HB4412 EnrolledLRB100 15616 RPS 30711 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 changing
5Section 1-109.1 as follows:
 
6    (40 ILCS 5/1-109.1)  (from Ch. 108 1/2, par. 1-109.1)
7    Sec. 1-109.1. Allocation and delegation of fiduciary
8duties.
9    (1) Subject to the provisions of Section 22A-113 of this
10Code and subsections (2) and (3) of this Section, the board of
11trustees of a retirement system or pension fund established
12under this Code may:
13        (a) Appoint one or more investment managers as
14    fiduciaries to manage (including the power to acquire and
15    dispose of) any assets of the retirement system or pension
16    fund; and
17        (b) Allocate duties among themselves and designate
18    others as fiduciaries to carry out specific fiduciary
19    activities other than the management of the assets of the
20    retirement system or pension fund.
21    (2) The board of trustees of a pension fund established
22under Article 5, 6, 8, 9, 10, 11, 12 or 17 of this Code may not
23transfer its investment authority, nor transfer the assets of

 

 

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1the fund to any other person or entity for the purpose of
2consolidating or merging its assets and management with any
3other pension fund or public investment authority, unless the
4board resolution authorizing such transfer is submitted for
5approval to the contributors and pensioners of the fund at
6elections held not less than 30 days after the adoption of such
7resolution by the board, and such resolution is approved by a
8majority of the votes cast on the question in both the
9contributors election and the pensioners election. The
10election procedures and qualifications governing the election
11of trustees shall govern the submission of resolutions for
12approval under this paragraph, insofar as they may be made
13applicable.
14    (3) Pursuant to subsections (h) and (i) of Section 6 of
15Article VII of the Illinois Constitution, the investment
16authority of boards of trustees of retirement systems and
17pension funds established under this Code is declared to be a
18subject of exclusive State jurisdiction, and the concurrent
19exercise by a home rule unit of any power affecting such
20investment authority is hereby specifically denied and
21preempted.
22    (4) For the purposes of this Code, "emerging investment
23manager" means a qualified investment adviser that manages an
24investment portfolio of at least $10,000,000 but less than
25$10,000,000,000 and is a "minority-owned business",
26"women-owned business" or "business owned by a person with a

 

 

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1disability" as those terms are defined in the Business
2Enterprise for Minorities, Women, and Persons with
3Disabilities Act.
4    It is hereby declared to be the public policy of the State
5of Illinois to encourage the trustees of public employee
6retirement systems, pension funds, and investment boards to use
7emerging investment managers in managing their system's
8assets, encompassing all asset classes, and increase the
9racial, ethnic, and gender diversity of its fiduciaries, to the
10greatest extent feasible within the bounds of financial and
11fiduciary prudence, and to take affirmative steps to remove any
12barriers to the full participation in investment opportunities
13afforded by those retirement systems, pension funds, and
14investment boards.
15    On or before January 1, 2010, a retirement system, pension
16fund, or investment board subject to this Code, except those
17whose investments are restricted by Section 1-113.2 of this
18Code, shall adopt a policy that sets forth goals for
19utilization of emerging investment managers. This policy shall
20include quantifiable goals for the management of assets in
21specific asset classes by emerging investment managers. The
22retirement system, pension fund, or investment board shall
23establish 3 separate goals for: (i) emerging investment
24managers that are minority-owned businesses; (ii) emerging
25investment managers that are women-owned businesses; and (iii)
26emerging investment managers that are businesses owned by a

 

 

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1person with a disability. The goals established shall be based
2on the percentage of total dollar amount of investment service
3contracts let to minority-owned businesses, women-owned
4businesses, and businesses owned by a person with a disability,
5as those terms are defined in the Business Enterprise for
6Minorities, Women, and Persons with Disabilities Act. The
7retirement system, pension fund, or investment board shall
8annually review the goals established under this subsection.
9    If in any case an emerging investment manager meets the
10criteria established by a board for a specific search and meets
11the criteria established by a consultant for that search, then
12that emerging investment manager shall receive an invitation by
13the board of trustees, or an investment committee of the board
14of trustees, to present his or her firm for final consideration
15of a contract. In the case where multiple emerging investment
16managers meet the criteria of this Section, the staff may
17choose the most qualified firm or firms to present to the
18board.
19    The use of an emerging investment manager does not
20constitute a transfer of investment authority for the purposes
21of subsection (2) of this Section.
22    (5) Each retirement system, pension fund, or investment
23board subject to this Code, except those whose investments are
24restricted by Section 1-113.2 of this Code, shall establish a
25policy that sets forth goals for increasing the racial, ethnic,
26and gender diversity of its fiduciaries, including its

 

 

