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Illinois Compiled Statutes

Information maintained by the Legislative Reference Bureau
Updating the database of the Illinois Compiled Statutes (ILCS) is an ongoing process. Recent laws may not yet be included in the ILCS database, but they are found on this site as Public Acts soon after they become law. For information concerning the relationship between statutes and Public Acts, refer to the Guide.

Because the statute database is maintained primarily for legislative drafting purposes, statutory changes are sometimes included in the statute database before they take effect. If the source note at the end of a Section of the statutes includes a Public Act that has not yet taken effect, the version of the law that is currently in effect may have already been removed from the database and you should refer to that Public Act to see the changes made to the current law.

PENSIONS
(40 ILCS 5/) Illinois Pension Code.

40 ILCS 5/Art. 1

 
    (40 ILCS 5/Art. 1 heading)
ARTICLE 1. GENERAL PROVISIONS:
SHORT TITLE, EFFECT OF CODE AND OTHER PROVISIONS

40 ILCS 5/1-101

    (40 ILCS 5/1-101) (from Ch. 108 1/2, par. 1-101)
    Sec. 1-101. Short title.
    This Code shall be known and may be cited as the Illinois Pension Code.
(Source: Laws 1963, p. 161.)

40 ILCS 5/1-101.1

    (40 ILCS 5/1-101.1) (from Ch. 108 1/2, par. 1-101.1)
    Sec. 1-101.1. Definitions. For purposes of this Article, unless the context otherwise requires, the words defined in the Sections following this Section and preceding Section 1-102 shall have meanings given in those Sections.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-101.2

    (40 ILCS 5/1-101.2)
    Sec. 1-101.2. Fiduciary. A person is a "fiduciary" with respect to a pension fund or retirement system established under this Code to the extent that the person:
        (1) exercises any discretionary authority or
    
discretionary control respecting management of the pension fund or retirement system, or exercises any authority or control respecting management or disposition of its assets;
        (2) renders investment advice or renders advice on
    
the selection of fiduciaries for a fee or other compensation, direct or indirect, with respect to any moneys or other property of the pension fund or retirement system, or has any authority or responsibility to do so; or
        (3) has any discretionary authority or discretionary
    
responsibility in the administration of the pension fund or retirement system.
(Source: P.A. 96-6, eff. 4-3-09.)

40 ILCS 5/1-101.3

    (40 ILCS 5/1-101.3)
    Sec. 1-101.3. Party in interest. A person is a "party in interest" with respect to a pension fund or retirement system established under this Code if the person is:
        (1) a fiduciary, counsel, or employee of the pension
    
fund or retirement system, or a relative of such a person;
        (2) a person providing services to the pension fund
    
or retirement system, or a relative of such a person;
        (3) an employer, any of whose employees are covered
    
by the pension fund or retirement system;
        (4) an employee organization, any members of which
    
are covered by the pension fund or retirement system; or
        (5) an employee, officer, or director (or an
    
individual having powers or responsibilities similar to those of an officer or director) of the pension fund or retirement system or of a person described under item (2), (3), or (4) of this Section.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-101.4

    (40 ILCS 5/1-101.4)
    Sec. 1-101.4. Investment adviser. A person is an "investment adviser", "investment advisor", or "investment manager" with respect to a pension fund or retirement system established under this Code if the person:
        (1) is a fiduciary appointed by the board of trustees
    
of the pension fund or retirement system in accordance with Section 1-109.1;
        (2) has the power to manage, acquire, or dispose of
    
any asset of the retirement system or pension fund;
        (3) has acknowledged in writing that he or she is a
    
fiduciary with respect to the pension fund or retirement system; and
        (4) is at least one of the following: (i) registered
    
as an investment adviser under the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.); (ii) registered as an investment adviser under the Illinois Securities Law of 1953; (iii) a bank, as defined in the Investment Advisers Act of 1940; or (iv) an insurance company authorized to transact business in this State.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-101.5

    (40 ILCS 5/1-101.5)
    Sec. 1-101.5. Consultant. "Consultant" means any person or entity retained or employed by the board of a retirement system, pension fund, or investment board to make recommendations in developing an investment strategy, assist with finding appropriate investment advisers, or monitor the board's investments. "Consultant" does not include non-investment related professionals or professionals offering services that are not directly related to the investment of assets, such as legal counsel, actuary, proxy-voting services, services used to track compliance with legal standards, and investment fund of funds where the board has no direct contractual relationship with the investment advisers or partnerships. "Investment adviser" has the meaning ascribed to it in Section 1-101.4.
(Source: P.A. 96-6, eff. 4-3-09.)

40 ILCS 5/1-102

    (40 ILCS 5/1-102) (from Ch. 108 1/2, par. 1-102)
    Sec. 1-102. Continuation of prior statutes.
    The provisions of this Code insofar as they are the same or substantially the same as those of any prior statute, shall be construed as a continuation of such prior statute and not as a new enactment.
    If in any other statute reference is made to an Act of the General Assembly, or a Section of such an Act, which is continued in this Code, such reference shall be held to refer to the Act or Section thereof so continued in this Code.
(Source: Laws 1963, p. 161.)

40 ILCS 5/1-103

    (40 ILCS 5/1-103) (from Ch. 108 1/2, par. 1-103)
    Sec. 1-103. Effect of headings.
    Article, Division and Section headings contained herein shall not be deemed to govern, limit, modify or in any manner affect the scope, meaning or intent of the provisions of any Article, Division or Section hereof.
(Source: Laws 1963, p. 161.)

40 ILCS 5/1-103.1

    (40 ILCS 5/1-103.1) (from Ch. 108 1/2, par. 1-103.1)
    Sec. 1-103.1. Application of amendments.
    Amendments to this Code which have been or may be enacted shall be applicable only to persons who, on or after the effective date thereof, are in service as an employee under the retirement system or pension fund covered by the Article which is amended, unless the amendatory Act specifies otherwise.
(Source: P.A. 77-1415.)

40 ILCS 5/1-103.2

    (40 ILCS 5/1-103.2) (from Ch. 108 1/2, par. 1-103.2)
    Sec. 1-103.2. The amendatory provisions of this amendatory Act of 1987 which provide for benefit increases effective July 1, 1987 or January 1, 1988 are intended to be retroactive to the dates specified therein, notwithstanding the provisions of Section 1-103.1.
(Source: P.A. 85-941.)

40 ILCS 5/1-103.3

    (40 ILCS 5/1-103.3)
    (Text of Section before amendment by P.A. 98-599)
    Sec. 1-103.3. Application of 1994 amendment; funding standard.
    (a) The provisions of this amendatory Act of 1994 that change the method of calculating, certifying, and paying the required State contributions to the retirement systems established under Articles 2, 14, 15, 16, and 18 shall first apply to the State contributions required for State fiscal year 1996.
    (b) The General Assembly declares that a funding ratio (the ratio of a retirement system's total assets to its total actuarial liabilities) of 90% is an appropriate goal for State-funded retirement systems in Illinois, and it finds that a funding ratio of 90% is now the generally-recognized norm throughout the nation for public employee retirement systems that are considered to be financially secure and funded in an appropriate and responsible manner.
    (c) Every 5 years, beginning in 1999, the Commission on Government Forecasting and Accountability, in consultation with the affected retirement systems and the Governor's Office of Management and Budget (formerly Bureau of the Budget), shall consider and determine whether the 90% funding ratio adopted in subsection (b) continues to represent an appropriate goal for State-funded retirement systems in Illinois, and it shall report its findings and recommendations on this subject to the Governor and the General Assembly.
(Source: P.A. 93-1067, eff. 1-15-05.)
 
    (Text of Section after amendment by P.A. 98-599)
    Sec. 1-103.3. Application of 1994 amendment; funding standard.
    (a) The provisions of Public Act 88-593 that change the method of calculating, certifying, and paying the required State contributions to the retirement systems established under Articles 2, 14, 15, 16, and 18 shall first apply to the State contributions required for State fiscal year 1996.
    (b) (Blank).
    (c) Every 5 years, beginning in 1999, the Commission on Government Forecasting and Accountability, in consultation with the affected retirement systems and the Governor's Office of Management and Budget (formerly Bureau of the Budget), shall consider and determine whether the funding goals adopted in Articles 2, 14, 15, 16, and 18 of this Code continue to represent appropriate funding goals for those retirement systems, and it shall report its findings and recommendations on this subject to the Governor and the General Assembly.
(Source: P.A. 98-599, eff. 6-1-14.)

40 ILCS 5/1-104

    (40 ILCS 5/1-104) (from Ch. 108 1/2, par. 1-104)
    Sec. 1-104. Cross references.
    Where, in this Code, reference is made to a Section, Division or Article by its number and no Act is specified, the reference is to the correspondingly numbered Section, Division or Article of this Code. Where reference is made to "this Article" or "this Division" or "this Section" and no Act is specified, the reference is to the Article, Division or Section of this Code in which the reference appears. If any Section, Division or Article of this Code is hereafter amended, the reference shall thereafter be treated and considered as a reference to the Section, Division or Article as so amended.
(Source: Laws 1963, p. 161.)

40 ILCS 5/1-104.1

    (40 ILCS 5/1-104.1) (from Ch. 108 1/2, par. 1-104.1)
    Sec. 1-104.1. Gender.
    Words or phrases as used in this Code that import the masculine gender shall be construed to import also the feminine gender, unless such construction would be inconsistent with the manifest intention of the context.
(Source: P.A. 78-1129.)

40 ILCS 5/1-104.2

    (40 ILCS 5/1-104.2) (from Ch. 108 1/2, par. 1-104.2)
    Sec. 1-104.2. Beginning January 1, 1986, children not conceived in lawful wedlock shall be entitled to the same benefits as other children, and no child's or survivor's benefit shall be disallowed because of the fact that the child was born out of wedlock; however, in cases where the father is the employee parent, paternity must first be established. Paternity may be established by any one of the following means: (1) acknowledgment by the father, or (2) adjudication before or after the death of the father, or (3) any other means acceptable to the board of trustees of the pension fund or retirement system.
(Source: P.A. 94-229, eff. 1-1-06.)

40 ILCS 5/1-104.3

    (40 ILCS 5/1-104.3)
    Sec. 1-104.3. Adopted children. Notwithstanding any other provision of this Code to the contrary, beginning on the effective date of this amendatory Act of the 95th General Assembly, legally adopted children shall be entitled to the same benefits as other children, and no child's or survivor's benefit shall be disallowed because the child is an adopted child. The provisions of this Section apply without regard to whether the employee or member was in service on or after the date of the adoption of the child.
(Source: P.A. 95-279, eff. 1-1-08.)

40 ILCS 5/1-105

    (40 ILCS 5/1-105) (from Ch. 108 1/2, par. 1-105)
    Sec. 1-105. Partial invalidity.
    The invalidity of any provision of this Code shall not affect the validity of the remainder of this Code.
(Source: Laws 1963, p. 161.)

40 ILCS 5/1-106

    (40 ILCS 5/1-106) (from Ch. 108 1/2, par. 1-106)
    Sec. 1-106. Payment of distribution other than direct.
    (a) The board of trustees of any retirement fund or system operating under this Code may, at the written direction and request of any annuitant, solely as an accommodation to the annuitant, pay the annuity due the annuitant to a bank, savings and loan association, or any other financial institution insured by an agency of the federal government, for deposit to the account of the annuitant, or to a bank, savings and loan association, or trust company for deposit in a trust established by the annuitant for his or her benefit with that bank, savings and loan association, or trust company. The annuitant may withdraw the direction at any time.
    (b) Beginning January 1, 1993, each pension fund or retirement system operating under this Code may, and to the extent required by federal law shall, at the request of any person entitled to receive a refund, lump-sum benefit, or other nonperiodic distribution from the pension fund or retirement system, pay the distribution directly to any entity that (1) is designated in writing by the person, (2) is qualified under federal law to accept an eligible rollover distribution from a qualified plan, and (3) has agreed to accept the distribution.
(Source: P.A. 96-586, eff. 8-18-09.)

