State of Illinois
90th General Assembly
Legislation

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90_HB0366

      40 ILCS 5/1-116           from Ch. 108 1/2, par. 1-116
      40 ILCS 5/1-118 new
      40 ILCS 5/15-167          from Ch. 108 1/2, par. 15-167
      40 ILCS 5/16-179          from Ch. 108 1/2, par. 16-179
      40 ILCS 5/17-146          from Ch. 108 1/2, par. 17-146
      40 ILCS 5/17-146.1        from Ch. 108 1/2, par. 17-146.1
      40 ILCS 5/22A-112         from Ch. 108 1/2, par. 22A-112
      40 ILCS 5/22A-114         from Ch. 108 1/2, par. 22A-114
          Amends the Illinois Pension Code.    Amends  the  General
      Provisions Article to make the provisions relating to federal
      limitations  under  Section  415 of the U.S. Internal Revenue
      Code apply to all retirement systems subject to  the  Pension
      Code.   Permits  each  retirement  system  to  define its own
      Section 415 limitation year.  Requires  all  public  employee
      pension funds to comply with the requirements imposed on them
      by the federal Uniformed Services Employment and Reemployment
      Rights  Act.    Amends the State Board of Investment Article,
      the State Universities Article, and the Downstate and Chicago
      Teacher Articles to require that investments  be  carried  at
      cost  or  a  value  determined  in  accordance with generally
      accepted  accounting  principles.   Also  removes   the   50%
      investment  limitation  on  equity investments by the Chicago
      Teachers pension fund.  Amends the State Board of  Investment
      Article  to  remove  the  requirement  that  a  bank or trust
      company used for the registration of securities be  domiciled
      in Illinois.  Effective immediately.
                                                     LRB9001590EGfg
                                               LRB9001590EGfg
 1        AN ACT to amend the Illinois Pension Code.
 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
 5    changing  Sections  1-116,  15-167, 16-179, 17-146, 17-146.1,
 6    22A-112, and 22A-114 and adding Section 1-118 as follows:
 7        (40 ILCS 5/1-116) (from Ch. 108 1/2, par. 1-116)
 8        Sec. 1-116.  Federal benefit limitation.
 9        (a)  This Section applies shall apply only to all pension
10    funds and retirement  systems  established  under  this  Code
11    Article 2, 7, 8, 9, 11, 13, 14, 15, 16 or 18.
12        (b)  If   any  benefit  payable  by  a  pension  fund  or
13    retirement  system  subject  to  this  Section  exceeds   the
14    applicable  benefit  limits  set  by  Section 415 of the U.S.
15    Internal Revenue Code of 1986 for tax qualified  plans  under
16    Section 401(a) of that Code, the excess shall be payable only
17    from an excess benefit fund established under this Section in
18    accordance with federal law.
19        (c)  An  excess  benefit fund shall be established by any
20    pension fund or retirement system  subject  to  this  Section
21    that  has  any  member  eligible  to  receive  a benefit that
22    exceeds the applicable benefit limits set by Section  415  of
23    the  U.S.  Internal  Revenue  Code  of 1986 for tax qualified
24    plans under Section 401(a) of that Code.   Amounts  shall  be
25    credited  to the excess benefit fund, and payments for excess
26    benefits made from the  excess  benefit  fund,  in  a  manner
27    consistent with the applicable federal law.
28        (d)  For  purposes  of  matters  relating  to the benefit
29    limits set by Section 415 of the U.S. Internal  Revenue  Code
30    of  1986, the limitation year may be defined by each affected
31    pension fund or retirement system for that fund or system.
                            -2-                LRB9001590EGfg
 1    (Source: P.A. 86-1488; 87-794; 87-1265.)
 2        (40 ILCS 5/1-118 new)
 3        Sec. 1-118.  Veterans' rights.   All  pension  funds  and
 4    retirement systems subject to this Code shall comply with the
 5    requirements   imposed  on  them  by  the  federal  Uniformed
 6    Services  Employment  and  Reemployment  Rights   Act   (P.L.
 7    103-353).
 8        (40 ILCS 5/15-167) (from Ch. 108 1/2, par. 15-167)
 9        Sec.  15-167.   To  invest money.  To invest the funds of
10    the system, subject to the requirements and restrictions  set
11    forth  in  Sections  1-109,  1-109.1,  1-109.2, 1-110, 1-111,
12    1-114 and 1-115 and to invest  in  real  estate  acquired  by
13    purchase,  gift,  condemnation  or  otherwise, and any office
14    building or buildings existing or to be constructed  thereon,
15    including  any  additions  thereto or expansions thereof, for
16    the use of the system.  The board may lease surplus space  in
17    any  of  the buildings and use rental proceeds for operation,
18    maintenance,  improving,  expanding  and  furnishing  of  the
19    buildings or for any other lawful system purpose.
