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Public Act 102-0118


 

Public Act 0118 102ND GENERAL ASSEMBLY

  
  
  

 


 
Public Act 102-0118
 
HB0232 EnrolledLRB102 05177 RPS 15198 b

    AN ACT concerning public employee benefits.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Pension Code is amended by
changing Section 1-110.16 and by adding Section 1-110.17 as
follows:
 
    (40 ILCS 5/1-110.16)
    Sec. 1-110.16. Transactions prohibited by retirement
systems; companies that boycott Israel, for-profit companies
that contract to shelter migrant children, Iran-restricted
companies, Sudan-restricted companies, and expatriated
entities.
    (a) As used in this Section:
        "Boycott Israel" means engaging in actions that are
    politically motivated and are intended to penalize,
    inflict economic harm on, or otherwise limit commercial
    relations with the State of Israel or companies based in
    the State of Israel or in territories controlled by the
    State of Israel.
        "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 exist for the purpose of making profit.
        "Contract to shelter migrant children" means entering
    into a contract with the federal government to shelter
    migrant children under the federal Unaccompanied Alien
    Children Program or a substantially similar federal
    program.
        "Illinois Investment Policy Board" means the board
    established under subsection (b) of this Section.
        "Direct holdings" in a company means all publicly
    traded securities of that company that are held directly
    by the retirement system in an actively managed account or
    fund in which the retirement system owns all shares or
    interests.
        "Expatriated entity" has the meaning ascribed to it in
    Section 1-15.120 of the Illinois Procurement Code.
        "Indirect holdings" in a company means all securities
    of that company that 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 or
    that are held in an index fund.
        "Iran-restricted company" means a company that meets
    the qualifications under Section 1-110.15 of this Code.
        "Private market fund" means any private equity fund,
    private equity funds of funds, venture capital fund, hedge
    fund, hedge fund of funds, real estate fund, or other
    investment vehicle that is not publicly traded.
        "Restricted companies" means companies that boycott
    Israel, for-profit companies that contract to shelter
    migrant children, Iran-restricted companies,
    Sudan-restricted companies, and expatriated entities.
        "Retirement system" means a retirement system
    established under Article 2, 14, 15, 16, or 18 of this Code
    or the Illinois State Board of Investment.
        "Sudan-restricted company" means a company that meets
    the qualifications under Section 1-110.6 of this Code.
    (b) There shall be established an Illinois Investment
Policy Board. The Illinois Investment Policy Board shall
consist of 7 members. Each board of a pension fund or
investment board created under Article 15, 16, or 22A of this
Code shall appoint one member, and the Governor shall appoint
4 members.
    (c) Notwithstanding any provision of law to the contrary,
beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
Code shall be administered in accordance with this Section.
    (d) By April 1, 2016, the Illinois Investment Policy Board
shall make its best efforts to identify all Iran-restricted
companies, Sudan-restricted companies, and companies that
boycott Israel and assemble those identified companies into a
list of restricted companies, to be distributed to each
retirement system.
    These efforts shall include the following, as appropriate
in the Illinois Investment Policy Board's judgment:
        (1) reviewing and relying on publicly available
    information regarding Iran-restricted companies,
    Sudan-restricted companies, and companies that boycott
    Israel, including information provided by nonprofit
    organizations, research firms, and government entities;
        (2) contacting asset managers contracted by the
    retirement systems that invest in Iran-restricted
    companies, Sudan-restricted companies, and companies that
    boycott Israel;
        (3) contacting other institutional investors that have
    divested from or engaged with Iran-restricted companies,
    Sudan-restricted companies, and companies that boycott
    Israel; and
        (4) retaining an independent research firm to identify
    Iran-restricted companies, Sudan-restricted companies,
    and companies that boycott Israel.
    The Illinois Investment Policy Board shall review the list
of restricted companies on a quarterly basis based on evolving
information from, among other sources, those listed in this
subsection (d) and distribute any updates to the list of
restricted companies to the retirement systems and the State
Treasurer.
    By April 1, 2018, the Illinois Investment Policy Board
shall make its best efforts to identify all expatriated
entities and include those companies in the list of restricted
companies distributed to each retirement system and the State
Treasurer. These efforts shall include the following, as
appropriate in the Illinois Investment Policy Board's
judgment:
        (1) reviewing and relying on publicly available
    information regarding expatriated entities, including
    information provided by nonprofit organizations, research
    firms, and government entities;
        (2) contacting asset managers contracted by the
    retirement systems that invest in expatriated entities;
        (3) contacting other institutional investors that have
    divested from or engaged with expatriated entities; and
        (4) retaining an independent research firm to identify
    expatriated entities.
    By July 1, 2022, the Illinois Investment Policy Board
shall make its best efforts to identify all for-profit
companies that contract to shelter migrant children and
include those companies in the list of restricted companies
distributed to each retirement system. These efforts shall
include the following, as appropriate in the Illinois
Investment Policy Board's judgment:
        (1) reviewing and relying on publicly available
    information regarding for-profit companies that contract
    to shelter migrant children, including information
    provided by nonprofit organizations, research firms, and
    government entities;
        (2) contacting asset managers contracted by the
    retirement systems that invest in for-profit companies
    that contract to shelter migrant children;
        (3) contacting other institutional investors that have
    divested from or engaged with for-profit companies that
    contract to shelter migrant children; and
        (4) retaining an independent research firm to identify
    for-profit companies that contract to shelter migrant