40 ILCS 5/1-107

    (40 ILCS 5/1-107) (from Ch. 108 1/2, par. 1-107)
    Sec. 1-107. Indemnification of trustees, consultants and employees of retirement systems and pension funds. Every retirement system, pension fund or other system or fund established under this Code may indemnify and protect the trustees, staff and consultants against all damage claims and suits, including defense thereof, when damages are sought for negligent or wrongful acts alleged to have been committed in the scope of employment or under the direction of the trustees. However, the trustees, staff and consultants shall not be indemnified for wilful misconduct and gross negligence. Each board is authorized to insure against loss or liability of the trustees, staff and consultants which may result from these damage claims. This insurance shall be carried in a company which is licensed to write such coverage in this State.
(Source: P.A. 80-1364.)

40 ILCS 5/1-108

    (40 ILCS 5/1-108) (from Ch. 108 1/2, par. 1-108)
    Sec. 1-108. (a) In any proceeding commenced against an employee of a pension fund, alleging a civil wrong arising out of any act or omission occurring within the scope of the employee's pension fund employment, unless the court or the jury finds that the conduct which gave rise to the claim was intentional, wilful or wanton misconduct, the pension fund shall indemnify the employee for any damages awarded and court costs and attorneys' fees assessed as part of any final and unreversed judgment and any attorneys' fees, court costs and litigation expenses incurred by the employee in defending the claim. In any such proceeding if a majority of the board or trustees who are not a party to the action determine that the conduct which gave rise to the claim was not intentional, wilful or wanton misconduct, the board or trustees may agree to settlement of the proceeding and the pension fund shall indemnify the employee for any damages, court costs and attorneys' fees agreed to as part of the settlement and any attorneys' fees, court costs and litigation expenses incurred in defending the claim.
    (b) No employee of a pension fund shall be entitled to indemnification under this Section unless within 15 days after receipt by the employee of service of process, he shall give written notice of such proceeding to the pension fund.
    (c) Each pension fund may insure against loss or liability of employees which may arise as a result of these claims. This insurance shall be carried by a company authorized to provide such coverage in this State.
    (d) Nothing contained or implied in this Section shall operate, or be construed or applied, to deprive the State or a pension fund, or any other employee thereof, of any immunity or any defense heretofore available.
    (e) This Section shall apply regardless of whether the employee is sued in his or her individual or official capacity.
    (f) This Section shall not apply to claims for bodily injury or damage to property arising from motor vehicle accidents.
    (g) This Section shall apply to all proceedings filed on or after its effective date, and to any proceeding pending on its effective date, if the pension fund employee gives notice to the pension fund within 30 days of the Act's effective date.
(Source: P.A. 80-1078.)

40 ILCS 5/1-109

    (40 ILCS 5/1-109) (from Ch. 108 1/2, par. 1-109)
    Sec. 1-109. Duties of Fiduciaries. A fiduciary with respect to a retirement system or pension fund established under this Code shall discharge his or her duties with respect to the retirement system or pension fund solely in the interest of the participants and beneficiaries and:
    (a) For the exclusive purpose of:
    (1) Providing benefits to participants and their beneficiaries; and
    (2) Defraying reasonable expenses of administering the retirement system or pension fund;
    (b) With the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims;
    (c) By diversifying the investments of the retirement system or pension fund so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
    (d) In accordance with the provisions of the Article of the Pension Code governing the retirement system or pension fund.
(Source: P.A. 82-960.)

40 ILCS 5/1-109.1

    (40 ILCS 5/1-109.1) (from Ch. 108 1/2, par. 1-109.1)
    Sec. 1-109.1. Allocation and Delegation of Fiduciary Duties.
    (1) Subject to the provisions of Section 22A-113 of this Code and subsections (2) and (3) of this Section, the board of trustees of a retirement system or pension fund established under this Code may:
        (a) Appoint one or more investment managers as
    
fiduciaries to manage (including the power to acquire and dispose of) any assets of the retirement system or pension fund; and
        (b) Allocate duties among themselves and designate
    
others as fiduciaries to carry out specific fiduciary activities other than the management of the assets of the retirement system or pension fund.
    (2) The board of trustees of a pension fund established under Article 5, 6, 8, 9, 10, 11, 12 or 17 of this Code may not transfer its investment authority, nor transfer the assets of the fund to any other person or entity for the purpose of consolidating or merging its assets and management with any other pension fund or public investment authority, unless the board resolution authorizing such transfer is submitted for approval to the contributors and pensioners of the fund at elections held not less than 30 days after the adoption of such resolution by the board, and such resolution is approved by a majority of the votes cast on the question in both the contributors election and the pensioners election. The election procedures and qualifications governing the election of trustees shall govern the submission of resolutions for approval under this paragraph, insofar as they may be made applicable.
    (3) Pursuant to subsections (h) and (i) of Section 6 of Article VII of the Illinois Constitution, the investment authority of boards of trustees of retirement systems and pension funds established under this Code is declared to be a subject of exclusive State jurisdiction, and the concurrent exercise by a home rule unit of any power affecting such investment authority is hereby specifically denied and preempted.
    (4) For the purposes of this Code, "emerging investment manager" means a qualified investment adviser that manages an investment portfolio of at least $10,000,000 but less than $10,000,000,000 and is a "minority owned business", "female owned business" or "business owned by a person with a disability" as those terms are defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act.
    It is hereby declared to be the public policy of the State of Illinois to encourage the trustees of public employee retirement systems, pension funds, and investment boards to use emerging investment managers in managing their system's assets, encompassing all asset classes, and increase the racial, ethnic, and gender diversity of its fiduciaries, to the greatest extent feasible within the bounds of financial and fiduciary prudence, and to take affirmative steps to remove any barriers to the full participation in investment opportunities afforded by those retirement systems, pension funds, and investment boards.
    On or before January 1, 2010, a retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2 of this Code, shall adopt a policy that sets forth goals for utilization of emerging investment managers. This policy shall include quantifiable goals for the management of assets in specific asset classes by emerging investment managers. The retirement system, pension fund, or investment board shall establish 3 separate goals for: (i) emerging investment managers that are minority owned businesses; (ii) emerging investment managers that are female owned businesses; and (iii) emerging investment managers that are businesses owned by a person with a disability. The goals established shall be based on the percentage of total dollar amount of investment service contracts let to minority owned businesses, female owned businesses, and businesses owned by a person with a disability, as those terms are defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act. The retirement system, pension fund, or investment board shall annually review the goals established under this subsection.
    If in any case an emerging investment manager meets the criteria established by a board for a specific search and meets the criteria established by a consultant for that search, then that emerging investment manager shall receive an invitation by the board of trustees, or an investment committee of the board of trustees, to present his or her firm for final consideration of a contract. In the case where multiple emerging investment managers meet the criteria of this Section, the staff may choose the most qualified firm or firms to present to the board.
    The use of an emerging investment manager does not constitute a transfer of investment authority for the purposes of subsection (2) of this Section.
    (5) Each retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2 of this Code, shall establish a policy that sets forth goals for increasing the racial, ethnic, and gender diversity of its fiduciaries, including its consultants and senior staff. Each system, fund, and investment board shall annually review the goals established under this subsection.
    (6) On or before January 1, 2010, a retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2 of this Code, shall adopt a policy that sets forth goals for utilization of businesses owned by minorities, females, and persons with disabilities for all contracts and services. The goals established shall be based on the percentage of total dollar amount of all contracts let to minority owned businesses, female owned businesses, and businesses owned by a person with a disability, as those terms are defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act. The retirement system, pension fund, or investment board shall annually review the goals established under this subsection.
    (7) On or before January 1, 2010, a retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2 of this Code, shall adopt a policy that sets forth goals for increasing the utilization of minority broker-dealers. For the purposes of this Code, "minority broker-dealer" means a qualified broker-dealer who meets the definition of "minority owned business", "female owned business", or "business owned by a person with a disability", as those terms are defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act. The retirement system, pension fund, or investment board shall annually review the goals established under this Section.
    (8) Each retirement system, pension fund, and investment board subject to this Code, except those whose investments are restricted by Section 1-113.2 of this Code, shall submit a report to the Governor and the General Assembly by January 1 of each year that includes the following: (i) the policy adopted under subsection (4) of this Section, including the names and addresses of the emerging investment managers used, percentage of the assets under the investment control of emerging investment managers for the 3 separate goals, and the actions it has undertaken to increase the use of emerging investment managers, including encouraging other investment managers to use emerging investment managers as subcontractors when the opportunity arises; (ii) the policy adopted under subsection (5) of this Section; (iii) the policy adopted under subsection (6) of this Section; and (iv) the policy adopted under subsection (7) of this Section, including specific actions undertaken to increase the use of minority broker-dealers.
(Source: P.A. 96-6, eff. 4-3-09.)

40 ILCS 5/1-109.2

    (40 ILCS 5/1-109.2) (from Ch. 108 1/2, par. 1-109.2)
    Sec. 1-109.2. Extent of Cofiduciary Duties. (a) (1) Except to the extent otherwise required in subsection (b) of this Section, a fiduciary of a retirement system or pension fund to whom a specified duty has not been allocated shall not be responsible or liable for an act or omission, in connection with that duty, by the fiduciary to whom that duty has been allocated, except to the extent that the allocation, or the continuation thereof, is a violation of Section 1-109 of this Code. Nothing in this paragraph (1) shall be construed to relieve a fiduciary from responsibility or liability for any act by that fiduciary.
    (2) Except to the extent otherwise required in subsection (b) of this Section a fiduciary shall not be responsible or liable for an act or omission, in connection with a specific fiduciary activity, by any other person who has been designated to carry out that fiduciary activity, except to the extent that the designation, or the continuation thereof at any time under the circumstances then prevailing, is a violation of Section 1-109 of this Code. Nothing in this paragraph (2) shall be construed to relieve a fiduciary from responsibility for any act by that fiduciary.
    (b) With respect to any retirement system or pension fund established under this Code:
    (1) Each trustee shall use reasonable care to prevent any other trustee from committing a breach of duty; and
    (2) Subject to the provisions of Section 22A-113 of this Code, all trustees shall jointly manage and control the assets of the retirement system or pension fund.
    Nothing in this subsection (b) shall be construed to attribute a duty to a trustee which would be inconsistent with the appointment of, and delegation of authority to, an investment manager in accordance with paragraph (a) of Section 1-109.1 of this Code.
(Source: P.A. 82-960.)