20        No bank or savings and  loan  association  shall  receive
21    investment  funds as permitted by this Section, unless it has
22    complied  with  the  requirements  established  pursuant   to
23    Section  6  of  "An  Act  relating  to certain investments of
24    public funds by public agencies", approved July 23, 1943,  as
25    now  or hereafter amended.  The limitations set forth in such
26    Section 6 shall be applicable only at the time of  investment
27    and  shall  not  require the liquidation of any investment at
28    any time.
29        The board shall have the authority  to  enter  into  such
30    agreements  and to execute such documents as it determines to
31    be necessary to complete any investment transaction.
32        All investments shall be clearly held and  accounted  for
                            -3-                LRB9001590EGfg
 1    to  indicate ownership by the board. The board may direct the
 2    registration of securities in its own name or in the name  of
 3    a  nominee created for the express purpose of registration of
 4    securities by a national  or  state  bank  or  trust  company
 5    authorized  to  conduct  a  trust  business  in  the State of
 6    Illinois.
 7        Investments shall be carried at cost or at a  book  value
 8    determined  in  accordance with generally accepted accounting
 9    principles and accounting procedures approved by  the  Board.
10    No  adjustments  shall  be made in investment carrying values
11    for ordinary current market price fluctuations; but  reserves
12    may  be provided to account for possible losses or unrealized
13    gains as determined by the board.
14        The book value of  investments  held  by  the  retirement
15    system in one or more commingled investment accounts shall be
16    the  cost  of  its  units of participation in such commingled
17    account or accounts as recorded on the books of the board.
18        All  additions  to  assets  from  income,  interest,  and
19    dividends from investments shall be  used  to  pay  benefits,
20    operating  and  administrative  expenses  of the system, debt
21    service, including  any  redemption  premium,  on  any  bonds
22    issued  by  the board, expenses incurred or deposits required
23    in connection with such bonds, and such other costs as may be
24    provided in accordance with this Article.
25    (Source: P.A. 86-1034.)
26        (40 ILCS 5/16-179) (from Ch. 108 1/2, par. 16-179)
27        Sec. 16-179.  To be trustee of  reserves  and  to  invest
28    funds.  To  be the trustee of the reserves created under this
29    Article, and to invest and reinvest such reserves, subject to
30    the requirements  and  restrictions  set  forth  in  Sections
31    1-109, 1-109.1, 1-109.2, 1-110, 1-111, 1-114 and 1-115.
32        No  bank  or  savings  and loan association shall receive
33    investment funds as permitted by this Section, unless it  has
                            -4-                LRB9001590EGfg
 1    complied   with  the  requirements  established  pursuant  to
 2    Section 6 of "An  Act  relating  to  certain  investments  of
 3    public  funds by public agencies", approved July 23, 1943, as
 4    now or hereafter amended.  The limitations set forth in  such
 5    Section  6 shall be applicable only at the time of investment
 6    and shall not require the liquidation of  any  investment  at
 7    any time.
 8        The  board  shall  have  the authority to enter into such
 9    agreements and to execute such documents as it determines  to
10    be necessary to complete any investment transaction.
11        All  investments  shall be clearly held and accounted for
12    to indicate ownership by the system.  The  board  may  direct
13    the registration of securities or the holding in interests in
14    real  property  in the name of the system or in the name of a
15    nominee created for the express purpose  of  registration  of
16    securities  or  holding  interests  in  real  property  by  a
17    national or state bank or trust company authorized to conduct
18    a  trust  business  in  the State of Illinois.  The board may
19    hold title to interests in real property in the name  of  the
20    system  or in the name of a title holding corporation created
21    for the express purpose of holding title to interests in real
22    property.
23        Investments shall be carried at cost or at a  book  value
24    determined  in  accordance with generally accepted accounting
25    principles.  No  adjustments  shall  be  made  in  investment
26    carrying   values   for   ordinary   current   market   price
27    fluctuations;  but  reserves  may  be provided to account for
28    possible losses or unrealized gains.
29        The book value of  investments  held  by  the  retirement
30    system in one or more commingled investment accounts shall be
31    the  cost  of  its  units of participation in such commingled
32    account or accounts.
33    (Source: P.A. 86-272.)
