101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1389

 

Introduced 2/13/2019, by Sen. Chuck Weaver

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/1-109.1  from Ch. 108 1/2, par. 1-109.1
40 ILCS 5/1-110  from Ch. 108 1/2, par. 1-110
40 ILCS 5/1-110.6
40 ILCS 5/1-113.1
40 ILCS 5/1-113.4a
40 ILCS 5/1-113.5
40 ILCS 5/1-113.14
40 ILCS 5/1-113.16
40 ILCS 5/1-113.20
40 ILCS 5/1-150
40 ILCS 5/1-113.2 rep.
40 ILCS 5/1-113.3 rep.
40 ILCS 5/1-113.4 rep.

    Amends the General Provisions Article of the Illinois Pension Code. Removes provisions specifying, based on the net assets of the pension fund, types of investments that a downstate police or downstate firefighter pension fund may make. Removes provisions requiring an investment adviser for investments in certain common and preferred stocks. Removes certain limitations on the percentage of a pension fund's net assets that may be invested in certain types of investments. Makes conforming changes. Effective immediately.


LRB101 07319 RPS 52359 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB1389LRB101 07319 RPS 52359 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
5Sections 1-109.1, 1-110, 1-110.6, 1-113.1, 1-113.4a, 1-113.5,
61-113.14, 1-113.16, 1-113.20, and 1-150 as 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
9duties.
10    (1) Subject to the provisions of Section 22A-113 of this
11Code and subsections (2) and (3) of this Section, the board of
12trustees of a retirement system or pension fund established
13under 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
17    fund; and
18        (b) Allocate duties among themselves and designate
19    others as fiduciaries to carry out specific fiduciary
20    activities other than the management of the assets of the
21    retirement system or pension fund.
22    (2) The board of trustees of a pension fund established
23under Article 5, 6, 8, 9, 10, 11, 12 or 17 of this Code may not

 

 

SB1389- 2 -LRB101 07319 RPS 52359 b

1transfer its investment authority, nor transfer the assets of
2the fund to any other person or entity for the purpose of
3consolidating or merging its assets and management with any
4other pension fund or public investment authority, unless the
5board resolution authorizing such transfer is submitted for
6approval to the contributors and pensioners of the fund at
7elections held not less than 30 days after the adoption of such
8resolution by the board, and such resolution is approved by a
9majority of the votes cast on the question in both the
10contributors election and the pensioners election. The
11election procedures and qualifications governing the election
12of trustees shall govern the submission of resolutions for
13approval under this paragraph, insofar as they may be made
14applicable.
15    (3) Pursuant to subsections (h) and (i) of Section 6 of
16Article VII of the Illinois Constitution, the investment
17authority of boards of trustees of retirement systems and
18pension funds established under this Code is declared to be a
19subject of exclusive State jurisdiction, and the concurrent
20exercise by a home rule unit of any power affecting such
21investment authority is hereby specifically denied and
22preempted.
23    (4) For the purposes of this Code, "emerging investment
24manager" means a qualified investment adviser that manages an
25investment portfolio of at least $10,000,000 but less than
26$10,000,000,000 and is a "minority-owned business",

 

 

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

 

 

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

 

 

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

 

 

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

 

 

SB1389- 7 -LRB101 07319 RPS 52359 b

1specific actions undertaken to increase the use of minority
2broker-dealers; and (v) the policy adopted under subsection (9)
3of this Section.
4    (9) A On or before February 1, 2015, a retirement system,
5pension fund, or investment board subject to this Code, except
6those under Article 3 or 4 whose investments are restricted by
7Section 1-113.2 of this Code, shall adopt a policy that sets
8forth goals for increasing the utilization of minority
9investment managers. For the purposes of this Code, "minority
10investment manager" means a qualified investment manager that
11manages an investment portfolio and meets the definition of
12"minority-owned business", "women-owned business", or
13"business owned by a person with a disability", as those terms
14are defined in the Business Enterprise for Minorities, Women,
15and Persons with Disabilities Act.
16    It is hereby declared to be the public policy of the State
17of Illinois to encourage the trustees of public employee
18retirement systems, pension funds, and investment boards to use
19minority investment managers in managing their systems'
20assets, encompassing all asset classes, and to increase the
21racial, ethnic, and gender diversity of their fiduciaries, to
22the greatest extent feasible within the bounds of financial and
23fiduciary prudence, and to take affirmative steps to remove any
24barriers to the full participation in investment opportunities
25afforded by those retirement systems, pension funds, and
26investment boards.