40 ILCS 5/1-109.3

    (40 ILCS 5/1-109.3)
    Sec. 1-109.3. Training requirement for pension trustees.
    (a) All elected and appointed trustees under Article 3 and 4 of this Code must participate in a mandatory trustee certification training seminar that consists of at least 32 hours of initial trustee certification at a training facility that is accredited and affiliated with a State of Illinois certified college or university. This training must include without limitation all of the following:
        (1) Duties and liabilities of a fiduciary under
    
Article 1 of the Illinois Pension Code.
        (2) Adjudication of pension claims.
        (3) Basic accounting and actuarial training.
        (4) Trustee ethics.
        (5) The Illinois Open Meetings Act.
        (6) The Illinois Freedom of Information Act.
    The training required under this subsection (a) must be completed within the first year that a trustee is elected or appointed under an Article 3 or 4 pension fund. The elected and appointed trustees of an Article 3 or 4 pension fund who are police officers (as defined in Section 3-106 of this Code) or firefighters (as defined in Section 4-106 of this Code) or are employed by the municipality shall be permitted time away from their duties to attend such training without reduction of accrued leave or benefit time. Active or appointed trustees serving on the effective date of this amendatory Act of the 96th General Assembly shall not be required to attend the training required under this subsection (a).
    (b) In addition to the initial trustee certification training required under subsection (a), all elected and appointed trustees under Article 3 and 4 of this Code, including trustees serving on the effective date of this amendatory Act of the 96th General Assembly, shall also participate in a minimum of 16 hours of continuing trustee education each year after the first year that the trustee is elected or appointed.
    (c) The training required under this Section shall be paid for by the pension fund.
    (d) Any board member who does not timely complete the training required under this Section is not eligible to serve on the board of trustees of an Article 3 or 4 pension fund, unless the board member completes the missed training within 6 months after the date the member failed to complete the required training. In the event of a board member's failure to complete the required training, a successor shall be appointed or elected, as applicable, for the unexpired term. A successor who is elected under such circumstances must be elected at a special election called by the board and conducted in the same manner as a regular election under Article 3 or 4, as applicable.
(Source: P.A. 96-429, eff. 8-13-09.)

40 ILCS 5/1-110

    (40 ILCS 5/1-110) (from Ch. 108 1/2, par. 1-110)
    Sec. 1-110. Prohibited Transactions.
    (a) A fiduciary with respect to a retirement system, pension fund, or investment board shall not cause the retirement system or pension fund to engage in a transaction if he or she knows or should know that such transaction constitutes a direct or indirect:
        (1) Sale or exchange, or leasing of any property from
    
the retirement system or pension fund to a party in interest for less than adequate consideration, or from a party in interest to a retirement system or pension fund for more than adequate consideration.
        (2) Lending of money or other extension of credit
    
from the retirement system or pension fund to a party in interest without the receipt of adequate security and a reasonable rate of interest, or from a party in interest to a retirement system or pension fund with the provision of excessive security or an unreasonably high rate of interest.
        (3) Furnishing of goods, services or facilities from
    
the retirement system or pension fund to a party in interest for less than adequate consideration, or from a party in interest to a retirement system or pension fund for more than adequate consideration.
        (4) Transfer to, or use by or for the benefit of, a
    
party in interest of any assets of a retirement system or pension fund for less than adequate consideration.
    (b) A fiduciary with respect to a retirement system or pension fund established under this Code shall not:
        (1) Deal with the assets of the retirement system or
    
pension fund in his own interest or for his own account;
        (2) In his individual or any other capacity act in
    
any transaction involving the retirement system or pension fund on behalf of a party whose interests are adverse to the interests of the retirement system or pension fund or the interests of its participants or beneficiaries; or
        (3) Receive any consideration for his own personal
    
account from any party dealing with the retirement system or pension fund in connection with a transaction involving the assets of the retirement system or pension fund.
    (c) Nothing in this Section shall be construed to prohibit any trustee from:
        (1) Receiving any benefit to which he may be entitled
    
as a participant or beneficiary in the retirement system or pension fund.
        (2) Receiving any reimbursement of expenses properly
    
and actually incurred in the performance of his duties with the retirement system or pension fund.
        (3) Serving as a trustee in addition to being an
    
officer, employee, agent or other representative of a party in interest.
    (d) A fiduciary of a pension fund established under Article 3 or 4 shall not knowingly cause or advise the pension fund to engage in an investment transaction when the fiduciary (i) has any direct interest in the income, gains, or profits of the investment adviser through which the investment transaction is made or (ii) has a business relationship with that investment adviser that would result in a pecuniary benefit to the fiduciary as a result of the investment transaction.
    Violation of this subsection (d) is a Class 4 felony.
    (e) A board member, employee, or consultant with respect to a retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2, shall not knowingly cause or advise the retirement system, pension fund, or investment board to engage in an investment transaction with an investment adviser when the board member, employee, consultant, or their spouse (i) has any direct interest in the income, gains, or profits of the investment adviser through which the investment transaction is made or (ii) has a relationship with that investment adviser that would result in a pecuniary benefit to the board member, employee, or consultant or spouse of such board member, employee, or consultant as a result of the investment transaction. For purposes of this subsection (e), a consultant includes an employee or agent of a consulting firm who has greater than 7.5% ownership of the consulting firm.
    Violation of this subsection (e) is a Class 4 felony.
(Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)

40 ILCS 5/1-110.5

    (40 ILCS 5/1-110.5)
    Sec. 1-110.5. (Repealed).
(Source: P.A. 94-79, eff. 1-27-06. Repealed by P.A. 95-521, eff. 8-28-07.)

40 ILCS 5/1-110.6

    (40 ILCS 5/1-110.6)
    Sec. 1-110.6. Transactions prohibited by retirement systems; Republic of the Sudan.
    (a) The Government of the United States has determined that Sudan is a nation that sponsors terrorism and genocide. The General Assembly finds that acts of terrorism have caused injury and death to Illinois and United States residents who serve in the United States military, and pose a significant threat to safety and health in Illinois. The General Assembly finds that public employees and their families, including police officers and firefighters, are more likely than others to be affected by acts of terrorism. The General Assembly finds that Sudan continues to solicit investment and commercial activities by forbidden entities, including private market funds. The General Assembly finds that investments in forbidden entities are inherently and unduly risky, not in the interests of public pensioners and Illinois taxpayers, and against public policy. The General Assembly finds that Sudan's capacity to sponsor terrorism and genocide depends on or is supported by the activities of forbidden entities. The General Assembly further finds and re-affirms that the people of the State, acting through their representatives, do not want to be associated with forbidden entities, genocide, and terrorism.
    (b) For purposes of this Section:
    "Business operations" means maintaining, selling, or leasing equipment, facilities, personnel, or any other apparatus of business or commerce in the Republic of the Sudan, including the ownership or possession of real or personal property located in the Republic of the Sudan.
    "Certifying company" means a company that (1) directly provides asset management services or advice to a retirement system or (2) as directly authorized or requested by a retirement system (A) identifies particular investment options for consideration or approval; (B) chooses particular investment options; or (C) allocates particular amounts to be invested. If no company meets the criteria set forth in this paragraph, then "certifying company" shall mean the retirement system officer who, as designated by the board, executes the investment decisions made by the board, or, in the alternative, the company that the board authorizes to complete the certification as the agent of that officer.
    "Company" is any entity capable of affecting commerce, including but not limited to (i) a government, government agency, natural person, legal person, sole proprietorship, partnership, firm, corporation, subsidiary, affiliate, franchisor, franchisee, joint venture, trade association, financial institution, utility, public franchise, provider of financial services, trust, or enterprise; and (ii) any association thereof.
    "Department" means the Public Pension Division of the Department of Financial and Professional Regulation.
    "Forbidden entity" means any of the following:
        (1) The government of the Republic of the Sudan and
    
any of its agencies, including but not limited to political units and subdivisions;
        (2) Any company that is wholly or partially managed
    
or controlled by the government of the Republic of the Sudan and any of its agencies, including but not limited to political units and subdivisions;
        (3) Any company (i) that is established or organized
    
under the laws of the Republic of the Sudan or (ii) whose principal place of business is in the Republic of the Sudan;
        (4) Any company (i) identified by the Office of
    
Foreign Assets Control in the United States Department of the Treasury as sponsoring terrorist activities in the Republic of the Sudan; or (ii) fined, penalized, or sanctioned by the Office of Foreign Assets Control in the United States Department of the Treasury for any violation of any United States rules and restrictions relating to the Republic of the Sudan that occurred at any time following the effective date of this Act;
        (5) Any publicly traded company that is individually
    
identified by an independent researching firm that specializes in global security risk and that has been retained by a certifying company as provided in subsection (c) of this Section as being a company that owns or controls property or assets located in, has employees or facilities located in, provides goods or services to, obtains goods or services from, has distribution agreements with, issues credits or loans to, purchases bonds or commercial paper issued by, or invests in (A) the Republic of the Sudan; or (B) any company domiciled in the Republic of the Sudan; and
        (6) Any private market fund that fails to satisfy the
    
requirements set forth in subsections (d) and (e) of this Section.
    Notwithstanding the foregoing, the term "forbidden entity" shall exclude (A) mutual funds that meet the requirements of item (iii) of paragraph (13) of Section 1-113.2 and (B) companies that transact business in the Republic of the Sudan under the law, license, or permit of the United States, including a license from the United States Department of the Treasury, and companies, except agencies of the Republic of the Sudan, who are certified as Non-Government Organizations by the United Nations, or who engage solely in (i) the provision of goods and services intended to relieve human suffering or to promote welfare, health, religious and spiritual activities, and education or humanitarian purposes; or (ii) journalistic activities.
    "Private market fund" means any private equity fund, private equity fund of funds, venture capital fund, hedge fund, hedge fund of funds, real estate fund, or other investment vehicle that is not publicly traded.
    "Republic of the Sudan" means those geographic areas of the Republic of Sudan that are subject to sanction or other restrictions placed on commercial activity imposed by the United States Government due to an executive or congressional declaration of genocide.
    "Retirement system" means the State Employees' Retirement System of Illinois, the Judges Retirement System of Illinois, the General Assembly Retirement System, the State Universities Retirement System, and the Teachers' Retirement System of the State of Illinois.
    (c) A retirement system shall not transfer or disburse funds to, deposit into, acquire any bonds or commercial paper from, or otherwise loan to or invest in any entity unless, as provided in this Section, a certifying company certifies to the retirement system that, (1) with respect to investments in a publicly traded company, the certifying company has relied on information provided by an independent researching firm that specializes in global security risk and (2) 100% of the retirement system's assets for which the certifying company provides services or advice are not and have not been invested or reinvested in any forbidden entity at any time after 4 months after the effective date of this Section.
    The certifying company shall make the certification required under this subsection (c) to a retirement system 6 months after the effective date of this Section and annually thereafter. A retirement system shall submit the certifications to the Department, and the Department shall notify the Secretary of Financial and Professional Regulation if a retirement system fails to do so.
    (d) With respect to a commitment or investment made pursuant to a written agreement executed prior to the effective date of this Section, each private market fund shall submit to the appropriate certifying company, at no additional cost to the retirement system:
        (1) an affidavit sworn under oath in which an
    
expressly authorized officer of the private market fund avers that the private market fund (A) does not own or control any property or asset located in the Republic of the Sudan and (B) does not conduct business operations in the Republic of the Sudan; or
        (2) a certificate in which an expressly authorized
    
officer of the private market fund certifies that the private market fund, based on reasonable due diligence, has determined that, other than direct or indirect investments in companies certified as Non-Government Organizations by the United Nations, the private market fund has no direct or indirect investment in any company (A) organized under the laws of the Republic of the Sudan; (B) whose principal place of business is in the Republic of the Sudan; or (C) that conducts business operations in the Republic of the Sudan. Such certificate shall be based upon the periodic reports received by the private market fund, and the private market fund shall agree that the certifying company, directly or through an agent, or the retirement system, as the case may be, may from time to time review the private market fund's certification process.
    (e) With respect to a commitment or investment made pursuant to a written agreement executed after the effective date of this Section, each private market fund shall, at no additional cost to the retirement system:
        (1) submit to the appropriate certifying company an
    
affidavit or certificate consistent with the requirements pursuant to subsection (d) of this Section; or
        (2) enter into an enforceable written agreement with
    