                            -5-                LRB9001590EGfg
 1        (40 ILCS 5/17-146) (from Ch. 108 1/2, par. 17-146)
 2        Sec. 17-146.  To make investments.  To invest the  moneys
 3    of the fund, subject to the requirements and restrictions set
 4    forth  in  this  Article  and  in  Sections  1-109,  1-109.1,
 5    1-109.2, 1-110, 1-111, 1-114 and 1-115.  The total book value
 6    of  all  stocks  and convertible debt owned by the fund shall
 7    not exceed 50% of the aggregate book value of all investments
 8    of the fund, calculated on the basis of amortized cost.
 9        No bank or savings and  loan  association  shall  receive
10    investment  funds as permitted by this Section, unless it has
11    complied  with  the  requirements  established  pursuant   to
12    Section  6  of  the  Public  Funds  Investment  Act.    Those
13    requirements   shall  be  applicable  only  at  the  time  of
14    investment and shall  not  require  the  liquidation  of  any
15    investment at any time.
16        The  board  shall  have  the  authority to enter into any
17    agreements and to execute any documents that it determines to
18    be necessary to complete any investment transaction.
19        All investments shall be clearly held and  accounted  for
20    to  indicate ownership by the fund.  The board may direct the
21    registration of securities or the  holding  of  interests  in
22    real  property  in  the  name of the fund or in the name of a
23    nominee  created  for  the  express  purpose  of  registering
24    securities  or  holding  interests  in  real  property  by  a
25    national or state bank or trust company authorized to conduct
26    a trust business in the State of  Illinois.   The  board  may
27    hold  title  to interests in real property in the name of the
28    fund or in the name of a title  holding  corporation  created
29    for the express purpose of holding title to interests in real
30    property.
31        Investments  shall  be carried at cost or at a book value
32    determined in accordance with generally  accepted  accounting
33    principles  and  accounting procedures approved by the board.
34    No adjustments shall be made in  investment  carrying  values
                            -6-                LRB9001590EGfg
 1    for  ordinary current market price fluctuations, but reserves
 2    may be provided to account for possible losses or  unrealized
 3    gains.
 4        The  book value of investments held by the fund in one or
 5    more commingled investment accounts shall  be  determined  in
 6    accordance  with generally accepted accounting principles the
 7    cost of  its  units  of  participation  in  those  commingled
 8    account or accounts.
 9        The  board of trustees of any fund established under this
10    Article  may  not  transfer  its  investment  authority,  nor
11    transfer the assets of the fund to any other person or entity
12    for the purpose of consolidating or merging  its  assets  and
13    management  with  any other pension fund or public investment
14    authority,  unless  the  board  resolution  authorizing  such
15    transfer is submitted for approval to  the  contributors  and
16    pensioners  of  the  fund  at elections held not less than 30
17    days after the adoption of such resolution by the board,  and
18    such  resolution  is approved by a majority of the votes cast
19    on the question in both the  contributors  election  and  the
20    pensioners   election.      The   election   procedures   and
21    qualifications  governing  the  election  of  trustees  shall
22    govern  the submission of resolutions for approval under this
23    paragraph, insofar as they may be made applicable.
24    (Source: P.A. 89-636, eff. 8-9-96.)
25        (40 ILCS 5/17-146.1) (from Ch. 108 1/2, par. 17-146.1)
26        Sec. 17-146.1.  Participation  in  commingled  investment
27    funds; transfer of investment functions and securities.
28        (a)  The  retirement  board  may invest in any commingled
29    investment fund or funds established and  maintained  by  the
30    Illinois  State  Board  of Investment under the provisions of
31    Article 22A of this Code.  The book value of  all  commingled
32    equity  participations  plus  the  book  value of other stock
33    investments owned by this system shall not exceed the maximum
                            -7-                LRB9001590EGfg
 1    permissible percentage rate for equity investments prescribed
 2    in Section 17-146.  All commingled fund participations  shall
 3    be  subject  to the law governing the Illinois State Board of
 4    Investment and the rules, policies  and  directives  of  that
 5    Board.
 6        (b)  The retirement board may, by resolution duly adopted
 7    by  a  majority  vote  of  its  membership,  transfer  to the
 8    Illinois State Board of Investment created by Article 22A  of
 9    this Code, for management and administration, all investments
10    owned  by  the  Fund  of  every  kind  and  character.   Upon
11    completion  of such transfer, the authority of the retirement
12    board to make investments shall  terminate.  Thereafter,  all
13    investments  of the reserves of the Fund shall be made by the
14    Illinois State Board of Investment  in  accordance  with  the
15    provisions of Article 22A of this Code.
