98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB3486

 

Introduced 2/14/2014, by Sen. Iris Y. Martinez

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/1-109.1  from Ch. 108 1/2, par. 1-109.1
40 ILCS 5/1-109.3
40 ILCS 5/1-109.4 new
40 ILCS 5/1-109.5 new

    Amends the General Provisions Article of the Illinois Pension Code. Provides that each public retirement system, pension fund, and investment board shall set annual goals regarding the utilization of Illinois-based financial service businesses, including businesses that are minority owned or female owned; requires information to be collected and reported. Requires each public retirement system, pension fund, and investment board to adopt utilization goals for minority or female owned businesses and to independently verify the status of each contracted business on an annual basis; includes personal and staff penalties for failure to achieve those goals. Provides that every person appointed on or after January 1, 2015 by the board of trustees of a retirement system, pension fund, or investment board to be Executive Director, Chief Investment Officer, Chief Financial Officer, or an equivalent position within that system, fund, or board, or to fill a vacancy on the board of trustees, shall be subject to Senate confirmation and shall be appointed to serve for a term of no more than 4 years. Beginning January 1, 2015, requires every current or incoming trustee, Chief Financial Officer, Chief Investment Officer, and Executive Director of any public retirement system, pension fund, or investment board to receive 10 hours of minority and female investment inclusion training, with the oversight of the Senate Public Pensions and State Investments Committee.


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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,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Sections 1-109.1 and 1-109.3 and by adding Sections 1-109.4 and
61-109.5 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

 

 

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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", "female

 

 

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1owned business" or "business owned by a person with a
2disability" as those terms are defined in the Business
3Enterprise for Minorities, Females, 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 to 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    On or before January 1, 2010, a retirement system, pension
17fund, or investment board subject to this Code, except those
18whose investments are restricted by Section 1-113.2 of this
19Code, shall adopt a policy that sets forth goals for
20utilization of emerging investment managers. This policy shall
21include quantifiable goals for the management of assets in
22specific asset classes by emerging investment managers. The
23retirement system, pension fund, or investment board shall
24establish 3 separate goals for: (i) emerging investment
25managers that are minority owned businesses; (ii) emerging
26investment managers that are female owned businesses; and (iii)

 

 

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

 

 

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1and gender diversity of its fiduciaries, including its
2consultants and senior staff. Each system, fund, and investment
3board shall annually review the goals established under this
4subsection.
5    (5.1) Each retirement system, pension fund, and investment
6board established under this Code shall set annual goals
7regarding the utilization of Illinois-based financial service
8businesses, including businesses that are minority owned and
9female owned. Each retirement system, pension fund, and
10investment board shall maintain information on and report to
11the Governor and the General Assembly on its utilization of
12in-state and out-of-state financial service businesses.
13    (6) On or before January 1, 2010, a retirement system,
14pension fund, or investment board subject to this Code, except
15those whose investments are restricted by Section 1-113.2 of
16this Code, shall adopt a policy that sets forth goals for
17utilization of businesses owned by minorities, females, and
18persons with disabilities for all contracts and services. The
19goals established shall be based on the percentage of total
20dollar amount of all contracts let to minority owned
21businesses, female owned businesses, and businesses owned by a
22person with a disability, as those terms are defined in the
23Business Enterprise for Minorities, Females, and Persons with
24Disabilities Act. The retirement system, pension fund, or
25investment board shall annually review the goals established
26under this subsection.

 

 

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1    (7) On or before January 1, 2010, a retirement system,
2pension fund, or investment board subject to this Code, except
3those whose investments are restricted by Section 1-113.2 of
4this Code, shall adopt a policy that sets forth goals for
5increasing the utilization of minority broker-dealers. For the
6purposes of this Code, "minority broker-dealer" means a
7qualified broker-dealer who meets the definition of "minority
8owned business", "female owned business", or "business owned by
9a person with a disability", as those terms are defined in the
10Business Enterprise for Minorities, Females, and Persons with
11Disabilities Act. The retirement system, pension fund, or
12investment board shall annually review the goals established
13under this Section.
14    (8) Each retirement system, pension fund, and investment
15board subject to this Code, except those whose investments are
16restricted by Section 1-113.2 of this Code, shall submit a
17report to the Governor and the General Assembly by January 1 of
18each year that includes the following: (i) the policy adopted
19under subsection (4) of this Section, including the names and
20addresses of the emerging investment managers used, percentage
21of the assets under the investment control of emerging
22investment managers for the 3 separate goals, and the actions
23it has undertaken to increase the use of emerging investment
24managers, including encouraging other investment managers to
25use emerging investment managers as subcontractors when the
26opportunity arises; (ii) the policy adopted under subsection

 

 

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1(5) of this Section; (iii) the policy adopted under subsection
2(6) of this Section; and (iv) the policy adopted under
3subsection (7) of this Section, including specific actions
4undertaken to increase the use of minority broker-dealers.
5(Source: P.A. 96-6, eff. 4-3-09.)
 