the retirement system that provides for remedies consistent with those set forth in subsection (g) of this Section if any of the assets of the retirement system shall be transferred, loaned, or otherwise invested in any company that directly or indirectly (A) has facilities or employees in the Republic of the Sudan or (B) conducts business operations in the Republic of the Sudan.
    (f) In addition to any other penalties and remedies available under the law of Illinois and the United States, any transaction, other than a transaction with a private market fund that is governed by subsections (g) and (h) of this Section, that violates the provisions of this Act shall be against public policy and voidable, at the sole discretion of the retirement system.
    (g) If a private market fund fails to provide the affidavit or certification required in subsections (d) and (e) of this Section, then the retirement system shall, within 90 days, divest, or attempt in good faith to divest, the retirement system's interest in the private market fund, provided that the Board of the retirement system confirms through resolution that the divestment does not have a material and adverse impact on the retirement system. The retirement system shall immediately notify the Department, and the Department shall notify all other retirement systems, as soon as practicable, by posting the name of the private market fund on the Department's Internet website or through e-mail communications. No other retirement system may enter into any agreement under which the retirement system directly or indirectly invests in the private market fund unless the private market fund provides that retirement system with the affidavit or certification required in subsections (d) and (e) of this Section and complies with all other provisions of this Section.
    (h) If a private market fund fails to fulfill its obligations under any agreement provided for in paragraph (2) of subsection (e) of this Section, the retirement system shall immediately take legal and other action to obtain satisfaction through all remedies and penalties available under the law and the agreement itself. The retirement system shall immediately notify the Department, and the Department shall notify all other retirement systems, as soon as practicable, by posting the name of the private market fund on the Department's Internet website or through e-mail communications, and no other retirement system may enter into any agreement under which the retirement system directly or indirectly invests in the private market fund.
    (i) This Section shall have full force and effect during any period in which the Republic of the Sudan, or the officials of the government of that Republic, are subject to sanctions authorized under any statute or executive order of the United States or until such time as the State Department of the United States confirms in the federal register or through other means that the Republic of the Sudan is no longer subject to sanctions by the government of the United States.
    (j) If any provision of this Section or its application to any person or circumstance is held invalid, the invalidity of that provision or application does not affect other provisions or applications of this Section that can be given effect without the invalid provision or application.
(Source: P.A. 95-521, eff. 8-28-07.)

40 ILCS 5/1-110.10

    (40 ILCS 5/1-110.10)
    Sec. 1-110.10. Servicer certification.
    (a) For the purposes of this Section:
    "Illinois finance entity" means any entity chartered under the Illinois Banking Act, the Savings Bank Act, the Illinois Credit Union Act, or the Illinois Savings and Loan Act of 1985 and any person or entity licensed under the Residential Mortgage License Act of 1987, the Consumer Installment Loan Act, or the Sales Finance Agency Act.
    "Retirement system or pension fund" means a retirement system or pension fund established under this Code.
    (b) In order for an Illinois finance entity to be eligible for investment or deposit of retirement system or pension fund assets, the Illinois finance entity must annually certify that it complies with the requirements of the High Risk Home Loan Act and the rules adopted pursuant to that Act that are applicable to that Illinois finance entity. For Illinois finance entities with whom the retirement system or pension fund is investing or depositing assets on the effective date of this Section, the initial certification required under this Section shall be completed within 6 months after the effective date of this Section. For Illinois finance entities with whom the retirement system or pension fund is not investing or depositing assets on the effective date of this Section, the initial certification required under this Section must be completed before the retirement system or pension fund may invest or deposit assets with the Illinois finance entity.
    (c) A retirement system or pension fund shall submit the certifications to the Public Pension Division of the Department of Financial and Professional Regulation, and the Division shall notify the Secretary of Financial and Professional Regulation if a retirement system or pension fund fails to do so.
    (d) If an Illinois finance entity fails to provide an initial certification within 6 months after the effective date of this Section or fails to submit an annual certification, then the retirement system or pension fund shall notify the Illinois finance entity. The Illinois finance entity shall, within 30 days after the date of notification, either (i) notify the retirement system or pension fund of its intention to certify and complete certification or (ii) notify the retirement system or pension fund of its intention to not complete certification. If an Illinois finance entity fails to provide certification, then the retirement system or pension fund shall, within 90 days, divest, or attempt in good faith to divest, the retirement system's or pension fund's assets with that Illinois finance entity. The retirement system or pension fund shall immediately notify the Department of the Illinois finance entity's failure to provide certification.
    (e) If any provision of this Section or its application to any person or circumstance is held invalid, the invalidity of that provision or application does not affect other provisions or applications of this Section that can be given effect without the invalid provision or application.
(Source: P.A. 95-521, eff. 8-28-07; 95-876, eff. 8-21-08.)

40 ILCS 5/1-110.15

    (40 ILCS 5/1-110.15)
    Sec. 1-110.15. Transactions prohibited by retirement systems; Iran.
    (a) As used in this Section:
    "Active business operations" means all business operations that are not inactive business operations.
    "Business operations" means engaging in commerce in any form in Iran, including, but not limited to, acquiring, developing, maintaining, owning, selling, possessing, leasing, or operating equipment, facilities, personnel, products, services, personal property, real property, or any other apparatus of business or commerce.
    "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly owned subsidiaries, majority-owned subsidiaries, parent companies, or affiliates of those entities or business associations, that exists for the purpose of making profit.
    "Direct holdings" in a company means all securities of that company that are held directly by the retirement system or in an account or fund in which the retirement system owns all shares or interests.
    "Inactive business operations" means the mere continued holding or renewal of rights to property previously operated for the purpose of generating revenues but not presently deployed for that purpose.
    "Indirect holdings" in a company means all securities of that company which are held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the retirement system, in which the retirement system owns shares or interests together with other investors not subject to the provisions of this Section.
    "Mineral-extraction activities" include exploring, extracting, processing, transporting, or wholesale selling or trading of elemental minerals or associated metal alloys or oxides (ore), including gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten, uranium, and zinc.
    "Oil-related activities" include, but are not limited to, owning rights to oil blocks; exporting, extracting, producing, refining, processing, exploring for, transporting, selling, or trading of oil; and constructing, maintaining, or operating a pipeline, refinery, or other oil-field infrastructure. The mere retail sale of gasoline and related consumer products is not considered an oil-related activity.
    "Petroleum resources" means petroleum, petroleum byproducts, or natural gas.
    "Private market fund" means any private equity fund, private equity fund of funds, venture capital fund, hedge fund, hedge fund of funds, real estate fund, or other investment vehicle that is not publicly traded.
    "Retirement system" means the State Employees' Retirement System of Illinois, the Judges Retirement System of Illinois, the General Assembly Retirement System, the State Universities Retirement System, and the Teachers' Retirement System of the State of Illinois.
    "Scrutinized business operations" means business operations that have caused a company to become a scrutinized company.
    "Scrutinized company" means the company has business operations that involve contracts with or provision of supplies or services to the Government of Iran, companies in which the Government of Iran has any direct or indirect equity share, consortiums or projects commissioned by the Government of Iran, or companies involved in consortiums or projects commissioned by the Government of Iran and:
        (1) more than 10% of the company's revenues produced
    
in or assets located in Iran involve oil-related activities or mineral-extraction activities; less than 75% of the company's revenues produced in or assets located in Iran involve contracts with or provision of oil-related or mineral-extraction products or services to the Government of Iran or a project or consortium created exclusively by that government; and the company has failed to take substantial action; or
        (2) the company has, on or after August 5, 1996, made
    
an investment of $20 million or more, or any combination of investments of at least $10 million each that in the aggregate equals or exceeds $20 million in any 12-month period, that directly or significantly contributes to the enhancement of Iran's ability to develop petroleum resources of Iran.
    "Substantial action" means adopting, publicizing, and implementing a formal plan to cease scrutinized business operations within one year and to refrain from any such new business operations.
    (b) Within 90 days after the effective date of this Section, a retirement system shall make its best efforts to identify all scrutinized companies in which the retirement system has direct or indirect holdings.
    These efforts shall include the following, as appropriate in the retirement system's judgment:
        (1) reviewing and relying on publicly available
    
information regarding companies having business operations in Iran, including information provided by nonprofit organizations, research firms, international organizations, and government entities;
        (2) contacting asset managers contracted by the
    
retirement system that invest in companies having business operations in Iran; and
        (3) Contacting other institutional investors that
    
have divested from or engaged with companies that have business operations in Iran.
    The retirement system may retain an independent research firm to identify scrutinized companies in which the retirement system has direct or indirect holdings. By the first meeting of the retirement system following the 90-day period described in this subsection (b), the retirement system shall assemble all scrutinized companies identified into a scrutinized companies list.
    The retirement system shall update the scrutinized companies list annually based on evolving information from, among other sources, those listed in this subsection (b).
    (c) The retirement system shall adhere to the following procedures for companies on the scrutinized companies list:
        (1) The retirement system shall determine the
    
companies on the scrutinized companies list in which the retirement system owns direct or indirect holdings.
        (2) For each company identified in item (1) of this
    
subsection (c) that has only inactive business operations, the retirement system shall send a written notice informing the company of this Section and encouraging it to continue to refrain from initiating active business operations in Iran until it is able to avoid scrutinized business operations. The retirement system shall continue such correspondence semiannually.
        (3) For each company newly identified in item (1) of
    
this subsection (c) that has active business operations, the retirement system shall send a written notice informing the company of its scrutinized company status and that it may become subject to divestment by the retirement system. The notice must inform the company of the opportunity to clarify its Iran-related activities and encourage the company, within 90 days, to cease its scrutinized business operations or convert such operations to inactive business operations in order to avoid qualifying for divestment by the retirement system.
        (4) If, within 90 days after the retirement system's
    
first engagement with a company pursuant to this subsection (c), that company ceases scrutinized business operations, the company shall be removed from the scrutinized companies list and the provisions of this Section shall cease to apply to it unless it resumes scrutinized business operations. If, within 90 days after the retirement system's first engagement, the company converts its scrutinized active business operations to inactive business operations, the company is subject to all provisions relating thereto.
    (d) If, after 90 days following the retirement system's first engagement with a company pursuant to subsection (c), the company continues to have scrutinized active business operations, and only while such company continues to have scrutinized active business operations, the retirement system shall sell, redeem, divest, or withdraw all publicly traded securities of the company, except as provided in paragraph (f), from the retirement system's assets under management within 12 months after the company's most recent appearance on the scrutinized companies list.
    If a company that ceased scrutinized active business operations following engagement pursuant to subsection (c) resumes such operations, this subsection (d) immediately applies, and the retirement system shall send a written notice to the company. The company shall also be immediately reintroduced onto the scrutinized companies list.
    (e) The retirement system may not acquire securities of companies on the scrutinized companies list that have active business operations, except as provided in subsection (f).
    (f) A company that the United States Government affirmatively declares to be excluded from its present or any future federal sanctions regime relating to Iran is not subject to divestment or the investment prohibition pursuant to subsections (d) and (e).
    (g) Notwithstanding the provisions of this Section, paragraphs (d) and (e) do not apply to indirect holdings in a private market fund. However, the retirement system shall submit letters to the managers of those investment funds containing companies that have scrutinized active business operations requesting that they consider removing the companies from the fund or create a similar actively managed fund having indirect holdings devoid of the companies. If the manager creates a similar fund, the retirement system shall replace all applicable investments with investments in the similar fund in an expedited timeframe consistent with prudent investing standards.
    (h) The retirement system shall file a report with the Public Pension Division of the Department of Financial and Professional Regulation that includes the scrutinized companies list within 30 days after the list is created. This report shall be made available to the public.
    The retirement system shall file an annual report with the Public Pension Division, which shall be made available to the public, that includes all of the following:
        (1) A summary of correspondence with companies
    