 

 

SB1389- 8 -LRB101 07319 RPS 52359 b

1    The retirement system, pension fund, or investment board
2shall establish 3 separate goals for: (i) minority investment
3managers that are minority-owned businesses; (ii) minority
4investment managers that are women-owned businesses; and (iii)
5minority investment managers that are businesses owned by a
6person with a disability. The retirement system, pension fund,
7or investment board shall annually review the goals established
8under this Section.
9    If in any case a minority 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 minority 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 minority 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 a minority investment manager does not
20constitute a transfer of investment authority for the purposes
21of subsection (2) of this Section.
22    (10) Beginning January 1, 2016, it shall be the
23aspirational goal for a retirement system, pension fund, or
24investment board subject to this Code to use emerging
25investment managers for not less than 20% of the total funds
26under management. Furthermore, it shall be the aspirational

 

 

SB1389- 9 -LRB101 07319 RPS 52359 b

1goal that not less than 20% of investment advisors be
2minorities, women, and persons with disabilities as those terms
3are defined in the Business Enterprise for Minorities, Women,
4and Persons with Disabilities Act. It shall be the aspirational
5goal to utilize businesses owned by minorities, women, and
6persons with disabilities for not less than 20% of contracts
7awarded for "information technology services", "accounting
8services", "insurance brokers", "architectural and engineering
9services", and "legal services" as those terms are defined in
10the Act.
11(Source: P.A. 99-462, eff. 8-25-15; 100-391, eff. 8-25-17;
12100-902, eff. 8-17-18.)
 
13    (40 ILCS 5/1-110)  (from Ch. 108 1/2, par. 1-110)
14    Sec. 1-110. Prohibited Transactions.
15    (a) A fiduciary with respect to a retirement system,
16pension fund, or investment board shall not cause the
17retirement system or pension fund to engage in a transaction if
18he or she knows or should know that such transaction
19constitutes a direct or indirect:
20        (1) Sale or exchange, or leasing of any property from
21    the retirement system or pension fund to a party in
22    interest for less than adequate consideration, or from a
23    party in interest to a retirement system or pension fund
24    for more than adequate consideration.
25        (2) Lending of money or other extension of credit from

 

 

SB1389- 10 -LRB101 07319 RPS 52359 b

1    the retirement system or pension fund to a party in
2    interest without the receipt of adequate security and a
3    reasonable rate of interest, or from a party in interest to
4    a retirement system or pension fund with the provision of
5    excessive security or an unreasonably high rate of
6    interest.
7        (3) Furnishing of goods, services or facilities from
8    the retirement system or pension fund to a party in
9    interest for less than adequate consideration, or from a
10    party in interest to a retirement system or pension fund
11    for more than adequate consideration.
12        (4) Transfer to, or use by or for the benefit of, a
13    party in interest of any assets of a retirement system or
14    pension fund for less than adequate consideration.
15    (b) A fiduciary with respect to a retirement system or
16pension fund established under this Code shall not:
17        (1) Deal with the assets of the retirement system or
18    pension fund in his own interest or for his own account;
19        (2) In his individual or any other capacity act in any
20    transaction involving the retirement system or pension
21    fund on behalf of a party whose interests are adverse to
22    the interests of the retirement system or pension fund or
23    the interests of its participants or beneficiaries; or
24        (3) Receive any consideration for his own personal
25    account from any party dealing with the retirement system
26    or pension fund in connection with a transaction involving

 

 

SB1389- 11 -LRB101 07319 RPS 52359 b

1    the assets of the retirement system or pension fund.
2    (c) Nothing in this Section shall be construed to prohibit
3any trustee from:
4        (1) Receiving any benefit to which he may be entitled
5    as a participant or beneficiary in the retirement system or
6    pension fund.
7        (2) Receiving any reimbursement of expenses properly
8    and actually incurred in the performance of his duties with
9    the retirement system or pension fund.
10        (3) Serving as a trustee in addition to being an
11    officer, employee, agent or other representative of a party
12    in interest.
13    (d) A fiduciary of a pension fund established under Article
143 or 4 shall not knowingly cause or advise the pension fund to
15engage in an investment transaction when the fiduciary (i) has
16any direct interest in the income, gains, or profits of the
17investment adviser through which the investment transaction is
18made or (ii) has a business relationship with that investment
19adviser that would result in a pecuniary benefit to the
20fiduciary as a result of the investment transaction.
21    Violation of this subsection (d) is a Class 4 felony.
22    (e) A board member, employee, or consultant with respect to
23a retirement system, pension fund, or investment board subject
24to this Code, except those under Article 3 or 4 whose
25investments are restricted by Section 1-113.2, shall not
26knowingly cause or advise the retirement system, pension fund,

 

 

SB1389- 12 -LRB101 07319 RPS 52359 b

1or investment board to engage in an investment transaction with
2an investment adviser when the board member, employee,
3consultant, or their spouse (i) has any direct interest in the
4income, gains, or profits of the investment adviser through
5which the investment transaction is made or (ii) has a
6relationship with that investment adviser that would result in
7a pecuniary benefit to the board member, employee, or
8consultant or spouse of such board member, employee, or
9consultant as a result of the investment transaction. For
10purposes of this subsection (e), a consultant includes an
11employee or agent of a consulting firm who has greater than
127.5% ownership of the consulting firm.
13    Violation of this subsection (e) is a Class 4 felony.
14(Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)
 
15    (40 ILCS 5/1-110.6)
16    Sec. 1-110.6. Transactions prohibited by retirement
17systems; Republic of the Sudan.
18    (a) The Government of the United States has determined that
19Sudan is a nation that sponsors terrorism and genocide. The
20General Assembly finds that acts of terrorism have caused
21injury and death to Illinois and United States residents who
22serve in the United States military, and pose a significant
23threat to safety and health in Illinois. The General Assembly
24finds that public employees and their families, including
25police officers and firefighters, are more likely than others