6    (40 ILCS 5/1-109.3)
7    Sec. 1-109.3. Training requirement for pension trustees
8and managers.
9    (a) All elected and appointed trustees under Article 3 and
104 of this Code must participate in a mandatory trustee
11certification training seminar that consists of at least 32
12hours of initial trustee certification at a training facility
13that is accredited and affiliated with a State of Illinois
14certified college or university. This training must include
15without limitation all of the following:
16        (1) Duties and liabilities of a fiduciary under Article
17    1 of the Illinois Pension Code.
18        (2) Adjudication of pension claims.
19        (3) Basic accounting and actuarial training.
20        (4) Trustee ethics.
21        (5) The Illinois Open Meetings Act.
22        (6) The Illinois Freedom of Information Act.
23    The training required under this subsection (a) must be
24completed within the first year that a trustee is elected or
25appointed under an Article 3 or 4 pension fund. The elected and

 

 

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1appointed trustees of an Article 3 or 4 pension fund who are
2police officers (as defined in Section 3-106 of this Code) or
3firefighters (as defined in Section 4-106 of this Code) or are
4employed by the municipality shall be permitted time away from
5their duties to attend such training without reduction of
6accrued leave or benefit time. Active or appointed trustees
7serving on the effective date of this amendatory Act of the
896th General Assembly shall not be required to attend the
9training required under this subsection (a).
10    (b) In addition to the initial trustee certification
11training required under subsection (a), all elected and
12appointed trustees under Article 3 and 4 of this Code,
13including trustees serving on the effective date of this
14amendatory Act of the 96th General Assembly, shall also
15participate in a minimum of 16 hours of continuing trustee
16education each year after the first year that the trustee is
17elected or appointed.
18    (c) The training required under this Section shall be paid
19for by the pension fund.
20    (d) Any board member who does not timely complete the
21training required under this Section is not eligible to serve
22on the board of trustees of an Article 3 or 4 pension fund,
23unless the board member completes the missed training within 6
24months after the date the member failed to complete the
25required training. In the event of a board member's failure to
26complete the required training, a successor shall be appointed

 

 

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1or elected, as applicable, for the unexpired term. A successor
2who is elected under such circumstances must be elected at a
3special election called by the board and conducted in the same
4manner as a regular election under Article 3 or 4, as
5applicable.
6    (e) Beginning January 1, 2015, every current or incoming
7trustee, Chief Financial Officer, Chief Investment Officer,
8and Executive Director of any pension fund or retirement system
9established under any Article of this Code shall receive 10
10hours of minority and female investment inclusion training,
11with the oversight of the Senate Public Pensions and State
12Investments Committee.
13(Source: P.A. 96-429, eff. 8-13-09.)
 
14    (40 ILCS 5/1-109.4 new)
15    Sec. 1-109.4. Minority or female owned business
16utilization goals.
17    (a) As used in this Section:
18    "Minority or female owned business" means a business
19concern that is either (i) at least 51% owned, managed, and
20controlled without restriction by minorities or (ii) at least
2151% owned, managed, and controlled without restriction by
22females. A business entity may be certified as both a minority
23owned business and a female owned business if it has at least
2451% minority ownership and at least 51% female ownership. A
25business entity that has less than 51% minority ownership and

 

 

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1less than 51% female ownership shall not be certified as a
2minority or female owned business, even if the combined
3minority and female ownership exceeds 51%.
4    "Minority or female owned business utilization goals"
5means the statewide goals of not less than 20% of the total
6dollar amount of contracts or the goals established by each
7individual retirement system, pension fund or investment
8board, whichever is greater. These minimum goals shall be
9applied across all asset classes in which the retirement
10system, pension fund, or investment board is invested.
11    (b) Each retirement system, pension fund, and investment
12board must adopt minority or female owned business utilization
13goals and shall independently verify the minority or women
14owned business certification status of each contracted
15business on an annual basis.
16    (c) Failure to meet the minority or female owned business
17utilization goals in a fiscal year shall result in the
18following consequences for a retirement system, pension fund,
19or investment board:
20        (1) the Chief Investment Officer, Chief Financial
21    Officer, or Executive Director, whichever is relevant, and
22    the staff operating under that position, shall not be
23    eligible to receive more than 60% of their expected bonus
24    for that fiscal year; and
25        (2) the Chief Investment Officer, Chief Financial
26    Officer, or Executive Director, whichever is relevant,

 

 

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1    shall be placed on a watch list for that year; and
2        (3) if the Chief Investment Officer, Chief Financial
3    Officer, or Executive Director consistently fails to meet
4    minority or female owned business utilization goals, the
5    Senate shall take that failure into consideration when
6    determining whether or not to confirm that person in his or
7    her position at the time of renewal or any subsequent
8    appointment.
 
9    (40 ILCS 5/1-109.5 new)
10    Sec. 1-109.5. Senate confirmation required. Every person
11appointed on or after January 1, 2015 by the board of trustees
12of a retirement system, pension fund, or investment board
13established under any Article of this Code as Executive
14Director, Chief Investment Officer, Chief Financial Officer,or
15an equivalent position within that system, fund, or investment
16board, or to fill a vacancy on the board of trustees, shall be
17subject to Senate confirmation and shall be appointed to serve
18for a term of no more than 4 years.