engaged by the retirement system under items (2) and (3) of subsection (c).
        (2) All investments sold, redeemed, divested, or
    
withdrawn in compliance with subsection (d).
        (3) All prohibited investments under subsection (e).
        (4) A summary of correspondence with private market
    
funds notified under subsection (g).
    (i) This Section expires upon the occurrence of any of the following:
        (1) The United States revokes all sanctions imposed
    
against the Government of Iran.
        (2) The Congress or President of the United States
    
declares that the Government of Iran has ceased to acquire weapons of mass destruction and to support international terrorism.
        (3) The Congress or President of the United States,
    
through legislation or executive order, declares that mandatory divestment of the type provided for in this Section interferes with the conduct of United States foreign policy.
    (j) With respect to actions taken in compliance with this Act, including all good-faith determinations regarding companies as required by this Act, the retirement system is exempt from any conflicting statutory or common law obligations, including any fiduciary duties under this Article and any obligations with respect to choice of asset managers, investment funds, or investments for the retirement system's securities portfolios.
    (k) Notwithstanding any other provision of this Section to the contrary, the retirement system may cease divesting from scrutinized companies pursuant to subsection (d) or reinvest in scrutinized companies from which it divested pursuant to subsection (d) if clear and convincing evidence shows that the value of investments in scrutinized companies with active scrutinized business operations becomes equal to or less than 0.5% of the market value of all assets under management by the retirement system. Cessation of divestment, reinvestment, or any subsequent ongoing investment authorized by this Section is limited to the minimum steps necessary to avoid the contingency set forth in this subsection (k). For any cessation of divestment, reinvestment, or subsequent ongoing investment authorized by this Section, the retirement system shall provide a written report to the Public Pension Division in advance of initial reinvestment, updated semiannually thereafter as applicable, setting forth the reasons and justification, supported by clear and convincing evidence, for its decisions to cease divestment, reinvest, or remain invested in companies having scrutinized active business operations. This Section does not apply to reinvestment in companies on the grounds that they have ceased to have scrutinized active business operations.
    (l) If any provision of this Section or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of this Section are severable.
(Source: P.A. 95-616, eff. 1-1-08; 95-876, eff. 8-21-08.)

40 ILCS 5/1-111

    (40 ILCS 5/1-111) (from Ch. 108 1/2, par. 1-111)
    Sec. 1-111. Ten Per Cent Limitation of Employer Securities. A plan may not acquire a security issued by an employer of employees covered by the retirement system or pension fund, if immediately after such acquisition, the aggregate fair market value of such employer securities held by the retirement system or pension fund exceed 10 per cent of the fair market value of the assets of the retirement system or pension fund.
(Source: P.A. 81-948.)

40 ILCS 5/1-113

    (40 ILCS 5/1-113) (from Ch. 108 1/2, par. 1-113)
    Sec. 1-113. Investment authority of certain pension funds, not including those established under Article 3 or 4. The investment authority of a board of trustees of a retirement system or pension fund established under this Code shall, if so provided in the Article establishing such retirement system or pension fund, embrace the following investments:
    (1) Bonds, notes and other direct obligations of the United States Government; bonds, notes and other obligations of any United States Government agency or instrumentality, whether or not guaranteed; and obligations the principal and interest of which are guaranteed unconditionally by the United States Government or by an agency or instrumentality thereof.
    (2) Obligations of the Inter-American Development Bank, the International Bank for Reconstruction and Development, the African Development Bank, the International Finance Corporation, and the Asian Development Bank.
    (3) Obligations of any state, or of any political subdivision in Illinois, or of any county or city in any other state having a population as shown by the last federal census of not less than 30,000 inhabitants provided that such political subdivision is not permitted by law to become indebted in excess of 10% of the assessed valuation of property therein and has not defaulted for a period longer than 30 days in the payment of interest and principal on any of its general obligations or indebtedness during a period of 10 calendar years immediately preceding such investment.
    (4) Nonconvertible bonds, debentures, notes and other corporate obligations of any corporation created or existing under the laws of the United States or any state, district or territory thereof, provided there has been no default on the obligations of the corporation or its predecessor(s) during the 5 calendar years immediately preceding the purchase. Up to 5% of the assets of a pension fund established under Article 9 of this Code may be invested in nonconvertible bonds, debentures, notes, and other corporate obligations of corporations created or existing under the laws of a foreign country, provided there has been no default on the obligations of the corporation or its predecessors during the 5 calendar years immediately preceding the date of purchase.
    (5) Obligations guaranteed by the Government of Canada, or by any Province of Canada, or by any Canadian city with a population of not less than 150,000 inhabitants, provided (a) they are payable in United States currency and are exempt from any Canadian withholding tax; (b) the investment in any one issue of bonds shall not exceed 10% of the amount outstanding; and (c) the total investments at book value in Canadian securities shall be limited to 5% of the total investment account of the board at book value.
    (5.1) Direct obligations of the State of Israel for the payment of money, or obligations for the payment of money which are guaranteed as to the payment of principal and interest by the State of Israel, or common or preferred stock or notes issued by a bank owned or controlled in whole or in part by the State of Israel, on the following conditions:
        (a) The total investments in such obligations shall
    
not exceed 5% of the book value of the aggregate investments owned by the board;
        (b) The State of Israel shall not be in default in
    
the payment of principal or interest on any of its direct general obligations on the date of such investment;
        (c) The bonds, stock or notes, and interest thereon
    
shall be payable in currency of the United States;
        (d) The bonds shall (1) contain an option for the
    
redemption thereof after 90 days from date of purchase or (2) either become due 5 years from the date of their purchase or be subject to redemption 120 days after the date of notice for redemption;
        (e) The investment in these obligations has been
    
approved in writing by investment counsel employed by the board, which counsel shall be a national or state bank or trust company authorized to do a trust business in the State of Illinois, or an investment advisor qualified under the Federal Investment Advisors Act of 1940 and registered under the Illinois Securities Act of 1953;
        (f) The fund or system making the investment shall
    
have at least $5,000,000 of net present assets.
    (6) Notes secured by mortgages under Sections 203, 207, 220 and 221 of the National Housing Act which are insured by the Federal Housing Commissioner, or his successor assigns, or debentures issued by such Commissioner, which are guaranteed as to principal and interest by the Federal Housing Administration, or agency of the United States Government, provided the aggregate investment shall not exceed 20% of the total investment account of the board at book value, and provided further that the investment in such notes under Sections 220 and 221 shall in no event exceed one-half of the maximum investment in notes under this paragraph.
    (7) Loans to veterans guaranteed in whole or part by the United States Government pursuant to Title III of the Act of Congress known as the "Servicemen's Readjustment Act of 1944," 58 Stat. 284, 38 U.S.C. 693, as amended or supplemented from time to time, provided such guaranteed loans are liens upon real estate.
    (8) Common and preferred stocks and convertible debt securities authorized for investment of trust funds under the laws of the State of Illinois, provided:
        (a) the common stocks, except as provided in
    
subparagraph (g), are listed on a national securities exchange or board of trade, as defined in the federal Securities Exchange Act of 1934, or quoted in the National Association of Securities Dealers Automated Quotation System (NASDAQ);
        (b) the securities are of a corporation created or
    
existing under the laws of the United States or any state, district or territory thereof, except that up to 5% of the assets of a pension fund established under Article 9 of this Code may be invested in securities issued by corporations created or existing under the laws of a foreign country, if those securities are otherwise in conformance with this paragraph (8);
        (c) the corporation is not in arrears on payment of
    
dividends on its preferred stock;
        (d) the total book value of all stocks and
    
convertible debt owned by any pension fund or retirement system shall not exceed 40% of the aggregate book value of all investments of such pension fund or retirement system, except for a pension fund or retirement system governed by Article 9 or 17, where the total of all stocks and convertible debt shall not exceed 50% of the aggregate book value of all fund investments, and except for a pension fund or retirement system governed by Article 13, where the total market value of all stocks and convertible debt shall not exceed 65% of the aggregate market value of all fund investments;
        (e) the book value of stock and convertible debt
    
investments in any one corporation shall not exceed 5% of the total investment account at book value in which such securities are held, determined as of the date of the investment, and the investments in the stock of any one corporation shall not exceed 5% of the total outstanding stock of such corporation, and the investments in the convertible debt of any one corporation shall not exceed 5% of the total amount of such debt that may be outstanding;
        (f) the straight preferred stocks or convertible
    
preferred stocks and convertible debt securities are issued or guaranteed by a corporation whose common stock qualifies for investment by the board; and
        (g) that any common stocks not listed or quoted as
    
provided in subdivision 8(a) above be limited to the following types of institutions: (a) any bank which is a member of the Federal Deposit Insurance Corporation having capital funds represented by capital stock, surplus and undivided profits of at least $20,000,000; (b) any life insurance company having capital funds represented by capital stock, special surplus funds and unassigned surplus totalling at least $50,000,000; and (c) any fire or casualty insurance company, or a combination thereof, having capital funds represented by capital stock, net surplus and voluntary reserves of at least $50,000,000.
    (9) Withdrawable accounts of State chartered and federal chartered savings and loan associations insured by the Federal Savings and Loan Insurance Corporation; deposits or certificates of deposit in State and national banks insured by the Federal Deposit Insurance Corporation; and share accounts or share certificate accounts in a State or federal credit union, the accounts of which are insured as required by the Illinois Credit Union Act or the Federal Credit Union Act, as applicable.
    No bank or savings and loan association shall receive investment funds as permitted by this subsection (9), unless it has complied with the requirements established pursuant to Section 6 of the Public Funds Investment Act.
    (10) Trading, purchase or sale of listed options on underlying securities owned by the board.
    (11) Contracts and agreements supplemental thereto providing for investments in the general account of a life insurance company authorized to do business in Illinois.
    (12) Conventional mortgage pass-through securities which are evidenced by interests in Illinois owner-occupied residential mortgages, having not less than an "A" rating from at least one national securities rating service. Such mortgages may have loan-to-value ratios up to 95%, provided that any amount over 80% is insured by private mortgage insurance. The pool of such mortgages shall be insured by mortgage guaranty or equivalent insurance, in accordance with industry standards.
    (13) Pooled or commingled funds managed by a national or State bank which is authorized to do a trust business in the State of Illinois, shares of registered investment companies as defined in the federal Investment Company Act of 1940 which are registered under that Act, and separate accounts of a life insurance company authorized to do business in Illinois, where such pooled or commingled funds, shares, or separate accounts are comprised of common or preferred stocks, bonds, or money market instruments.
    (14) Pooled or commingled funds managed by a national or state bank which is authorized to do a trust business in the State of Illinois, separate accounts managed by a life insurance company authorized to do business in Illinois, and commingled group trusts managed by an investment adviser registered under the federal Investment Advisors Act of 1940 (15 U.S.C. 80b-1 et seq.) and under the Illinois Securities Law of 1953, where such pooled or commingled funds, separate accounts or commingled group trusts are comprised of real estate or loans upon real estate secured by first or second mortgages. The total investment in such pooled or commingled funds, commingled group trusts and separate accounts shall not exceed 10% of the aggregate book value of all investments owned by the fund.
    (15) Investment companies which (a) are registered as such under the Investment Company Act of 1940, (b) are diversified, open-end management investment companies and (c) invest only in money market instruments.
    (16) Up to 10% of the assets of the fund may be invested in investments not included in paragraphs (1) through (15) of this Section, provided that such investments comply with the requirements and restrictions set forth in Sections 1-109, 1-109.1, 1-109.2, 1-110 and 1-111 of this Code.
    The board shall have the authority to enter into such agreements and to execute such documents as it determines to be necessary to complete any investment transaction.
    Any limitations herein set forth shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time.
    All investments shall be clearly held and accounted for to indicate ownership by such board. Such board may direct the registration of securities in its own name or in the name of a nominee created for the express purpose of registration of securities by a national or state bank or trust company authorized to conduct a trust business in the State of Illinois.
    Investments shall be carried at cost or at a value determined in accordance with generally accepted accounting principles and accounting procedures approved by such board.
(Source: P.A. 92-53, eff. 7-12-01.)