16        Such  transfer shall be made not later than the first day
17    of  the  fourth  month  next  following  the  date  of   such
18    resolution. Before such transfer an audit of such investments
19    shall  be completed by a certified public accountant selected
20    by the Illinois State Board of Investment and approved by the
21    Auditor General of the State of Illinois. The expense of such
22    audit shall be defrayed by the retirement board.
23    (Source: P. A. 78-645.)
24        (40 ILCS 5/22A-112) (from Ch. 108 1/2, par. 22A-112)
25        Sec. 22A-112. Investment authority.  The board shall have
26    the authority to invest funds, subject  to  the  requirements
27    and  restrictions  set  forth  in  Sections  1-109,  1-109.1,
28    1-109.2, 1-110, 1-111, 1-114 and 1-115 of this Code.
29        No  bank  or  savings  and loan association shall receive
30    investment funds as permitted by this Section, unless it  has
31    complied   with  the  requirements  established  pursuant  to
32    Section 6 of "An  Act  relating  to  certain  investments  of
33    public  funds by public agencies", approved July 23, 1943, as
                            -8-                LRB9001590EGfg
 1    now or hereafter amended.  The limitations set forth in  such
 2    Section  6 shall be applicable only at the time of investment
 3    and shall not require the liquidation of  any  investment  at
 4    any time.
 5        The  board  shall  have  the authority to enter into such
 6    agreements and to execute such documents as it determines  to
 7    be necessary to complete any investment transaction.
 8        All  investments  shall be clearly held and accounted for
 9    to indicate ownership by the board.  The board may direct the
10    registration of securities in its own name or in the name  of
11    a  nominee created for the express purpose of registration of
12    securities by a national  or  state  bank  or  trust  company
13    authorized  to  conduct a trust business and domiciled in the
14    State of Illinois.
15        Investments shall be carried at cost or at a  book  value
16    determined  in  accordance with generally accepted accounting
17    principles and accounting procedures approved by  the  board.
18    No  adjustments  shall  be made in investment carrying values
19    for ordinary current market price fluctuations; but  reserves
20    may  be provided to account for possible losses or unrealized
21    gains as determined by the board.
22        The book value of investments held by any  pension  fund,
23    retirement system or education fund in one or more commingled
24    investment  accounts  shall  be determined in accordance with
25    generally accepted accounting  principles  the  cost  of  its
26    units of participation in such commingled account or accounts
27    as recorded on the books of the board.
28    (Source: P.A. 84-1127.)
29        (40 ILCS 5/22A-114) (from Ch. 108 1/2, par. 22A-114)
30        Sec.  22A-114.  Accounting.  In the management of pension
31    and education funds the board:
32        (1)  may, for investment purposes,  commingle  all  or  a
33    part  of  the  invested  assets  of  one  or  more pension or
                            -9-                LRB9001590EGfg
 1    education funds under its jurisdiction and authority;
 2        (2)  shall, unless it directs otherwise, carry assets  of
 3    all  funds  at  amortized  cost or a book value determined in
 4    accordance with generally accepted accounting principles  and
 5    accounting  procedures  approved  by  the  board  as to fixed
 6    income  securities  and  original  cost  as  to  common   and
 7    preferred  stock  or  other equity property.  Each investment
 8    initially transferred to the  board  by  a  pension  fund  or
 9    monies transferred to the board by an education fund shall be
10    similarly  valued  except  that  the board may elect to place
11    such value on any investment conditionally in which case  the
12    amount of any later realization of such asset in cash that is
13    in  excess of or is less than the amount so credited shall be
14    credited or charged to the fund that made the transfer;
15        (3)  shall keep  proper  books  of  account  which  shall
16    reflect at all times the value of all investments held by the
17    board  for  a  pension fund or education fund whether for the
18    separate account of the fund or in a commingled fund;
19        (4)  shall charge each pension  fund  or  education  fund
20    with  its share of all expenses of the board (including those
21    repayable under Section 22A-116)  at  quarter-yearly  periods
22    pro  rata  according to the value of the investments held for
23    the respective funds at the beginning of the quarter  or  any
24    other equitable formula;
25        (5)  shall  charge all distributions made by the board to
26    or for a pension  fund  or  education  fund  to  the  account
27    maintained for that fund.
28    (Source: P.A. 84-1127.)
29        Section  99.  Effective date.  This Act takes effect upon
30    becoming law.

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