisor , as defined under Section 1-101.4 and | 12 | | appointed under Section 1-113.5, and must meet all of the | 13 | | following requirements: | 14 | | (1) The bonds must be rated as investment grade by | 15 | | one of the 2 largest rating services at the time of | 16 | | purchase. | 17 | | (2) If subsequently downgraded below investment | 18 | | grade, the bonds must be liquidated from the portfolio | 19 | | within 90 days after being downgraded by the manager. | 20 | | A pension fund's total investment in the items authorized | 21 | | under paragraph (13) and paragraph (13.5) shall not exceed 65% | 22 | | of the market value of the pension fund's net present assets | 23 | | stated in its most recent annual report on file with the | 24 | | Department of Insurance. | 25 | | (Source: P.A. 96-1495, eff. 1-1-11.)
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| 1 | | (40 ILCS 5/1-113.4)
| 2 | | Sec. 1-113.4. List of additional permitted investments for | 3 | | pension funds
with net assets of $5,000,000 or more. | 4 | | (a) In addition to the items in Section Sections 1-113.2 | 5 | | and 1-113.3 , a pension fund
established under Article 3 or 4 | 6 | | that has net assets of at least $5,000,000 and
has appointed an | 7 | | investment adviser under Section 1-113.5 may, through that
| 8 | | investment adviser, invest a portion of its assets in common | 9 | | and preferred
stocks authorized for investments of trust funds | 10 | | under the laws of the State
of Illinois. The stocks must meet | 11 | | all of the following requirements:
| 12 | | (1) The common stocks are listed on a national | 13 | | securities exchange or
board of trade (as defined in the | 14 | | federal Securities Exchange Act of 1934 and
set forth in | 15 | | subdivision G of Section 3 of the Illinois Securities Law | 16 | | of 1953) or quoted in
the National Association of | 17 | | Securities Dealers Automated Quotation System
National | 18 | | Market System (NASDAQ NMS).
| 19 | | (2) The securities are of a corporation created or | 20 | | existing under the laws
of the United States or any state, | 21 | | district, or territory thereof and the
corporation has been | 22 | | in existence for at least 5 years.
| 23 | | (3) The corporation has not been in arrears on payment | 24 | | of dividends on its
preferred stock during the preceding 5 | 25 | | years.
| 26 | | (4) The market value of stock in any one corporation |
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| 1 | | does not exceed 5% of
the cash and invested assets of the | 2 | | pension fund, and the investments in the
stock of any one | 3 | | corporation do not exceed 5% of the total outstanding stock | 4 | | of
that corporation.
| 5 | | (5) The straight preferred stocks or convertible | 6 | | preferred stocks are
issued or guaranteed by a corporation | 7 | | whose common stock qualifies for
investment by the board.
| 8 | | (6) The issuer of the stocks has been subject to the | 9 | | requirements of
Section 12 of the federal Securities | 10 | | Exchange Act of 1934 and has been current
with the filing | 11 | | requirements of Sections 13 and 14 of that Act during the
| 12 | | preceding 3 years.
| 13 | | (b) A pension fund's total investment in the items | 14 | | authorized under this
Section and paragraphs (13) and (13.5) of | 15 | | Section 1-113.2 Section 1-113.3 shall not exceed 65% 35% of the | 16 | | market value of the
pension fund's net present assets stated in | 17 | | its most recent annual report on
file with the Illinois | 18 | | Department of Insurance.
| 19 | | (c) A pension fund that invests funds under this Section | 20 | | shall
electronically file with the Division any reports of its | 21 | | investment activities
that the Division may require, at the | 22 | | times and in the format required by the
Division.
| 23 | | (Source: P.A. 100-201, eff. 8-18-17.)