40 ILCS 5/1-113.1

    (40 ILCS 5/1-113.1)
    Sec. 1-113.1. Investment authority of pension funds established under Article 3 or 4. The board of trustees of a police pension fund established under Article 3 of this Code or firefighter pension fund established under Article 4 of this Code shall draw pension funds from the treasurer of the municipality and, beginning January 1, 1998, invest any part thereof in the name of the board in the items listed in Sections 1-113.2 through 1-113.4 according to the limitations and requirements of this Article. These investments shall be made with the care, skill, prudence, and diligence that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of like character with like aims.
    Interest and any other income from the investments shall be credited to the pension fund.
    For the purposes of Sections 1-113.2 through 1-113.11, the "net assets" of a pension fund include both the cash and invested assets of the pension fund.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.2

    (40 ILCS 5/1-113.2)
    Sec. 1-113.2. List of permitted investments for all Article 3 or 4 pension funds. Any pension fund established under Article 3 or 4 may invest in the following items:
    (1) Interest bearing direct obligations of the United States of America.
    (2) Interest bearing obligations to the extent that they are fully guaranteed or insured as to payment of principal and interest by the United States of America.
    (3) Interest bearing bonds, notes, debentures, or other similar obligations of agencies of the United States of America. For the purposes of this Section, "agencies of the United States of America" includes: (i) the Federal National Mortgage Association and the Student Loan Marketing Association; (ii) federal land banks, federal intermediate credit banks, federal farm credit banks, and any other entity authorized to issue direct debt obligations of the United States of America under the Farm Credit Act of 1971 or amendments to that Act; (iii) federal home loan banks and the Federal Home Loan Mortgage Corporation; and (iv) any agency created by Act of Congress that is authorized to issue direct debt obligations of the United States of America.
    (4) Interest bearing savings accounts or certificates of deposit, issued by federally chartered banks or savings and loan associations, to the extent that the deposits are insured by agencies or instrumentalities of the federal government.
    (5) Interest bearing savings accounts or certificates of deposit, issued by State of Illinois chartered banks or savings and loan associations, to the extent that the deposits are insured by agencies or instrumentalities of the federal government.
    (6) Investments in credit unions, to the extent that the investments are insured by agencies or instrumentalities of the federal government.
    (7) Interest bearing bonds of the State of Illinois.
    (8) Pooled interest bearing accounts managed by the Illinois Public Treasurer's Investment Pool in accordance with the Deposit of State Moneys Act, interest bearing funds or pooled accounts of the Illinois Metropolitan Investment Funds, and interest bearing funds or pooled accounts managed, operated, and administered by banks, subsidiaries of banks, or subsidiaries of bank holding companies in accordance with the laws of the State of Illinois.
    (9) Interest bearing bonds or tax anticipation warrants of any county, township, or municipal corporation of the State of Illinois.
    (10) Direct obligations of the State of Israel, subject to the conditions and limitations of item (5.1) of Section 1-113.
    (11) Money market mutual funds managed by investment companies that are registered under the federal Investment Company Act of 1940 and the Illinois Securities Law of 1953 and are diversified, open-ended management investment companies; provided that the portfolio of the money market mutual fund is limited to the following:
        (i) bonds, notes, certificates of indebtedness,
    
treasury bills, or other securities that are guaranteed by the full faith and credit of the United States of America as to principal and interest;
        (ii) bonds, notes, debentures, or other similar
    
obligations of the United States of America or its agencies; and
        (iii) short term obligations of corporations
    
organized in the United States with assets exceeding $400,000,000, provided that (A) the obligations mature no later than 180 days from the date of purchase, (B) at the time of purchase, the obligations are rated by at least 2 standard national rating services at one of their 3 highest classifications, and (C) the obligations held by the mutual fund do not exceed 10% of the corporation's outstanding obligations.
    (12) General accounts of life insurance companies authorized to transact business in Illinois.
    (13) Any combination of the following, not to exceed 10% of the pension fund's net assets:
        (i) separate accounts that are managed by life
    
insurance companies authorized to transact business in Illinois and are comprised of diversified portfolios consisting of common or preferred stocks, bonds, or money market instruments;
        (ii) separate accounts that are managed by insurance
    
companies authorized to transact business in Illinois, and are comprised of real estate or loans upon real estate secured by first or second mortgages; and
        (iii) mutual funds that meet the following
    
requirements:
            (A) the mutual fund is managed by an investment
        
company as defined and registered under the federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953;
            (B) the mutual fund has been in operation for at
        
least 5 years;
            (C) the mutual fund has total net assets of $250
        
million or more; and
            (D) the mutual fund is comprised of diversified
        
portfolios of common or preferred stocks, bonds, or money market instruments.
    (14) Corporate bonds managed through an investment advisor must meet all of the following requirements:
        (1) The bonds must be rated as investment grade by
    
one of the 2 largest rating services at the time of purchase.
        (2) If subsequently downgraded below investment
    
grade, the bonds must be liquidated from the portfolio within 90 days after being downgraded by the manager.
(Source: P.A. 96-1495, eff. 1-1-11.)

40 ILCS 5/1-113.3

    (40 ILCS 5/1-113.3)
    Sec. 1-113.3. List of additional permitted investments for pension funds with net assets of $2,500,000 or more.
    (a) In addition to the items in Section 3-113.2, a pension fund established under Article 3 or 4 that has net assets of at least $2,500,000 may invest a portion of its net assets in the following items:
        (1) Separate accounts that are managed by life
    
insurance companies authorized to transact business in Illinois and are comprised of diversified portfolios consisting of common or preferred stocks, bonds, or money market instruments.
        (2) Mutual funds that meet the following requirements:
            (i) the mutual fund is managed by an investment
        
company as defined and registered under the federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953;
            (ii) the mutual fund has been in operation for at
        
least 5 years;
            (iii) the mutual fund has total net assets of
        
$250 million or more; and
            (iv) the mutual fund is comprised of diversified
        
portfolios of common or preferred stocks, bonds, or money market instruments.
    (b) A pension fund's total investment in the items authorized under this Section shall not exceed 35% of the market value of the pension fund's net present assets stated in its most recent annual report on file with the Illinois Department of Insurance.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.4

    (40 ILCS 5/1-113.4)
    Sec. 1-113.4. List of additional permitted investments for pension funds with net assets of $5,000,000 or more.
    (a) In addition to the items in Sections 1-113.2 and 1-113.3, a pension fund established under Article 3 or 4 that has net assets of at least $5,000,000 and has appointed an investment adviser under Section 1-113.5 may, through that investment adviser, invest a portion of its assets in common and preferred stocks authorized for investments of trust funds under the laws of the State of Illinois. The stocks must meet all of the following requirements:
        (1) The common stocks are listed on a national
    
securities exchange or board of trade (as defined in the federal Securities Exchange Act of 1934 and set forth in Section 3.G of the Illinois Securities Law of 1953) or quoted in the National Association of Securities Dealers Automated Quotation System National Market System (NASDAQ NMS).
        (2) The securities are of a corporation created or
    
existing under the laws of the United States or any state, district, or territory thereof and the corporation has been in existence for at least 5 years.
        (3) The corporation has not been in arrears on
    
payment of dividends on its preferred stock during the preceding 5 years.
        (4) The market value of stock in any one corporation
    
does not exceed 5% of the cash and invested assets of the pension fund, and the investments in the stock of any one corporation do not exceed 5% of the total outstanding stock of that corporation.
        (5) The straight preferred stocks or convertible
    
preferred stocks are issued or guaranteed by a corporation whose common stock qualifies for investment by the board.
        (6) The issuer of the stocks has been subject to the
    
requirements of Section 12 of the federal Securities Exchange Act of 1934 and has been current with the filing requirements of Sections 13 and 14 of that Act during the preceding 3 years.
    (b) A pension fund's total investment in the items authorized under this Section and Section 1-113.3 shall not exceed 35% of the market value of the pension fund's net present assets stated in its most recent annual report on file with the Illinois Department of Insurance.
    (c) A pension fund that invests funds under this Section shall electronically file with the Division any reports of its investment activities that the Division may require, at the times and in the format required by the Division.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.4a

    (40 ILCS 5/1-113.4a)
    Sec. 1-113.4a. List of additional permitted investments for Article 3 and 4 pension funds with net assets of $10,000,000 or more.
    (a) In addition to the items in Sections 1-113.2 and 1-113.3, a pension fund established under Article 3 or 4 that has net assets of at least $10,000,000 and has appointed an investment adviser, as defined under Sections 1-101.4 and 1-113.5, may, through that investment adviser, invest an additional portion of its assets in common and preferred stocks and mutual funds.
    (b) The stocks must meet all of the following requirements:
        (1) The common stocks must be listed on a national
    
securities exchange or board of trade (as defined in the Federal Securities Exchange Act of 1934 and set forth in paragraph G of Section 3 of the Illinois Securities Law of 1953) or quoted in the National Association of Securities Dealers Automated Quotation System National Market System.
        (2) The securities must be of a corporation in
    
existence for at least 5 years.
        (3) The market value of stock in any one corporation
    
may not exceed 5% of the cash and invested assets of the pension fund, and the investments in the stock of any one corporation may not exceed 5% of the total outstanding stock of that corporation.
        (4) The straight preferred stocks or convertible
    
preferred stocks must be issued or guaranteed by a corporation whose common stock qualifies for investment by the board.
    (c) The mutual funds must meet the following requirements:
        (1) The mutual fund must be managed by an investment
    
company registered under the Federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953.
        (2) The mutual fund must have been in operation for
    
at least 5 years.
        (3) The mutual fund must have total net assets of
    
$250,000,000 or more.
        (4) The mutual fund must be comprised of a
    
diversified portfolio of common or preferred stocks, bonds, or money market instruments.
    (d) A pension fund's total investment in the items authorized under this Section and Section 1-113.3 shall not exceed 50% effective July 1, 2011 and 55% effective July 1, 2012 of the market value of the pension fund's net present assets stated in its most recent annual report on file with the Department of Insurance.
    (e) A pension fund that invests funds under this Section shall electronically file with the Division any reports of its investment activities that the Division may require, at the time and in the format required by the Division.
(Source: P.A. 96-1495, eff. 1-1-11.)