 

 

SB1389- 13 -LRB101 07319 RPS 52359 b

1to be affected by acts of terrorism. The General Assembly finds
2that Sudan continues to solicit investment and commercial
3activities by forbidden entities, including private market
4funds. The General Assembly finds that investments in forbidden
5entities are inherently and unduly risky, not in the interests
6of public pensioners and Illinois taxpayers, and against public
7policy. The General Assembly finds that Sudan's capacity to
8sponsor terrorism and genocide depends on or is supported by
9the activities of forbidden entities. The General Assembly
10further finds and re-affirms that the people of the State,
11acting through their representatives, do not want to be
12associated with forbidden entities, genocide, and terrorism.
13    (b) For purposes of this Section:
14    "Business operations" means maintaining, selling, or
15leasing equipment, facilities, personnel, or any other
16apparatus of business or commerce in the Republic of the Sudan,
17including the ownership or possession of real or personal
18property located in the Republic of the Sudan.
19    "Certifying company" means a company that (1) directly
20provides asset management services or advice to a retirement
21system or (2) as directly authorized or requested by a
22retirement system (A) identifies particular investment options
23for consideration or approval; (B) chooses particular
24investment options; or (C) allocates particular amounts to be
25invested. If no company meets the criteria set forth in this
26paragraph, then "certifying company" shall mean the retirement

 

 

SB1389- 14 -LRB101 07319 RPS 52359 b

1system officer who, as designated by the board, executes the
2investment decisions made by the board, or, in the alternative,
3the company that the board authorizes to complete the
4certification as the agent of that officer.
5    "Company" is any entity capable of affecting commerce,
6including but not limited to (i) a government, government
7agency, natural person, legal person, sole proprietorship,
8partnership, firm, corporation, subsidiary, affiliate,
9franchisor, franchisee, joint venture, trade association,
10financial institution, utility, public franchise, provider of
11financial services, trust, or enterprise; and (ii) any
12association thereof.
13    "Department" means the Public Pension Division of the
14Department of Financial and Professional Regulation.
15    "Forbidden entity" means any of the following:
16        (1) The government of the Republic of the Sudan and any
17    of its agencies, including but not limited to political
18    units and subdivisions;
19        (2) Any company that is wholly or partially managed or
20    controlled by the government of the Republic of the Sudan
21    and any of its agencies, including but not limited to
22    political units and subdivisions;
23        (3) Any company (i) that is established or organized
24    under the laws of the Republic of the Sudan or (ii) whose
25    principal place of business is in the Republic of the
26    Sudan;

 

 

SB1389- 15 -LRB101 07319 RPS 52359 b

1        (4) Any company (i) identified by the Office of Foreign
2    Assets Control in the United States Department of the
3    Treasury as sponsoring terrorist activities in the
4    Republic of the Sudan; or (ii) fined, penalized, or
5    sanctioned by the Office of Foreign Assets Control in the
6    United States Department of the Treasury for any violation
7    of any United States rules and restrictions relating to the
8    Republic of the Sudan that occurred at any time following
9    the effective date of this Act;
10        (5) Any publicly traded company that is individually
11    identified by an independent researching firm that
12    specializes in global security risk and that has been
13    retained by a certifying company as provided in subsection
14    (c) of this Section as being a company that owns or
15    controls property or assets located in, has employees or
16    facilities located in, provides goods or services to,
17    obtains goods or services from, has distribution
18    agreements with, issues credits or loans to, purchases
19    bonds or commercial paper issued by, or invests in (A) the
20    Republic of the Sudan; or (B) any company domiciled in the
21    Republic of the Sudan; and
22        (6) Any private market fund that fails to satisfy the
23    requirements set forth in subsections (d) and (e) of this
24    Section.
25    Notwithstanding the foregoing, the term "forbidden entity"
26shall exclude (A) mutual funds that (i) are managed by an

 

 

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1investment company as defined and registered under the federal
2Investment Company Act of 1940 and registered under the
3Illinois Securities Law of 1953, (ii) have been in operation
4for at least 5 years, (iii) have total net assets of
5$250,000,000 or more, and (iv) are comprised of diversified
6portfolios of common or preferred stocks, bonds, or money
7market instruments; meet the requirements of item (iii) of
8paragraph (13) of Section 1-113.2 and (B) companies that
9transact business in the Republic of the Sudan under the law,
10license, or permit of the United States, including a license
11from the United States Department of the Treasury, and
12companies, except agencies of the Republic of the Sudan, who
13are certified as Non-Government Organizations by the United
14Nations, or who engage solely in (i) the provision of goods and
15services intended to relieve human suffering or to promote
16welfare, health, religious and spiritual activities, and
17education or humanitarian purposes; or (ii) journalistic
18activities.
19    "Private market fund" means any private equity fund,
20private equity fund of funds, venture capital fund, hedge fund,
21hedge fund of funds, real estate fund, or other investment
22vehicle that is not publicly traded.
23    "Republic of the Sudan" means those geographic areas of the
24Republic of Sudan that are subject to sanction or other
25restrictions placed on commercial activity imposed by the
26United States Government due to an executive or congressional