| 24 | | (40 ILCS 5/1-113.4a) | 25 | | Sec. 1-113.4a. List of additional permitted investments |
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| 1 | | for Article 3 and 4 pension funds with net assets of | 2 | | $10,000,000 or more. | 3 | | (a) In addition to the items in Section Sections 1-113.2 | 4 | | and 1-113.3 , a pension fund established under Article 3 or 4 | 5 | | that has net assets of at least $10,000,000 and has appointed | 6 | | an investment adviser, as defined under Sections 1-101.4 and | 7 | | 1-113.5, may, through that investment adviser, invest an | 8 | | additional portion of its assets in common and preferred stocks | 9 | | and mutual funds. | 10 | | (b) The stocks must meet all of the following requirements: | 11 | | (1) The common stocks must be listed on a national | 12 | | securities exchange or board of trade (as defined in the | 13 | | Federal Securities Exchange Act of 1934 and set forth in | 14 | | paragraph G of Section 3 of the Illinois Securities Law of | 15 | | 1953) or quoted in the National Association of Securities | 16 | | Dealers Automated Quotation System National Market System. | 17 | | (2) The securities must be of a corporation in | 18 | | existence for at least 5 years. | 19 | | (3) The market value of stock in any one corporation | 20 | | may not exceed 5% of the cash and invested assets of the | 21 | | pension fund, and the investments in the stock of any one | 22 | | corporation may not exceed 5% of the total outstanding | 23 | | stock of that corporation. | 24 | | (4) The straight preferred stocks or convertible | 25 | | preferred stocks must be issued or guaranteed by a | 26 | | corporation whose common stock qualifies for investment by |
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| 1 | | the board. | 2 | | (c) The mutual funds must meet the following requirements: | 3 | | (1) The mutual fund must be managed by an investment | 4 | | company registered under the Federal Investment Company | 5 | | Act of 1940 and registered under the Illinois Securities | 6 | | Law of 1953. | 7 | | (2) The mutual fund must have been in operation for at | 8 | | least 5 years. | 9 | | (3) The mutual fund must have total net assets of | 10 | | $250,000,000 or more. | 11 | | (4) The mutual fund must be comprised of a diversified | 12 | | portfolio of common or preferred stocks, bonds, or money | 13 | | market instruments. | 14 | | (d) A pension fund's total investment in the items | 15 | | authorized under this Section and Section 1-113.3 shall not | 16 | | exceed 50% effective July 1, 2011 and 55% effective July 1, | 17 | | 2012 of the market value of the pension fund's net present | 18 | | assets stated in its most recent annual report on file with the | 19 | | Department of Insurance. | 20 | | (d-5) A pension fund's total investment in the items | 21 | | authorized under this Section and paragraphs (13) and (13.5) of | 22 | | Section 1-113.2 shall not exceed 65% of the market value of the | 23 | | pension fund's net present assets stated in its most recent | 24 | | annual report on file with the Department of Insurance. The | 25 | | changes to this Section made by this amendatory Act of the | 26 | | 100th General Assembly apply on and after the effective date of |
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| 1 | | this amendatory Act of the 100th General Assembly. | 2 | | (e) A pension fund that invests funds under this Section | 3 | | shall electronically file with the Division any reports of its | 4 | | investment activities that the Division may require, at the | 5 | | time and in the format required by the Division.
| 6 | | (Source: P.A. 96-1495, eff. 1-1-11.)
| 7 | | (40 ILCS 5/1-113.5)
| 8 | | Sec. 1-113.5. Investment advisers and investment services | 9 | | for all Article 3 or 4 pension funds.
| 10 | | (a) The board of trustees of a pension fund may appoint | 11 | | investment advisers
as defined in Section 1-101.4. The board of | 12 | | any pension fund investing in
common or preferred stock under | 13 | | Section 1-113.4 shall appoint an investment
adviser before | 14 | | making such investments.
| 15 | | The investment adviser shall be a fiduciary, as defined in | 16 | | Section 1-101.2,
with respect to the pension fund and shall be | 17 | | one of the following:
| 18 | | (1) an investment adviser registered under the federal | 19 | | Investment Advisers
Act of 1940 and the Illinois Securities | 20 | | Law of 1953;
| 21 | | (2) a bank or trust company authorized to conduct a | 22 | | trust business in
Illinois;
| 23 | | (3) a life insurance company authorized to transact | 24 | | business in Illinois;
or
| 25 | | (4) an investment company as defined and registered |
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| 1 | | under the federal
Investment Company Act of 1940 and | 2 | | registered under the Illinois Securities Law
of 1953.