40 ILCS 5/1-113.5

    (40 ILCS 5/1-113.5)
    Sec. 1-113.5. Investment advisers and investment services for all Article 3 or 4 pension funds.
    (a) The board of trustees of a pension fund may appoint investment advisers as defined in Section 1-101.4. The board of any pension fund investing in common or preferred stock under Section 1-113.4 shall appoint an investment adviser before making such investments.
    The investment adviser shall be a fiduciary, as defined in Section 1-101.2, with respect to the pension fund and shall be one of the following:
        (1) an investment adviser registered under the
    
federal Investment Advisers Act of 1940 and the Illinois Securities Law of 1953;
        (2) a bank or trust company authorized to conduct a
    
trust business in Illinois;
        (3) a life insurance company authorized to transact
    
business in Illinois; or
        (4) an investment company as defined and registered
    
under the federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953.
    (a-5) Notwithstanding any other provision of law, a person or entity that provides consulting services (referred to as a "consultant" in this Section) to a pension fund with respect to the selection of fiduciaries may not be awarded a contract to provide those consulting services that is more than 5 years in duration. No contract to provide such consulting services may be renewed or extended. At the end of the term of a contract, however, the contractor is eligible to compete for a new contract. No person shall attempt to avoid or contravene the restrictions of this subsection by any means. All offers from responsive offerors shall be accompanied by disclosure of the names and addresses of the following:
        (1) The offeror.
        (2) Any entity that is a parent of, or owns a
    
controlling interest in, the offeror.
        (3) Any entity that is a subsidiary of, or in which a
    
controlling interest is owned by, the offeror.
    Beginning on July 1, 2008, a person, other than a trustee or an employee of a pension fund or retirement system, may not act as a consultant under this Section unless that person is at least one of the following: (i) registered as an investment adviser under the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.); (ii) registered as an investment adviser under the Illinois Securities Law of 1953; (iii) a bank, as defined in the Investment Advisers Act of 1940; or (iv) an insurance company authorized to transact business in this State.
    (b) All investment advice and services provided by an investment adviser or a consultant appointed under this Section shall be rendered pursuant to a written contract between the investment adviser and the board, and in accordance with the board's investment policy.
    The contract shall include all of the following:
        (1) acknowledgement in writing by the investment
    
adviser that he or she is a fiduciary with respect to the pension fund;
        (2) the board's investment policy;
        (3) full disclosure of direct and indirect fees,
    
commissions, penalties, and any other compensation that may be received by the investment adviser, including reimbursement for expenses; and
        (4) a requirement that the investment adviser submit
    
periodic written reports, on at least a quarterly basis, for the board's review at its regularly scheduled meetings. All returns on investment shall be reported as net returns after payment of all fees, commissions, and any other compensation.
    (b-5) Each contract described in subsection (b) shall also include (i) full disclosure of direct and indirect fees, commissions, penalties, and other compensation, including reimbursement for expenses, that may be paid by or on behalf of the investment adviser or consultant in connection with the provision of services to the pension fund and (ii) a requirement that the investment adviser or consultant update the disclosure promptly after a modification of those payments or an additional payment.
    Within 30 days after the effective date of this amendatory Act of the 95th General Assembly, each investment adviser and consultant providing services on the effective date or subject to an existing contract for the provision of services must disclose to the board of trustees all direct and indirect fees, commissions, penalties, and other compensation paid by or on behalf of the investment adviser or consultant in connection with the provision of those services and shall update that disclosure promptly after a modification of those payments or an additional payment.
    A person required to make a disclosure under subsection (d) is also required to disclose direct and indirect fees, commissions, penalties, or other compensation that shall or may be paid by or on behalf of the person in connection with the rendering of those services. The person shall update the disclosure promptly after a modification of those payments or an additional payment.
    The disclosures required by this subsection shall be in writing and shall include the date and amount of each payment and the name and address of each recipient of a payment.
    (c) Within 30 days after appointing an investment adviser or consultant, the board shall submit a copy of the contract to the Division of Insurance of the Department of Financial and Professional Regulation.
    (d) Investment services provided by a person other than an investment adviser appointed under this Section, including but not limited to services provided by the kinds of persons listed in items (1) through (4) of subsection (a), shall be rendered only after full written disclosure of direct and indirect fees, commissions, penalties, and any other compensation that shall or may be received by the person rendering those services.
    (e) The board of trustees of each pension fund shall retain records of investment transactions in accordance with the rules of the Department of Financial and Professional Regulation.
(Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)

40 ILCS 5/1-113.6

    (40 ILCS 5/1-113.6)
    Sec. 1-113.6. Investment policies. Every board of trustees of a pension fund shall adopt a written investment policy and file a copy of that policy with the Department of Insurance within 30 days after its adoption. Whenever a board changes its investment policy, it shall file a copy of the new policy with the Department within 30 days.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.7

    (40 ILCS 5/1-113.7)
    Sec. 1-113.7. Registration of investments; custody and safekeeping. The board of trustees may register the investments of its pension fund in the name of the pension fund, in the nominee name of a bank or trust company authorized to conduct a trust business in Illinois, or in the nominee name of the Illinois Public Treasurer's Investment Pool.
    The assets of the pension fund and ownership of its investments shall be protected through third-party custodial safekeeping. The board of trustees may appoint as custodian of the investments of its pension fund the treasurer of the municipality, a bank or trust company authorized to conduct a trust business in Illinois, or the Illinois Public Treasurer's Investment Pool.
    A dealer may not maintain possession of or control over securities of a pension fund subject to the provisions of this Section unless it is registered as a broker-dealer with the U.S. Securities and Exchange Commission and is a member in good standing of the National Association of Securities Dealers, and (1) with respect to securities that are not issued only in book-entry form, (A) all such securities of each fund are either held in safekeeping in a place reasonably free from risk of destruction or held in custody by a securities depository that is a "clearing agency" registered with the U.S. Securities and Exchange Commission, (B) the dealer is a member of the Securities Investor Protection Corporation, (C) the dealer sends to each fund, no less frequently than each calendar quarter, an itemized statement showing the moneys and securities in the custody or possession of the dealer at the end of such period, and (D) an independent certified public accountant conducts an audit, no less frequently than each calendar year, that reviews the dealer's internal accounting controls and procedures for safeguarding securities; and (2) with respect to securities that are issued only in book-entry form, (A) all such securities of each fund are held either in a securities depository that is a "clearing agency" registered with the U.S. Securities and Exchange Commission or in a bank that is a member of the Federal Reserve System, (B) the dealer records the ownership interest of the funds in such securities on the dealer's books and records, (C) the dealer is a member of the Securities Investor Protection Corporation, (D) the dealer sends to each fund, no less frequently than each calendar quarter, an itemized statement showing the moneys and securities in the custody or possession of the dealer at the end of such period, and (E) the dealer's financial statement (which shall contain among other things a statement of the dealer's net capital and its required net capital computed in accordance with Rule 15c3-1 under the Securities Exchange Act of 1934) is audited annually by an independent certified public accountant, and the dealer's most recent audited financial statement is furnished to the fund. No broker-dealer serving as a custodian for any public pension fund as provided by this Act shall be authorized to serve as an investment advisor for that same public pension fund as described in Section 1-101.4 of this Code, to the extent that the investment advisor acquires or disposes of any asset of that same public pension fund. Notwithstanding the foregoing, in no event may a broker or dealer that is a natural person maintain possession of or control over securities or other assets of a pension fund subject to the provisions of this Section. In maintaining securities of a pension fund subject to the provisions of this Section, each dealer must maintain those securities in conformity with the provisions of Rule 15c3-3(b) of the Securities Exchange Act of 1934 (Physical Possession or Control of Securities). The Director of the Department of Insurance may adopt such rules and regulations as shall be necessary and appropriate in his or her judgment to effectuate the purposes of this Section.
    A bank or trust company authorized to conduct a trust business in Illinois shall register, deposit, or hold investments for safekeeping, all in accordance with the obligations and subject to the limitations of the Securities in Fiduciary Accounts Act.
(Source: P.A. 92-651, eff. 7-11-02.)

40 ILCS 5/1-113.8

    (40 ILCS 5/1-113.8)
    Sec. 1-113.8. Limitations on banks and savings and loan associations. A bank or savings and loan association shall not receive investment funds from a pension fund established under Article 3 or 4 of this Code, unless it has complied with the requirements established under Section 6 of the Public Funds Investment Act. The limitations set forth in that Section 6 are applicable only at the time of investment and do not require the liquidation of any investment at any time.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.9

    (40 ILCS 5/1-113.9)
    Sec. 1-113.9. Illegal investments. A person registered as a dealer, salesperson, or investment adviser under the Illinois Securities Law of 1953 who sells a pension fund a security, or engages in a transaction with a pension fund, that is not authorized by this Code, shall be subject to the penalty provisions of Subsection E of Section 8 of the Illinois Securities Law of 1953, if (1) the dealer, salesperson, or investment adviser has discretionary authority or control over the fund's assets and has acknowledged in writing that it is acting in a fiduciary capacity for the fund, (2) the fund has requested the investment advice of the dealer, salesperson, or investment adviser and has provided the dealer, salesperson, or investment adviser with its investment policy, and the dealer, salesperson, or investment adviser acknowledges in writing that the fund is relying primarily on the investment advice of that dealer, salesperson, or investment adviser, or (3) the dealer, salesperson, or investment adviser knows or has reason to know that the fund is not capable of independently evaluating investment risk or exercising independent judgment with respect to a particular securities transaction, and nonetheless recommends that the fund engage in that transaction.
    A bank or trust company authorized to conduct a trust business in Illinois or a broker-dealer, and any officer, director, or employee thereof, that advises or causes a pension fund to make an investment or engages in a transaction not authorized by this Code is subject to the penalty provisions of Article V of the Corporate Fiduciary Act.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.10

    (40 ILCS 5/1-113.10)
    Sec. 1-113.10. Legality at time of investment. The investment limitations set forth in this Article are applicable only at the time of investment and do not require the liquidation of any investment at any time. However, no additional pension funds may be invested in any investment item while the market value of the pension fund's investments in that item meets or exceeds the applicable limitation.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.11

    (40 ILCS 5/1-113.11)
    Sec. 1-113.11. Rules. The Department of Insurance is authorized to promulgate rules that are necessary or useful for the administration and enforcement of Sections 1-113.1 through 1-113.10 of this Article.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.12

    (40 ILCS 5/1-113.12)
    Sec. 1-113.12. Application. Sections 1-113.1 through 1-113.10 apply only to pension funds established under Article 3 or 4 of this Code.
(Source: P.A. 90-507, eff. 8-22-97.)

40 ILCS 5/1-113.14

    (40 ILCS 5/1-113.14)
    Sec. 1-113.14. Investment services for retirement systems, pension funds, and investment boards, except those funds established under Articles 3 and 4.
    (a) For the purposes of this Section, "investment services" means services provided by an investment adviser or a consultant other than qualified fund-of-fund management services as defined in Section 1-113.15.
    (b) The selection and appointment of an investment adviser or consultant for investment services by the board of a retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2, shall be made and awarded in accordance with this Section. All contracts for investment services shall be awarded by the board using a competitive process that is substantially similar to the process required for the procurement of professional and artistic services under Article 35 of the Illinois Procurement Code. Each board of trustees shall adopt a policy in accordance with this subsection (b) within 60 days after the effective date of this amendatory Act of the 96th General Assembly. The policy shall be posted on its web site and filed with the Illinois Procurement Policy Board. Exceptions to this Section are allowed for (i) sole source procurements, (ii) emergency procurements, (iii) at the discretion of the pension fund, retirement system, or board of investment, contracts that are nonrenewable and one year or less in duration, so long as the contract has a value of less than $20,000, and (iv) in the discretion of the pension fund, retirement system, or investment board, contracts for follow-on funds with the same fund sponsor through closed-end funds. All exceptions granted under this Section must be published on the system's, fund's, or board's web site, shall name the person authorizing the procurement, and shall include a brief explanation of the reason for the exception.
    A person, other than a trustee or an employee of a retirement system, pension fund, or investment board, may not act as a consultant or investment adviser under this Section unless that person is registered as an investment adviser under the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.) or a bank, as defined in the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
    (c) Investment services provided by an investment adviser or a consultant appointed under this Section shall be rendered pursuant to a written contract between the investment adviser or consultant and the board.
    The contract shall include all of the following:
        (1) Acknowledgement in writing by the investment
    
adviser or consultant that he or she is a fiduciary with respect to the pension fund or retirement system.
        (2) The description of the board's investment policy
    
and notice that the policy is subject to change.
        (3) (i) Full disclosure of direct and indirect fees,
    