 

 

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1declaration of genocide.
2    "Retirement system" means the State Employees' Retirement
3System of Illinois, the Judges Retirement System of Illinois,
4the General Assembly Retirement System, the State Universities
5Retirement System, and the Teachers' Retirement System of the
6State of Illinois.
7    (c) A retirement system shall not transfer or disburse
8funds to, deposit into, acquire any bonds or commercial paper
9from, or otherwise loan to or invest in any entity unless, as
10provided in this Section, a certifying company certifies to the
11retirement system that, (1) with respect to investments in a
12publicly traded company, the certifying company has relied on
13information provided by an independent researching firm that
14specializes in global security risk and (2) 100% of the
15retirement system's assets for which the certifying company
16provides services or advice are not and have not been invested
17or reinvested in any forbidden entity at any time after 4
18months after the effective date of this Section.
19    The certifying company shall make the certification
20required under this subsection (c) to a retirement system 6
21months after the effective date of this Section and annually
22thereafter. A retirement system shall submit the
23certifications to the Department, and the Department shall
24notify the Secretary of Financial and Professional Regulation
25if a retirement system fails to do so.
26    (d) With respect to a commitment or investment made

 

 

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1pursuant to a written agreement executed prior to the effective
2date of this Section, each private market fund shall submit to
3the appropriate certifying company, at no additional cost to
4the retirement system:
5        (1) an affidavit sworn under oath in which an expressly
6    authorized officer of the private market fund avers that
7    the private market fund (A) does not own or control any
8    property or asset located in the Republic of the Sudan and
9    (B) does not conduct business operations in the Republic of
10    the Sudan; or
11        (2) a certificate in which an expressly authorized
12    officer of the private market fund certifies that the
13    private market fund, based on reasonable due diligence, has
14    determined that, other than direct or indirect investments
15    in companies certified as Non-Government Organizations by
16    the United Nations, the private market fund has no direct
17    or indirect investment in any company (A) organized under
18    the laws of the Republic of the Sudan; (B) whose principal
19    place of business is in the Republic of the Sudan; or (C)
20    that conducts business operations in the Republic of the
21    Sudan. Such certificate shall be based upon the periodic
22    reports received by the private market fund, and the
23    private market fund shall agree that the certifying
24    company, directly or through an agent, or the retirement
25    system, as the case may be, may from time to time review
26    the private market fund's certification process.

 

 

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1    (e) With respect to a commitment or investment made
2pursuant to a written agreement executed after the effective
3date of this Section, each private market fund shall, at no
4additional cost to the retirement system:
5        (1) submit to the appropriate certifying company an
6    affidavit or certificate consistent with the requirements
7    pursuant to subsection (d) of this Section; or
8        (2) enter into an enforceable written agreement with
9    the retirement system that provides for remedies
10    consistent with those set forth in subsection (g) of this
11    Section if any of the assets of the retirement system shall
12    be transferred, loaned, or otherwise invested in any
13    company that directly or indirectly (A) has facilities or
14    employees in the Republic of the Sudan or (B) conducts
15    business operations in the Republic of the Sudan.
16    (f) In addition to any other penalties and remedies
17available under the law of Illinois and the United States, any
18transaction, other than a transaction with a private market
19fund that is governed by subsections (g) and (h) of this
20Section, that violates the provisions of this Act shall be
21against public policy and voidable, at the sole discretion of
22the retirement system.
23    (g) If a private market fund fails to provide the affidavit
24or certification required in subsections (d) and (e) of this
25Section, then the retirement system shall, within 90 days,
26divest, or attempt in good faith to divest, the retirement

 

 

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1system's interest in the private market fund, provided that the
2Board of the retirement system confirms through resolution that
3the divestment does not have a material and adverse impact on
4the retirement system. The retirement system shall immediately
5notify the Department, and the Department shall notify all
6other retirement systems, as soon as practicable, by posting
7the name of the private market fund on the Department's
8Internet website or through e-mail communications. No other
9retirement system may enter into any agreement under which the
10retirement system directly or indirectly invests in the private
11market fund unless the private market fund provides that
12retirement system with the affidavit or certification required
13in subsections (d) and (e) of this Section and complies with
14all other provisions of this Section.
15    (h) If a private market fund fails to fulfill its
16obligations under any agreement provided for in paragraph (2)
17of subsection (e) of this Section, the retirement system shall
18immediately take legal and other action to obtain satisfaction
19through all remedies and penalties available under the law and
20the agreement itself. The retirement system shall immediately
21notify the Department, and the Department shall notify all
22other retirement systems, as soon as practicable, by posting
23the name of the private market fund on the Department's
24Internet website or through e-mail communications, and no other
25retirement system may enter into any agreement under which the
26retirement system directly or indirectly invests in the private

 

 

SB1389- 21 -LRB101 07319 RPS 52359 b

1market fund.
2    (i) This Section shall have full force and effect during
3any period in which the Republic of the Sudan, or the officials
4of the government of that Republic, are subject to sanctions
5authorized under any statute or executive order of the United
6States or until such time as the State Department of the United
7States confirms in the federal register or through other means
8that the Republic of the Sudan is no longer subject to
9sanctions by the government of the United States.
10    (j) If any provision of this Section or its application to
11any person or circumstance is held invalid, the invalidity of
12that provision or application does not affect other provisions
13or applications of this Section that can be given effect
14without the invalid provision or application.
15(Source: P.A. 95-521, eff. 8-28-07.)
 
