Public Act 098-1022
 
SB0452 EnrolledLRB098 04664 EFG 34692 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 1-109.1 and by adding Section 1-113.21 as follows:
 
    (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; and
(v) the policy adopted under subsection (9) of this Section.
    (9) On or before February 1, 2015, 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 investment managers.
For the purposes of this Code, "minority investment manager"
means a qualified investment manager that manages an investment
portfolio and 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.
    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
minority investment managers in managing their systems'
assets, encompassing all asset classes, and to increase the
racial, ethnic, and gender diversity of their 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.
    The retirement system, pension fund, or investment board
shall establish 3 separate goals for: (i) minority investment
managers that are minority owned businesses; (ii) minority
investment managers that are female owned businesses; and (iii)
minority investment managers that are businesses owned by a
person with a disability. The retirement system, pension fund,
or investment board shall annually review the goals established
under this Section.
    If in any case a minority 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 minority 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 minority 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 a minority investment manager does not
constitute a transfer of investment authority for the purposes
of subsection (2) of this Section.
(Source: P.A. 96-6, eff. 4-3-09.)
 
    (40 ILCS 5/1-113.21 new)
    Sec. 1-113.21. Contracts for services.
    (a) Beginning January 1, 2015, no contract, oral or
written, for investment services, consulting services, or
commitment to a private market fund shall be awarded by a
retirement system, pension fund, or investment board
established under this Code unless the investment advisor,
consultant, or private market fund first discloses:
        (1) the number of its investment and senior staff and
    the percentage of its investment and senior staff who are
    (i) a minority person, (ii) a female, and (iii) a person
    with a disability; and
        (2) the number of contracts, oral or written, for
    investment services, consulting services, and professional
    and artistic services that the investment advisor,
    consultant, or private market fund has with (i) a minority
    owned business, (ii) a female owned business, or (iii) a
    business owned by a person with a disability; and
        (3) the number of contracts, oral or written, for
    investment services, consulting services, and professional
    and artistic services the investment advisor, consultant,
    or private market fund has with a business other than (i) a
    minority owned business, (ii) a female owned business or
    (iii) a business owned by a person with a disability, if
    more than 50% of services performed pursuant to the
    contract are performed by (i) a minority person, (ii) a
    female, and (iii) a person with a disability.
    (b) The disclosures required by this Section shall be
considered, within the bounds of financial and fiduciary
prudence, prior to the awarding of a contract, oral or written,
for investment services, consulting services, or commitment to
a private market fund.
    (c) For the purposes of this Section, the terms "minority
person", "female", "person with a disability", "minority owned
business", "female owned business", and "business owned by a
person with a disability" have the same meaning as those terms
have in the Business Enterprise for Minorities, Females, and
Persons with Disabilities Act.
    (d) For purposes of this Section, the term "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.
 
    Section 10. The Illinois Prepaid Tuition Act is amended by
changing Section 30 as follows:
 