commissions, penalties, and other compensation, including reimbursement for expenses, that may be paid by or on behalf of the consultant in connection with the provision of services to the pension fund or retirement system and (ii) a requirement that the consultant update the disclosure promptly after a modification of those payments or an additional payment.
        (4) A requirement that the investment adviser or
    
consultant, in conjunction with the board's staff, submit periodic written reports, on at least a quarterly basis, for the board's review at its regularly scheduled meetings. All returns on investment shall be reported as net returns after payment of all fees, commissions, and any other compensation.
        (5) Disclosure of the names and addresses of (i) the
    
consultant or investment adviser; (ii) any entity that is a parent of, or owns a controlling interest in, the consultant or investment adviser; (iii) any entity that is a subsidiary of, or in which a controlling interest is owned by, the consultant or investment adviser; (iv) any persons who have an ownership or distributive income share in the consultant or investment adviser that is in excess of 7.5%; or (v) serves as an executive officer of the consultant or investment adviser.
        (6) A disclosure of the names and addresses of all
    
subcontractors, if applicable, and the expected amount of money each will receive under the contract, including an acknowledgment that the contractor must promptly make notification, in writing, if at any time during the term of the contract a contractor adds or changes any subcontractors. For purposes of this subparagraph (6), "subcontractor" does not include non-investment related professionals or professionals offering services that are not directly related to the investment of assets, such as legal counsel, actuary, proxy-voting services, services used to track compliance with legal standards, and investment fund of funds where the board has no direct contractual relationship with the investment advisers or partnerships.
        (7) A description of service to be performed.
        (8) A description of the need for the service.
        (9) A description of the plan for post-performance
    
review.
        (10) A description of the qualifications necessary.
        (11) The duration of the contract.
        (12) The method for charging and measuring cost.
    (d) Notwithstanding any other provision of law, a retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2 of this Code, shall not enter into a contract with a consultant that exceeds 5 years in duration. No contract to provide consulting services may be renewed or extended. At the end of the term of a contract, however, the consultant is eligible to compete for a new contract as provided in this Section. No retirement system, pension fund, or investment board shall attempt to avoid or contravene the restrictions of this subsection (d) by any means.
    (e) Within 60 days after the effective date of this amendatory Act of the 96th General Assembly, each investment adviser or consultant currently providing services or subject to an existing contract for the provision of services must disclose to the board of trustees all direct and indirect fees, commissions, penalties, and other compensation paid by or on behalf of the investment adviser or consultant in connection with the provision of those services and shall update that disclosure promptly after a modification of those payments or an additional payment. The person shall update the disclosure promptly after a modification of those payments or an additional payment. The disclosures required by this subsection (e) shall be in writing and shall include the date and amount of each payment and the name and address of each recipient of a payment.
    (f) The retirement system, pension fund, or board of investment shall develop uniform documents that shall be used for the solicitation, review, and acceptance of all investment services. The form shall include the terms contained in subsection (c) of this Section. All such uniform documents shall be posted on the retirement system's, pension fund's, or investment board's web site.
    (g) A description of every contract for investment services shall be posted in a conspicuous manner on the web site of the retirement system, pension fund, or investment board. The description must include the name of the person or entity awarded a contract, the total amount applicable to the contract, the total fees paid or to be paid, and a disclosure approved by the board describing the factors that contributed to the selection of an investment adviser or consultant.
(Source: P.A. 98-433, eff. 8-16-13.)

40 ILCS 5/1-113.15

    (40 ILCS 5/1-113.15)
    Sec. 1-113.15. Qualified fund-of-fund management services.
    (a) As used in this Section:
    "Qualified fund-of-fund management services" means either (i) the services of an investment adviser acting in its capacity as an investment manager of a fund-of-funds or (ii) an investment adviser acting in its capacity as an investment manager of a separate account that is invested on a side-by-side basis in a substantially identical manner to a fund-of-funds, in each case pursuant to qualified written agreements.
    "Qualified written agreements" means one or more written contracts to which the investment adviser and the board are parties and includes all of the following: (i) the matters described in items (1), (4), (5), (7), (11), and (12) of subsection (c) of Section 1-113.14; (ii) a description of any fees, commissions, penalties, and other compensation payable, if any, directly by the retirement system, pension fund, or investment board (which shall not include any fees, commissions, penalties, and other compensation payable from the assets of the fund-of-funds or separate account); (iii) a description (or method of calculation) of the fees and expenses payable by the Fund to the investment adviser and the timing of the payment of the fees or expenses; and (iv) a description (or method of calculation) of any carried interest or other performance based interests, fees, or payments allocable by the Fund to the investment adviser or an affiliate of the investment adviser and the priority of distributions with respect to such interest.
    (b) A description of every contract for qualified fund-of-fund management services must be posted in a conspicuous manner on the web site of the retirement system, pension fund, or investment board. The description must include the name of the fund-of-funds, the name of its investment adviser, the total investment commitment of the retirement system, pension fund, or investment board to invest in such fund-of-funds, and a disclosure approved by the board describing the factors that contributed to the investment in such fund-of-funds. No information that is exempt from inspection pursuant to Section 7 of the Freedom of Information Act shall be disclosed under this Section.
(Source: P.A. 96-1554, eff. 3-18-11.)

40 ILCS 5/1-113.16

    (40 ILCS 5/1-113.16)
    Sec. 1-113.16. Investment transparency.
    (a) The purpose of this Section is to provide for transparency in the investment of retirement or pension funds and require the reporting of full and complete information regarding the investments by pension funds, retirement systems, and investment boards.
    (b) A retirement system, pension fund, or investment board subject to this Code and any committees established by such system, fund, or board must comply with the Open Meetings Act.
    (c) Any retirement system, pension fund, or investment board subject to this Code that establishes a committee shall ensure that the majority of the members on such committee are board members. If any member of a committee is not a member of the board for the system, fund, or board, then that committee member shall be a fiduciary.
    (d) A retirement system, pension fund, or investment board subject to this Code, except those whose investments are restricted by Section 1-113.2, shall maintain an official web site and make available in a clear and conspicuous manner, and update at least quarterly, all of the following information concerning the investment of funds:
        (1) The total amount of funds held by the pension
    
fund, retirement system, or investment board.
        (2) The asset allocation for the investments made by
    
the pension fund, retirement system, or investment board.
        (3) Current and historic return information.
        (4) A detailed listing of the investment advisers for
    
all asset classes.
        (5) Performance of investments compared against
    
established benchmarks.
        (6) A detailed list of all consultants doing business
    
with the retirement system, pension fund, or investment board.
        (7) A detailed list of all contractors, other than
    
investment advisers and consultants, doing business with the retirement system, pension fund, or investment board.
        (8) Any requests for investment services.
        (9) The names and email addresses of all board
    
members, directors, and senior staff.
        (10) The report required under Section 1-109.1 of
    
this Code, if applicable.
        (11) The description of each contract required under
    
subsection (g) of Section 1-113.14 of this Code, if applicable.
    (e) A pension fund whose investments are restricted by Section 1-113.2 of this Code shall make the information required in subsection (d) of this Section available on its web site or in a location that allows the information to be available for inspection by the public.
    (f) Nothing in this Section requires the pension fund, retirement system, or investment board to make information available on the Internet that is exempt from inspection and copying under the Freedom of Information Act.
(Source: P.A. 96-6, eff. 4-3-09.)

40 ILCS 5/1-113.18

    (40 ILCS 5/1-113.18)
    Sec. 1-113.18. Ethics training. All board members of a retirement system, pension fund, or investment board created under this Code must attend ethics training of at least 8 hours per year. The training required under this Section shall include training on ethics, fiduciary duty, and investment issues and any other curriculum that the board of the retirement system, pension fund, or investment board establishes as being important for the administration of the retirement system, pension fund, or investment board. The Supreme Court of Illinois shall be responsible for ethics training and curriculum for judges designated by the Court to serve as members of a retirement system, pension fund, or investment board. Each board shall annually certify its members' compliance with this Section and submit an annual certification to the Division of Insurance of the Department of Financial and Professional Regulation. Judges shall annually certify compliance with the ethics training requirement and shall submit an annual certification to the Chief Justice of the Supreme Court of Illinois.
(Source: P.A. 96-6, eff. 4-3-09.)

40 ILCS 5/1-113.20

    (40 ILCS 5/1-113.20)
    Sec. 1-113.20. Investment strategies; explicit and implicit costs. Every pension fund, retirement system, and investment board created under this Code, except those whose investments are restricted by Section 1-113.2 of this Code, shall instruct the fund's, system's, or board's investment advisors to utilize investment strategies designed to ensure that all securities transactions are executed in such a manner that the total explicit and implicit costs and total proceeds in every transaction are the most favorable under the circumstances.
(Source: P.A. 96-753, eff. 8-25-09.)

40 ILCS 5/1-114

    (40 ILCS 5/1-114) (from Ch. 108 1/2, par. 1-114)
    Sec. 1-114. Liability for Breach of Fiduciary Duty.
    (a) Any person who is a fiduciary with respect to a retirement system or pension fund established under this Code who breaches any duty imposed upon fiduciaries by this Code, including, but not limited to, a failure to report a reasonable suspicion of a false statement specified in Section 1-135 of this Code, shall be personally liable to make good to such retirement system or pension fund any losses to it resulting from each such breach, and to restore to such retirement system or pension fund any profits of such fiduciary which have been made through use of assets of the retirement system or pension fund by the fiduciary, and shall be subject to such equitable or remedial relief as the court may deem appropriate, including the removal of such fiduciary.
    (b) No person shall be liable with respect to a breach of fiduciary duty under this Code if such breach occurred before such person became a fiduciary or after such person ceased to be a fiduciary.
(Source: P.A. 97-651, eff. 1-5-12.)

40 ILCS 5/1-115

    (40 ILCS 5/1-115) (from Ch. 108 1/2, par. 1-115)
    Sec. 1-115. Civil Enforcement. A civil action may be brought by the Attorney General or by a participant, beneficiary or fiduciary in order to:
    (a) Obtain appropriate relief under Section 1-114 of this Code;
    (b) Enjoin any act or practice which violates any provision of this Code; or
    (c) Obtain other appropriate equitable relief to redress any such violation or to enforce any such provision.
(Source: P.A. 82-960.)

40 ILCS 5/1-116

    (40 ILCS 5/1-116) (from Ch. 108 1/2, par. 1-116)
    Sec. 1-116. Federal contribution and benefit limitations.
    (a) This Section applies to all pension funds and retirement systems established under this Code.
    (a-5) All pension funds and retirement systems established under this Code shall comply with the applicable contribution and benefit limitations imposed by Section 415 of the U.S. Internal Revenue Code of 1986 for tax qualified plans under Section 401(a) of that Code.
    (b) If any benefit payable by a pension fund or retirement system subject to this Section exceeds the applicable benefit limits set by Section 415 of the U.S. Internal Revenue Code of 1986 for tax qualified plans under Section 401(a) of that Code, the excess shall be payable only from an excess benefit fund established under this Section in accordance with federal law.
    (c) An excess benefit fund shall be established by any pension fund or retirement system subject to this Section that has any member eligible to receive a benefit that exceeds the applicable benefit limits set by Section 415 of the U.S. Internal Revenue Code of 1986 for tax qualified plans under Section 401(a) of that Code. Amounts shall be credited to the excess benefit fund, and payments for excess benefits made from the excess benefit fund, in a manner consistent with the applicable federal law.
    (d) For purposes of matters relating to the benefit limits set by Section 415 of the U.S. Internal Revenue Code of 1986, the limitation year may be defined by each affected pension fund or retirement system for that fund or system.
(Source: P.A. 90-19, eff. 6-20-97; 91-887, eff. 7-6-00.)