16    (40 ILCS 5/1-113.1)
17    Sec. 1-113.1. Investment authority of pension funds
18established under Article 3 or 4. The board of trustees of a
19police pension fund established under Article 3 of this Code or
20firefighter pension fund established under Article 4 of this
21Code shall draw pension funds from the treasurer of the
22municipality and, beginning January 1, 1998, invest any part
23thereof in the name of the board in the items listed in
24Sections 1-113.2 through 1-113.4 according to the limitations
25and requirements of this Article. These investments shall be

 

 

SB1389- 22 -LRB101 07319 RPS 52359 b

1made with the care, skill, prudence, and diligence that a
2prudent person acting in like capacity and familiar with such
3matters would use in the conduct of an enterprise of like
4character with like aims.
5    Interest and any other income from the investments shall be
6credited to the pension fund.
7    For the purposes of Sections 1-113.2 through 1-113.11, the
8"net assets" of a pension fund include both the cash and
9invested assets of the pension fund.
10(Source: P.A. 90-507, eff. 8-22-97.)
 
11    (40 ILCS 5/1-113.4a)
12    Sec. 1-113.4a. Pension fund investments in common and
13preferred stocks and mutual funds List of additional permitted
14investments for Article 3 and 4 pension funds with net assets
15of $10,000,000 or more.
16    (a) A In addition to the items in Sections 1-113.2 and
171-113.3, a pension fund established under Article 3 or 4 that
18has net assets of at least $10,000,000 and has appointed an
19investment adviser, as defined under Sections 1-101.4 and
201-113.5, may, through that investment adviser, invest an
21additional portion of its assets in common and preferred stocks
22and mutual funds.
23    (b) The stocks must meet all of the following requirements:
24        (1) The common stocks must be listed on a national
25    securities exchange or board of trade (as defined in the

 

 

SB1389- 23 -LRB101 07319 RPS 52359 b

1    Federal Securities Exchange Act of 1934 and set forth in
2    paragraph G of Section 3 of the Illinois Securities Law of
3    1953) or quoted in the National Association of Securities
4    Dealers Automated Quotation System National Market System.
5        (2) The securities must be of a corporation in
6    existence for at least 5 years.
7        (3) The market value of stock in any one corporation
8    may not exceed 5% of the cash and invested assets of the
9    pension fund, and the investments in the stock of any one
10    corporation may not exceed 5% of the total outstanding
11    stock of that corporation.
12        (4) The straight preferred stocks or convertible
13    preferred stocks must be issued or guaranteed by a
14    corporation whose common stock qualifies for investment by
15    the board.
16    (c) The mutual funds must meet the following requirements:
17        (1) The mutual fund must be managed by an investment
18    company registered under the Federal Investment Company
19    Act of 1940 and registered under the Illinois Securities
20    Law of 1953.
21        (2) The mutual fund must have been in operation for at
22    least 5 years.
23        (3) The mutual fund must have total net assets of
24    $250,000,000 or more.
25        (4) The mutual fund must be comprised of a diversified
26    portfolio of common or preferred stocks, bonds, or money

 

 

SB1389- 24 -LRB101 07319 RPS 52359 b

1    market instruments.
2    (d) (Blank). A pension fund's total investment in the items
3authorized under this Section and Section 1-113.3 shall not
4exceed 50% effective July 1, 2011 and 55% effective July 1,
52012 of the market value of the pension fund's net present
6assets stated in its most recent annual report on file with the
7Department of Insurance.
8    (e) A pension fund that invests funds under this Section
9shall electronically file with the Division any reports of its
10investment activities that the Division may require, at the
11time and in the format required by the Division.
12(Source: P.A. 96-1495, eff. 1-1-11.)
 
13    (40 ILCS 5/1-113.5)
14    Sec. 1-113.5. Investment advisers and investment services
15for all Article 3 or 4 pension funds.
16    (a) The board of trustees of a pension fund may appoint
17investment advisers as defined in Section 1-101.4. The board of
18any pension fund investing in common or preferred stock under
19Section 1-113.4 shall appoint an investment adviser before
20making such investments.
21    The investment adviser shall be a fiduciary, as defined in
22Section 1-101.2, with respect to the pension fund and shall be
23one of the following:
24        (1) an investment adviser registered under the federal
25    Investment Advisers Act of 1940 and the Illinois Securities

 

 