| 3 | | (a-5) Notwithstanding any other provision of law, a person | 4 | | or entity that provides consulting services (referred to as a | 5 | | "consultant" in this Section) to a pension fund with respect to | 6 | | the selection of fiduciaries may not be awarded a contract to | 7 | | provide those consulting services that is more than 5 years in | 8 | | duration. No contract to provide such consulting services may | 9 | | be renewed or extended. At the end of the term of a contract, | 10 | | however, the contractor is eligible to compete for a new | 11 | | contract. No person shall attempt to avoid or contravene the | 12 | | restrictions of this subsection by any means. All offers from | 13 | | responsive offerors shall be accompanied by disclosure of the | 14 | | names and addresses of the following: | 15 | | (1) The offeror. | 16 | | (2) Any entity that is a parent of, or owns a | 17 | | controlling interest in, the offeror. | 18 | | (3) Any entity that is a subsidiary of, or in which a | 19 | | controlling interest is owned by, the offeror. | 20 | | Beginning on July 1, 2008, a person, other than a trustee | 21 | | or an employee of a pension fund or retirement system, may not | 22 | | act as a consultant under this Section unless that person is at | 23 | | least one of the following: (i) registered as an investment | 24 | | adviser under the federal Investment Advisers Act of 1940 (15 | 25 | | U.S.C. 80b-1, et seq.); (ii) registered as an investment | 26 | | adviser under the Illinois Securities Law of 1953; (iii) a |
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| 1 | | bank, as defined in the Investment Advisers Act of 1940; or | 2 | | (iv) an insurance company authorized to transact business in | 3 | | this State. | 4 | | (b) All investment advice and services provided by an | 5 | | investment adviser
or a consultant appointed under this Section | 6 | | shall be rendered pursuant to a written contract
between the | 7 | | investment adviser and the board, and in accordance with the
| 8 | | board's investment policy.
| 9 | | The contract shall include all of the following:
| 10 | | (1) acknowledgement in writing by the investment | 11 | | adviser that he or she
is a fiduciary with respect to the | 12 | | pension fund;
| 13 | | (2) the board's investment policy;
| 14 | | (3) full disclosure of direct and indirect fees, | 15 | | commissions, penalties,
and any other compensation that | 16 | | may be received by the investment adviser,
including | 17 | | reimbursement for expenses; and
| 18 | | (4) a requirement that the investment adviser submit | 19 | | periodic written
reports, on at least a quarterly basis and | 20 | | on an annual basis as of the pension fund's year end , for | 21 | | the board's review at its regularly
scheduled meetings. | 22 | | Quarterly and annual All returns on investment shall be | 23 | | reported to the board as net returns
after payment of all | 24 | | fees, commissions, and any other compensation.
| 25 | | (b-5) Each contract described in subsection (b) shall also | 26 | | include (i) full disclosure of direct and indirect fees, |
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| 1 | | commissions, penalties, and other compensation, including
| 2 | | reimbursement for expenses, that may be paid by or on behalf of | 3 | | the investment adviser or consultant in connection with the | 4 | | provision of services to the pension fund and (ii) a | 5 | | requirement that the investment adviser or consultant update | 6 | | the disclosure promptly after a modification of those payments | 7 | | or an additional payment. | 8 | | Within 30 days after the effective date of this amendatory | 9 | | Act of the 95th General Assembly, each investment adviser and | 10 | | consultant providing services on the effective date or subject | 11 | | to an existing contract for the provision of services must | 12 | | disclose to the board of trustees all direct and indirect fees, | 13 | | commissions, penalties, and other compensation paid by or on
| 14 | | behalf of the investment adviser or consultant in connection | 15 | | with the provision of those services and shall update that | 16 | | disclosure promptly after a modification of those payments or | 17 | | an additional payment. | 18 | | A person required to make a disclosure under subsection (d) | 19 | | is also required to disclose direct and indirect fees, | 20 | | commissions, penalties, or other compensation that shall or may | 21 | | be paid by or on behalf of the person in connection with the | 22 | | rendering of those services. The person shall update the | 23 | | disclosure promptly after a modification of those payments or | 24 | | an additional payment. | 25 | | The disclosures required by this subsection shall be in | 26 | | writing and shall include the date and amount of each payment |
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| 1 | | and the name and address of each recipient of a payment. | 2 | | (c) Within 30 days after appointing an investment adviser | 3 | | or consultant, the board shall
submit a copy of the contract to | 4 | | the Division of Insurance of the Department of Financial and | 5 | | Professional Regulation.
| 6 | | (d) Investment services provided by a person other than an | 7 | | investment
adviser appointed under this Section, including but | 8 | | not limited to services
provided by the kinds of persons listed | 9 | | in items (1) through (4) of subsection
(a), shall be rendered | 10 | | only after full written disclosure of direct and
indirect fees, | 11 | | commissions, penalties, and any other compensation that shall | 12 | | or
may be received by the person rendering those services.
| 13 | | (e) The board of trustees of each pension fund shall retain | 14 | | records of
investment transactions in accordance with the rules | 15 | | of the Department of
Financial and Professional Regulation.
| 16 | | (Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)
| 17 | | (40 ILCS 5/1-113.3 rep.)
| 18 | | Section 10. The Illinois Pension Code is amended by | 19 | | repealing Section 1-113.3.
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