101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB3750

 

Introduced 2/14/2020, by Sen. Iris Y. Martinez

 

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

    Amends the General Provisions Article of the Illinois Pension Code. Provides that "emerging investment manager" means a qualified investment adviser that manages an investment portfolio of at least $10,000,000 but less than $20,000,000,000 (rather than at least $10,000,000 but less than $10,000,000,000) at the time of the initial contract with the retirement system, pension fund, or investment board and is a minority-owned business, women-owned business, or business owned by a person with a disability. Effective January 1, 2021.


LRB101 20277 RPS 69819 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB3750LRB101 20277 RPS 69819 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Section 1-109.1 as follows:
 
6    (40 ILCS 5/1-109.1)  (from Ch. 108 1/2, par. 1-109.1)
7    Sec. 1-109.1. Allocation and delegation of fiduciary
8duties.
9    (1) Subject to the provisions of Section 22A-113 of this
10Code and subsections (2) and (3) of this Section, the board of
11trustees of a retirement system or pension fund established
12under this Code may:
13        (a) Appoint one or more investment managers as
14    fiduciaries to manage (including the power to acquire and
15    dispose of) any assets of the retirement system or pension
16    fund; and
17        (b) Allocate duties among themselves and designate
18    others as fiduciaries to carry out specific fiduciary
19    activities other than the management of the assets of the
20    retirement system or pension fund.
21    (2) The board of trustees of a pension fund established
22under Article 5, 6, 8, 9, 10, 11, 12 or 17 of this Code may not
23transfer its investment authority, nor transfer the assets of

 

 

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

 

 

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1$10,000,000,000 and is a "minority-owned business",
2"women-owned business" or "business owned by a person with a
3disability" as those terms are defined in the Business
4Enterprise for Minorities, Women, and Persons with
5Disabilities Act.
6    It is hereby declared to be the public policy of the State
7of Illinois to encourage the trustees of public employee
8retirement systems, pension funds, and investment boards to use
9emerging investment managers in managing their system's
10assets, encompassing all asset classes, and increase the
11racial, ethnic, and gender diversity of its fiduciaries, to the
12greatest extent feasible within the bounds of financial and
13fiduciary prudence, and to take affirmative steps to remove any
14barriers to the full participation in investment opportunities
15afforded by those retirement systems, pension funds, and
16investment boards.
17    On or before January 1, 2010, a retirement system, pension
18fund, or investment board subject to this Code, except those
19whose investments are restricted by Section 1-113.2 of this
20Code, shall adopt a policy that sets forth goals for
21utilization of emerging investment managers. This policy shall
22include quantifiable goals for the management of assets in
23specific asset classes by emerging investment managers. The
24retirement system, pension fund, or investment board shall
25establish 3 separate goals for: (i) emerging investment
26managers that are minority-owned businesses; (ii) emerging

 

 

SB3750- 4 -LRB101 20277 RPS 69819 b

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

 

 

SB3750- 5 -LRB101 20277 RPS 69819 b

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

 

 

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

 

 

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

 

 

SB3750- 8 -LRB101 20277 RPS 69819 b

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

 

 

SB3750- 9 -LRB101 20277 RPS 69819 b

1are defined in the Business Enterprise for Minorities, Women,
2and Persons with Disabilities Act. It shall be the aspirational
3goal to utilize businesses owned by minorities, women, and
4persons with disabilities for not less than 20% of contracts
5awarded for "information technology services", "accounting
6services", "insurance brokers", "architectural and engineering
7services", and "legal services" as those terms are defined in
8the Act.
9(Source: P.A. 99-462, eff. 8-25-15; 100-391, eff. 8-25-17;
10100-902, eff. 8-17-18.)
 
11    Section 99. Effective date. This Act takes effect January
121, 2021.