SB1389- 25 -LRB101 07319 RPS 52359 b

1    Law of 1953;
2        (2) a bank or trust company authorized to conduct a
3    trust business in Illinois;
4        (3) a life insurance company authorized to transact
5    business in Illinois; or
6        (4) an investment company as defined and registered
7    under the federal Investment Company Act of 1940 and
8    registered under the Illinois Securities Law of 1953.
9    (a-5) Notwithstanding any other provision of law, a person
10or entity that provides consulting services (referred to as a
11"consultant" in this Section) to a pension fund with respect to
12the selection of fiduciaries may not be awarded a contract to
13provide those consulting services that is more than 5 years in
14duration. No contract to provide such consulting services may
15be renewed or extended. At the end of the term of a contract,
16however, the contractor is eligible to compete for a new
17contract. No person shall attempt to avoid or contravene the
18restrictions of this subsection by any means. All offers from
19responsive offerors shall be accompanied by disclosure of the
20names and addresses of the following:
21        (1) The offeror.
22        (2) Any entity that is a parent of, or owns a
23    controlling interest in, the offeror.
24        (3) Any entity that is a subsidiary of, or in which a
25    controlling interest is owned by, the offeror.
26    Beginning on July 1, 2008, a person, other than a trustee

 

 

SB1389- 26 -LRB101 07319 RPS 52359 b

1or an employee of a pension fund or retirement system, may not
2act as a consultant under this Section unless that person is at
3least one of the following: (i) registered as an investment
4adviser under the federal Investment Advisers Act of 1940 (15
5U.S.C. 80b-1, et seq.); (ii) registered as an investment
6adviser under the Illinois Securities Law of 1953; (iii) a
7bank, as defined in the Investment Advisers Act of 1940; or
8(iv) an insurance company authorized to transact business in
9this State.
10    (b) All investment advice and services provided by an
11investment adviser or a consultant appointed under this Section
12shall be rendered pursuant to a written contract between the
13investment adviser and the board, and in accordance with the
14board's investment policy.
15    The contract shall include all of the following:
16        (1) acknowledgement in writing by the investment
17    adviser that he or she is a fiduciary with respect to the
18    pension fund;
19        (2) the board's investment policy;
20        (3) full disclosure of direct and indirect fees,
21    commissions, penalties, and any other compensation that
22    may be received by the investment adviser, including
23    reimbursement for expenses; and
24        (4) a requirement that the investment adviser submit
25    periodic written reports, on at least a quarterly basis,
26    for the board's review at its regularly scheduled meetings.

 

 

SB1389- 27 -LRB101 07319 RPS 52359 b

1    All returns on investment shall be reported as net returns
2    after payment of all fees, commissions, and any other
3    compensation.
4    (b-5) Each contract described in subsection (b) shall also
5include (i) full disclosure of direct and indirect fees,
6commissions, penalties, and other compensation, including
7reimbursement for expenses, that may be paid by or on behalf of
8the investment adviser or consultant in connection with the
9provision of services to the pension fund and (ii) a
10requirement that the investment adviser or consultant update
11the disclosure promptly after a modification of those payments
12or an additional payment.
13    Within 30 days after the effective date of this amendatory
14Act of the 95th General Assembly, each investment adviser and
15consultant providing services on the effective date or subject
16to an existing contract for the provision of services must
17disclose to the board of trustees all direct and indirect fees,
18commissions, penalties, and other compensation paid by or on
19behalf of the investment adviser or consultant in connection
20with the provision of those services and shall update that
21disclosure promptly after a modification of those payments or
22an additional payment.
23    A person required to make a disclosure under subsection (d)
24is also required to disclose direct and indirect fees,
25commissions, penalties, or other compensation that shall or may
26be paid by or on behalf of the person in connection with the

 

 

SB1389- 28 -LRB101 07319 RPS 52359 b

1rendering of those services. The person shall update the
2disclosure promptly after a modification of those payments or
3an additional payment.
4    The disclosures required by this subsection shall be in
5writing and shall include the date and amount of each payment
6and the name and address of each recipient of a payment.
7    (c) Within 30 days after appointing an investment adviser
8or consultant, the board shall submit a copy of the contract to
9the Division of Insurance of the Department of Financial and
10Professional Regulation.
11    (d) Investment services provided by a person other than an
12investment adviser appointed under this Section, including but
13not limited to services provided by the kinds of persons listed
14in items (1) through (4) of subsection (a), shall be rendered
15only after full written disclosure of direct and indirect fees,
16commissions, penalties, and any other compensation that shall
17or may be received by the person rendering those services.
18    (e) The board of trustees of each pension fund shall retain
19records of investment transactions in accordance with the rules
20of the Department of Financial and Professional Regulation.
21(Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)
 
22    (40 ILCS 5/1-113.14)
23    Sec. 1-113.14. Investment services for retirement systems,
24pension funds, and investment boards, except those funds
25established under Articles 3 and 4.