    children.
    (e) The Illinois Investment Policy Board shall adhere to
the following procedures for companies on the list of
restricted companies:
        (1) For each company newly identified in subsection
    (d), the Illinois Investment Policy Board shall send a
    written notice informing the company of its status and
    that it may become subject to divestment or shareholder
    activism by the retirement systems.
        (2) If, following the Illinois Investment Policy
    Board's engagement pursuant to this subsection (e) with a
    restricted company, that company ceases activity that
    designates the company to be an Iran-restricted company, a
    Sudan-restricted company, a company that boycotts Israel,
    or an expatriated entity, or a for-profit company that
    contracts to shelter migrant children, the company shall
    be removed from the list of restricted companies and the
    provisions of this Section shall cease to apply to it
    unless it resumes such activities.
    (f) Except as provided in subsection (f-1) of this Section
the retirement system shall adhere to the following procedures
for companies on the list of restricted companies:
        (1) The retirement system shall identify those
    companies on the list of restricted companies in which the
    retirement system owns direct holdings and indirect
    holdings.
        (2) The retirement system shall instruct its
    investment advisors to sell, redeem, divest, or withdraw
    all direct holdings of restricted companies from the
    retirement system's assets under management in an orderly
    and fiduciarily responsible manner within 12 months after
    the company's most recent appearance on the list of
    restricted companies.
        (3) The retirement system may not acquire securities
    of restricted companies.
        (4) The provisions of this subsection (f) do not apply
    to the retirement system's indirect holdings or private
    market funds. The Illinois Investment Policy Board shall
    submit letters to the managers of those investment funds
    containing restricted companies 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.
    (f-1) The retirement system shall adhere to the following
procedures for restricted companies that are expatriated
entities or for-profit companies that contract to shelter
migrant children:
        (1) To the extent that the retirement system believes
    that shareholder activism would be more impactful than
    divestment, the retirement system shall have the authority
    to engage with a restricted company prior to divesting.
        (2) Subject to any applicable State or Federal laws,
    methods of shareholder activism utilized by the retirement
    system may include, but are not limited to, bringing
    shareholder resolutions and proxy voting on shareholder
    resolutions.
        (3) The retirement system shall report on its
    shareholder activism and the outcome of such efforts to
    the Illinois Investment Policy Board by April 1 of each
    year.
        (4) If the engagement efforts of the retirement system
    are unsuccessful, then it shall adhere to the procedures
    under subsection (f) of this Section.
    (g) Upon request, and by April 1 of each year, each
retirement system shall provide the Illinois Investment Policy
Board with information regarding investments sold, redeemed,
divested, or withdrawn in compliance with this Section.
    (h) Notwithstanding any provision of this Section to the
contrary, a retirement system may cease divesting from
companies pursuant to subsection (f) if clear and convincing
evidence shows that the value of investments in such companies
becomes equal to or less than 0.5% of the market value of all
assets under management by the retirement system. For any
cessation of divestment authorized by this subsection (h), the
retirement system shall provide a written notice to the
Illinois Investment Policy Board in advance of the cessation
of divestment, setting forth the reasons and justification,
supported by clear and convincing evidence, for its decision
to cease divestment under subsection (f).
    (i) The cost associated with the activities of the
Illinois Investment Policy Board shall be borne by the boards
of each pension fund or investment board created under Article
15, 16, or 22A of this Code.
    (j) With respect to actions taken in compliance with this
Section, including all good-faith determinations regarding
companies as required by this Section, the retirement system
and Illinois Investment Policy Board are 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) It is not the intent of the General Assembly in
enacting this amendatory Act of the 99th General Assembly to
cause divestiture from any company based in the United States
of America. The Illinois Investment Policy Board shall
consider this intent when developing or reviewing the list of
restricted companies.
    (l) If any provision of this amendatory Act of the 99th
General Assembly 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 amendatory Act of the 99th General
Assembly that can be given effect without the invalid
provision or application.
    (m) If any provision of Public Act 100-551 this amendatory
Act of the 100th General Assembly 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 Public Act 100-551 this amendatory Act of the
100th General Assembly that can be given effect without the
invalid provision or application.
    If any provision of this amendatory Act of the 102nd
General Assembly 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 amendatory Act of the 102nd General
Assembly that can be given effect without the invalid
provision or application.
(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)
 
    (40 ILCS 5/1-110.17 new)
    Sec. 1-110.17. Expiration of prohibited transactions. If,
at least 4 years after the effective date of an amendatory Act
that initially establishes a prohibited transaction under this
Article, the Illinois Investment Policy Board concludes that
divestment is no longer necessary due to achievement of the
underlying goals of the amendatory Act establishing the
prohibited transaction, changes in status surrounding the
prohibited transactions, or other verifiable reasons, the
Illinois Investment Policy Board may cease actions to require
divestment, identify restricted companies, or prohibit
transactions by a majority vote of the Illinois Investment
Policy Board if: (1) no less than one year prior to the change
in policy, the Illinois Investment Policy Board notifies, in
writing, the General Assembly of the change in policy and
lists the reasons for changing the policy; and (2) the General
Assembly does not, before the change in policy, adopt a House
Resolution or a Senate Resolution instructing the Illinois
Investment Policy Board to not change the policy.
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 7/23/2021