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1consultants and senior staff. Each retirement system, pension
2fund, or investment board shall make its best efforts to ensure
3that the racial and ethnic makeup of its senior administrative
4staff represents the racial and ethnic makeup of its
5membership. Each system, fund, and investment board shall
6annually review the goals established under this subsection.
7    (6) On or before January 1, 2010, a retirement system,
8pension fund, or investment board subject to this Code, except
9those whose investments are restricted by Section 1-113.2 of
10this Code, shall adopt a policy that sets forth goals for
11utilization of businesses owned by minorities, women, and
12persons with disabilities for all contracts and services. The
13goals established shall be based on the percentage of total
14dollar amount of all contracts let to minority-owned
15businesses, women-owned businesses, and businesses owned by a
16person with a disability, as those terms are defined in the
17Business Enterprise for Minorities, Women, and Persons with
18Disabilities Act. The retirement system, pension fund, or
19investment board shall annually review the goals established
20under this subsection.
21    (7) On or before January 1, 2010, a retirement system,
22pension fund, or investment board subject to this Code, except
23those whose investments are restricted by Section 1-113.2 of
24this Code, shall adopt a policy that sets forth goals for
25increasing the utilization of minority broker-dealers. For the
26purposes of this Code, "minority broker-dealer" means a

 

 

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1qualified broker-dealer who meets the definition of
2"minority-owned business", "women-owned business", or
3"business owned by a person with a disability", as those terms
4are defined in the Business Enterprise for Minorities, Women,
5and Persons with Disabilities Act. The retirement system,
6pension fund, or investment board shall annually review the
7goals established under this Section.
8    (8) Each retirement system, pension fund, and investment
9board subject to this Code, except those whose investments are
10restricted by Section 1-113.2 of this Code, shall submit a
11report to the Governor and the General Assembly by January 1 of
12each year that includes the following: (i) the policy adopted
13under subsection (4) of this Section, including the names and
14addresses of the emerging investment managers used, percentage
15of the assets under the investment control of emerging
16investment managers for the 3 separate goals, and the actions
17it has undertaken to increase the use of emerging investment
18managers, including encouraging other investment managers to
19use emerging investment managers as subcontractors when the
20opportunity arises; (ii) the policy adopted under subsection
21(5) of this Section; (iii) the policy adopted under subsection
22(6) of this Section; (iv) the policy adopted under subsection
23(7) of this Section, including specific actions undertaken to
24increase the use of minority broker-dealers; and (v) the policy
25adopted under subsection (9) of this Section.
26    (9) On or before February 1, 2015, 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 investment managers.
5For the purposes of this Code, "minority investment manager"
6means a qualified investment manager that manages an investment
7portfolio and meets the definition of "minority-owned
8business", "women-owned business", or "business owned by a
9person with a disability", as those terms are defined in the
10Business Enterprise for Minorities, Women, 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
15minority investment managers in managing their systems'
16assets, encompassing all asset classes, and to increase the
17racial, ethnic, and gender diversity of their fiduciaries, to
18the greatest 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    The retirement system, pension fund, or investment board
24shall establish 3 separate goals for: (i) minority investment
25managers that are minority-owned businesses; (ii) minority
26investment managers that are women-owned businesses; and (iii)

 

 

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1minority investment managers that are businesses owned by a
2person with a disability. The retirement system, pension fund,
3or investment board shall annually review the goals established
4under this Section.
5    If in any case a minority investment manager meets the
6criteria established by a board for a specific search and meets
7the criteria established by a consultant for that search, then
8that minority investment manager shall receive an invitation by
9the board of trustees, or an investment committee of the board
10of trustees, to present his or her firm for final consideration
11of a contract. In the case where multiple minority investment
12managers meet the criteria of this Section, the staff may
13choose the most qualified firm or firms to present to the
14board.
15    The use of a minority investment manager does not
16constitute a transfer of investment authority for the purposes
17of subsection (2) of this Section.
18    (10) Beginning January 1, 2016, it shall be the
19aspirational goal for a retirement system, pension fund, or
20investment board subject to this Code to use emerging
21investment managers for not less than 20% of the total funds
22under management. Furthermore, it shall be the aspirational
23goal that not less than 20% of investment advisors be
24minorities, women, and persons with disabilities as those terms
25are defined in the Business Enterprise for Minorities, Women,
26and Persons with Disabilities Act. It shall be the aspirational

 

 

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1goal to utilize businesses owned by minorities, women, and
2persons with disabilities for not less than 20% of contracts
3awarded for "information technology services", "accounting
4services", "insurance brokers", "architectural and engineering
5services", and "legal services" as those terms are defined in
6the Act.
7(Source: P.A. 99-462, eff. 8-25-15; 100-391, eff. 8-25-17.)
 
8    Section 99. Effective date. This Act takes effect upon
9becoming law.