 

 

SB1389- 29 -LRB101 07319 RPS 52359 b

1    (a) For the purposes of this Section, "investment services"
2means services provided by an investment adviser or a
3consultant other than qualified fund-of-fund management
4services as defined in Section 1-113.15.
5    (b) The selection and appointment of an investment adviser
6or consultant for investment services by the board of a
7retirement system, pension fund, or investment board subject to
8this Code, except those under Article 3 or 4 whose investments
9are restricted by Section 1-113.2, shall be made and awarded in
10accordance with this Section. All contracts for investment
11services shall be awarded by the board using a competitive
12process that is substantially similar to the process required
13for the procurement of professional and artistic services under
14Article 35 of the Illinois Procurement Code. Each board of
15trustees shall adopt a policy in accordance with this
16subsection (b) within 60 days after the effective date of this
17amendatory Act of the 96th General Assembly. The policy shall
18be posted on its web site and filed with the Illinois
19Procurement Policy Board. Exceptions to this Section are
20allowed for (i) sole source procurements, (ii) emergency
21procurements, (iii) at the discretion of the pension fund,
22retirement system, or board of investment, contracts that are
23nonrenewable and one year or less in duration, so long as the
24contract has a value of less than $20,000, and (iv) in the
25discretion of the pension fund, retirement system, or
26investment board, contracts for follow-on funds with the same

 

 

SB1389- 30 -LRB101 07319 RPS 52359 b

1fund sponsor through closed-end funds. All exceptions granted
2under this Section must be published on the system's, fund's,
3or board's web site, shall name the person authorizing the
4procurement, and shall include a brief explanation of the
5reason for the exception.
6    A person, other than a trustee or an employee of a
7retirement system, pension fund, or investment board, may not
8act as a consultant or investment adviser under this Section
9unless that person is registered as an investment adviser under
10the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
11et seq.) or a bank, as defined in the federal Investment
12Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
13    (c) Investment services provided by an investment adviser
14or a consultant appointed under this Section shall be rendered
15pursuant to a written contract between the investment adviser
16or consultant and the board.
17    The contract shall include all of the following:
18        (1) Acknowledgement in writing by the investment
19    adviser or consultant that he or she is a fiduciary with
20    respect to the pension fund or retirement system.
21        (2) The description of the board's investment policy
22    and notice that the policy is subject to change.
23        (3) (i) Full disclosure of direct and indirect fees,
24    commissions, penalties, and other compensation, including
25    reimbursement for expenses, that may be paid by or on
26    behalf of the consultant in connection with the provision

 

 

SB1389- 31 -LRB101 07319 RPS 52359 b

1    of services to the pension fund or retirement system and
2    (ii) a requirement that the consultant update the
3    disclosure promptly after a modification of those payments
4    or an additional payment.
5        (4) A requirement that the investment adviser or
6    consultant, in conjunction with the board's staff, submit
7    periodic written reports, on at least a quarterly basis,
8    for the board's review at its regularly scheduled meetings.
9    All returns on investment shall be reported as net returns
10    after payment of all fees, commissions, and any other
11    compensation.
12        (5) Disclosure of the names and addresses of (i) the
13    consultant or investment adviser; (ii) any entity that is a
14    parent of, or owns a controlling interest in, the
15    consultant or investment adviser; (iii) any entity that is
16    a subsidiary of, or in which a controlling interest is
17    owned by, the consultant or investment adviser; (iv) any
18    persons who have an ownership or distributive income share
19    in the consultant or investment adviser that is in excess
20    of 7.5%; or (v) serves as an executive officer of the
21    consultant or investment adviser.
22        (6) A disclosure of the names and addresses of all
23    subcontractors, if applicable, and the expected amount of
24    money each will receive under the contract, including an
25    acknowledgment that the contractor must promptly make
26    notification, in writing, if at any time during the term of

 

 

SB1389- 32 -LRB101 07319 RPS 52359 b

1    the contract a contractor adds or changes any
2    subcontractors. For purposes of this subparagraph (6),
3    "subcontractor" does not include non-investment related
4    professionals or professionals offering services that are
5    not directly related to the investment of assets, such as
6    legal counsel, actuary, proxy-voting services, services
7    used to track compliance with legal standards, and
8    investment fund of funds where the board has no direct
9    contractual relationship with the investment advisers or
10    partnerships.
11        (7) A description of service to be performed.
12        (8) A description of the need for the service.
13        (9) A description of the plan for post-performance
14    review.
15        (10) A description of the qualifications necessary.
16        (11) The duration of the contract.
17        (12) The method for charging and measuring cost.
18    (d) Notwithstanding any other provision of law, a
19retirement system, pension fund, or investment board subject to
20this Code, except those under Article 3 or 4 whose investments
21are restricted by Section 1-113.2 of this Code, shall not enter
22into a contract with a consultant that exceeds 5 years in
23duration. No contract to provide consulting services may be
24renewed or extended. At the end of the term of a contract,
25however, the consultant is eligible to compete for a new
26contract as provided in this Section. No retirement system,

 

 