    (110 ILCS 979/30)
    Sec. 30. Investment Advisory Panel duties and
responsibilities.
    (a) Advice and review. The panel shall offer advice and
counseling regarding the investments of the Illinois prepaid
tuition program with the objective of obtaining the best
possible return on investments consistent with actuarial
soundness of the program. The panel is required to annually
review and advise the Commission on provisions of the strategic
investment plan for the prepaid tuition program. The panel is
also charged with reviewing and advising the Commission with
regard to the annual report that describes the current
financial condition of the program. The panel at its own
discretion also may advise the Commission on other aspects of
the program.
    (b) Investment plan. The Commission annually shall adopt a
comprehensive investment plan for purposes of this Section. The
comprehensive investment plan shall specify the investment
policies to be utilized by the Commission in its administration
of the Illinois Prepaid Tuition Trust Fund created by Section
35. The Commission may direct that assets of those Funds be
placed in savings accounts or may use the same to purchase
fixed or variable life insurance or annuity contracts,
securities, evidence of indebtedness, or other investment
products pursuant to the comprehensive investment plan and in
such proportions as may be designated or approved under that
plan. The Commission shall invest such assets 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, and the
Commission shall diversify the investments of such assets so as
to minimize the risk of large losses, unless under the
circumstances it is clearly prudent not to do so. Those
insurance, annuity, savings, and investment products shall be
underwritten and offered in compliance with applicable federal
and State laws, rules, and regulations by persons who are
authorized thereunder to provide those services. The
Commission shall delegate responsibility for preparing the
comprehensive investment plan to the Executive Director of the
Commission. Nothing in this Section shall preclude the
Commission from contracting with a private corporation or
institution to provide such services as may be a part of the
comprehensive investment plan or as may be deemed necessary for
implementation of the comprehensive investment plan,
including, but not limited to, providing consolidated billing,
individual and collective record keeping and accounting, and
asset purchase, control, and safekeeping.
    (b-5) Investment duties. Beginning January 1, 2015, with
respect to any investments for which it is responsible under
this Section or any other law, the Commission shall be subject
to the same requirements as are imposed upon the board of
trustees of a retirement system under Sections 1-109.1(5.1),
1-109.1(9), and 1-113.21 of the Illinois Pension Code, to the
extent that those requirements are not in direct conflict with
any other requirement of law to which the Commission is
subject.
    (c) Program management. The Commission may not delegate its
management functions, but may arrange to compensate for
personalized investment advisory services rendered with
respect to any or all of the investments under its control an
investment advisor registered under Section 8 of the Illinois
Securities Law of 1953 or any bank or other entity authorized
by law to provide those services. Nothing contained herein
shall preclude the Commission from subscribing to general
investment research services available for purchase or use by
others. The Commission also shall have authority to compensate
for accounting, computing, and other necessary services.
    (d) Annual report. The Commission shall annually prepare or
cause to be prepared a report setting forth in appropriate
detail an accounting of all Illinois prepaid tuition program
funds and a description of the financial condition of the
program at the close of each fiscal year. Included in this
report shall be an evaluation by at least one nationally
recognized actuary of the financial viability of the program.
This report shall be submitted to the Governor, the President
of the Senate, the Speaker of the House of Representatives, the
Auditor General, and the Board of Higher Education on or before
March 1 of the subsequent fiscal year. This report also shall
be made available to purchasers of Illinois prepaid tuition
contracts and shall contain complete Illinois prepaid tuition
contract sales information, including, but not limited to,
projected postsecondary enrollment data for qualified
beneficiaries.
    (e) Marketing plan. Selection of a marketing agent for the
Illinois prepaid tuition program must be approved by the
Commission. At least once every 3 years, the Commission shall
solicit proposals for marketing of the Illinois prepaid tuition
program in accordance with the Illinois Securities Law of 1953
and any applicable provisions of federal law. The entity
designated pursuant to this paragraph shall serve as a
centralized marketing agent for the program and shall have
exclusive responsibility for marketing the program. No
contract for marketing the Illinois prepaid tuition program
shall extend for longer than 3 years. Any materials produced
for the purpose of marketing the program shall be submitted to
the Executive Director of the Commission for approval before
they are made public. Any eligible institution may distribute
marketing materials produced for the program, so long as the
Executive Director of the Commission approves the distribution
in advance. Neither the State nor the Commission shall be
liable for misrepresentation of the program by a marketing
agent.
    (f) Accounting and audit. The Commission shall annually
cause to be prepared an accounting of the trust and shall
transmit a copy of the accounting to the Governor, the
President of the Senate, the Speaker of the House, and the
minority leaders of the Senate and House of Representatives.
The Commission shall also make available this accounting of the
trust to any purchaser of an Illinois prepaid tuition contract,
upon request. The accounts of the Illinois prepaid tuition
program shall be subject to annual audits by the Auditor
General or a certified public accountant appointed by the
Auditor General.
(Source: P.A. 96-1282, eff. 7-26-10.)