SB1389- 33 -LRB101 07319 RPS 52359 b

1pension fund, or investment board shall attempt to avoid or
2contravene the restrictions of this subsection (d) by any
3means.
4    (e) Within 60 days after the effective date of this
5amendatory Act of the 96th General Assembly, each investment
6adviser or consultant currently providing services or subject
7to an existing contract for the provision of services must
8disclose to the board of trustees all direct and indirect fees,
9commissions, penalties, and other compensation paid by or on
10behalf of the investment adviser or consultant in connection
11with the provision of those services and shall update that
12disclosure promptly after a modification of those payments or
13an additional payment. The person shall update the disclosure
14promptly after a modification of those payments or an
15additional payment. The disclosures required by this
16subsection (e) shall be in writing and shall include the date
17and amount of each payment and the name and address of each
18recipient of a payment.
19    (f) The retirement system, pension fund, or board of
20investment shall develop uniform documents that shall be used
21for the solicitation, review, and acceptance of all investment
22services. The form shall include the terms contained in
23subsection (c) of this Section. All such uniform documents
24shall be posted on the retirement system's, pension fund's, or
25investment board's web site.
26    (g) A description of every contract for investment services

 

 

SB1389- 34 -LRB101 07319 RPS 52359 b

1shall be posted in a conspicuous manner on the web site of the
2retirement system, pension fund, or investment board. The
3description must include the name of the person or entity
4awarded a contract, the total amount applicable to the
5contract, the total fees paid or to be paid, and a disclosure
6approved by the board describing the factors that contributed
7to the selection of an investment adviser or consultant.
8(Source: P.A. 98-433, eff. 8-16-13.)
 
9    (40 ILCS 5/1-113.16)
10    Sec. 1-113.16. Investment transparency.
11    (a) The purpose of this Section is to provide for
12transparency in the investment of retirement or pension funds
13and require the reporting of full and complete information
14regarding the investments by pension funds, retirement
15systems, and investment boards.
16    (b) A retirement system, pension fund, or investment board
17subject to this Code and any committees established by such
18system, fund, or board must comply with the Open Meetings Act.
19    (c) Any retirement system, pension fund, or investment
20board subject to this Code that establishes a committee shall
21ensure that the majority of the members on such committee are
22board members. If any member of a committee is not a member of
23the board for the system, fund, or board, then that committee
24member shall be a fiduciary.
25    (d) A retirement system, pension fund, or investment board

 

 

SB1389- 35 -LRB101 07319 RPS 52359 b

1subject to this Code, except those under Article 3 or 4 whose
2investments are restricted by Section 1-113.2, shall maintain
3an official web site and make available in a clear and
4conspicuous manner, and update at least quarterly, all of the
5following information concerning the investment of funds:
6        (1) The total amount of funds held by the pension fund,
7    retirement system, or investment board.
8        (2) The asset allocation for the investments made by
9    the pension fund, retirement system, or investment board.
10        (3) Current and historic return information.
11        (4) A detailed listing of the investment advisers for
12    all asset classes.
13        (5) Performance of investments compared against
14    established benchmarks.
15        (6) A detailed list of all consultants doing business
16    with the retirement system, pension fund, or investment
17    board.
18        (7) A detailed list of all contractors, other than
19    investment advisers and consultants, doing business with
20    the retirement system, pension fund, or investment board.
21        (8) Any requests for investment services.
22        (9) The names and email addresses of all board members,
23    directors, and senior staff.
24        (10) The report required under Section 1-109.1 of this
25    Code, if applicable.
26        (11) The description of each contract required under

 

 

SB1389- 36 -LRB101 07319 RPS 52359 b

1    subsection (g) of Section 1-113.14 of this Code, if
2    applicable.
3    (e) A pension fund under Article 3 or 4 whose investments
4are restricted by Section 1-113.2 of this Code shall make the
5information required in subsection (d) of this Section
6available on its web site or in a location that allows the
7information to be available for inspection by the public.
8    (f) Nothing in this Section requires the pension fund,
9retirement system, or investment board to make information
10available on the Internet that is exempt from inspection and
11copying under the Freedom of Information Act.
12(Source: P.A. 96-6, eff. 4-3-09.)
 
13    (40 ILCS 5/1-113.20)
14    Sec. 1-113.20. Investment strategies; explicit and
15implicit costs. Every pension fund, retirement system, and
16investment board created under this Code, except those under
17Article 3 or 4 whose investments are restricted by Section
181-113.2 of this Code, shall instruct the fund's, system's, or
19board's investment advisors to utilize investment strategies
20designed to ensure that all securities transactions are
21executed in such a manner that the total explicit and implicit
22costs and total proceeds in every transaction are the most
23favorable under the circumstances.
24(Source: P.A. 96-753, eff. 8-25-09.)
 

 

 

SB1389- 37 -LRB101 07319 RPS 52359 b

1    (40 ILCS 5/1-150)
2    Sec. 1-150. Approval of travel or educational mission. The
3expenses for travel or educational missions of a board member
4of a retirement system, pension fund, or investment board
5created under this Code, except those under Article 3 or 4
6whose investments are restricted by Section 1-113.2 of this
7Code, must be approved by a majority of the board prior to the
8travel or educational mission.
9(Source: P.A. 96-6, eff. 4-3-09.)
 
10    (40 ILCS 5/1-113.2 rep.)
11    (40 ILCS 5/1-113.3 rep.)
12    (40 ILCS 5/1-113.4 rep.)
13    Section 10. The Illinois Pension Code is amended by
14repealing Sections 1-113.2, 1-113.3, and 1-113.4.
 
15    Section 99. Effective date. This Act takes effect upon
16becoming law.