SB3455 99TH GENERAL ASSEMBLY

LRB099 23881 RPS 51407 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB3455

Introduced 11/29/2016, by Sen. Michael E. Hastings

SYNOPSIS AS INTRODUCED:

See Index

Amends the Illinois Pension Code. Moves the investment power for eligible downstate police and downstate firefighter pension funds that have net assets in trust that exceed an amount equal to 3 months of current liabilities to the Board of Trustees of the Illinois Municipal Retirement Fund (IMRF). Provides that within 18 months of the effective date of the amendatory Act, the Department of Insurance shall audit the investment assets of each eligible pension fund to determine a certified investment asset list. Provides that upon receipt of the certified investment asset list, the Board of IMRF shall initiate the transfer of assets from the board of trustees of the eligible pension fund to the Board of IMRF. Makes conforming changes. Amends the State Mandates Act to require implementation without reimbursement.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

A BILL FOR

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 Sections 1-113.1, 1-113.2, 1-113.3, 1-113.4, 1-113.4a, 1-113.5, 1-113.6, 1-113.7, 3-127, 3-132, 3-135, 4-120, 4-123, and 4-128 and by adding Sections 1-101.6, 1-101.7, 1-113.05, 3-135.1, 3-135.2, 4-128.1, 4-128.2, 7-226, and 7-227 as follows:

(40 ILCS 5/1-101.6 new)

Sec. 1-101.6. Eligible pension fund. "Eligible pension fund" means a pension fund established pursuant to Article 3 or Article 4 of this Code that has net assets in trust that exceed the threshold amount defined in Section 1-101.7 of this Code. The status of "eligible pension fund", once established, continues in effect without regard to subsequent variations in the net assets of the pension fund. "Eligible pension fund" does not include a pension fund established pursuant to Article 3 or Article 4 of this Code that has elected before the effective date of this amendatory Act of the 99th General Assembly to come under the authority of the Illinois State Board of Investment for the management of its investments and that continues to be under the authority of the Illinois State Board of Investment for the management of its investments.

(40 ILCS 5/1-101.7 new)

Sec. 1-101.7. Threshold amount. "Threshold amount", when used in relation to the financial assets of a pension fund established under Article 3 or Article 4 of this Code, means an amount equal to 3 months of current liabilities of the pension fund, including benefit payments owed to annuitants and beneficiaries of the pension fund and reasonable operational expenses.

(40 ILCS 5/1-113.05 new)

Sec. 1-113.05. Transfer of investment authority of certain pension funds established under Article 3 or 4. Upon receiving a certified investment asset list from the Department of Insurance pursuant to Section 3-135.1 or Section 4-128.1 of this Code, the board of trustees of an eligible pension fund established under Article 3 or 4 of this Code shall cease investment activities and shall transfer all investment assets of the pension fund to the Board of Trustees of the Illinois Municipal Retirement Fund in the manner prescribed by rules adopted by the Board of Trustees of the Illinois Municipal Retirement Fund. Upon completion of that transfer, the investment authority of the board of trustees shall terminate.

(40 ILCS 5/1-113.1)

Sec. 1-113.1. Investment authority of certain pension funds established under Article 3 or 4.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (b) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

This Section continues to apply to any pension fund established under Article 3 or 4 that is not an eligible pension fund as defined in Section 1-101.6.

(b) 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)

Sec. 1-113.2. List of permitted investments for certain all Article 3 or 4 pension funds.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (b) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(b) Except as provided in subsection (a), any 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)

Sec. 1-113.3. List of additional permitted investments for certain pension funds with net assets of $2,500,000 or more.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-5) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-5) Except as provided in subsection (a), in (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)

Sec. 1-113.4. List of additional permitted investments for certain pension funds with net assets of $5,000,000 or more.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-5) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-5) Except as provided in subsection (a), in (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 subdivision G of Section 3 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; revised 10-25-16.)

(40 ILCS 5/1-113.4a)

Sec. 1-113.4a. List of additional permitted investments for certain Article 3 and 4 pension funds with net assets of $10,000,000 or more.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-5) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-5) Except as provided in subsection (a), in (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)

Sec. 1-113.5. Investment advisers and investment services for certain all Article 3 or 4 pension funds.

(a) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or when the transfer of investment authority is made pursuant to Section 1-113.05, whichever occurs first, subsection (a-1) of this Section does not apply to any pension fund that is an eligible pension fund as defined in Section 1-101.6.

(a-1) Except as provided in subsection (a), the (a) The board of trustees of a pension fund established under Article 3 or 4 of this Code 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 or consultant 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.

(f) Upon the initial transfer of assets and investment authority of an eligible pension fund under subsection (b) of Section 3-135 or subsection (b) of Section 4-128 of this Code, and thereafter in perpetuity, the Board of Trustees of the Illinois Municipal Retirement Fund shall provide all investment services for that eligible pension fund.

The Board of Trustees of the Illinois Municipal Retirement Fund shall not be held liable by or indemnify any individual annuitant or beneficiary of any eligible pension fund established under Article 3 or Article 4 of this Code for nonpayment of benefits by the eligible pension fund.

(Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)

(40 ILCS 5/1-113.6)

Sec. 1-113.6. Investment policies.

(a) Except as provided in subsection (b), every 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.

(b) Beginning 18 months after the effective date of this amendatory Act of the 99th General Assembly, or upon the transfer of its investment authority under Section 1-113.05, whichever occurs first, the requirement to maintain and file an investment policy under subsection (a) ceases to apply to the board of trustees of an eligible pension fund established under Article 3 or Article 4 of this Code.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/1-113.7)

Sec. 1-113.7. Registration of investments; custody and safekeeping.

This Section does not apply to investments that have been transferred under Section 1-113.05.

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 5/3-127) (from Ch. 108 1/2, par. 3-127)

Sec. 3-127. Reserves.

(a) The board shall establish and maintain a reserve to insure the payment of all obligations incurred under this Article excluding retirement annuities established under Section 3-109.3. The reserve to be accumulated shall be equal to the estimated total actuarial requirements of the fund.

(b) In the case of an eligible pension fund that has transferred its investment authority to the Board of Trustees of the Illinois Municipal Retirement Fund under Section 1-113.05 of this Code, the assets invested by the Board of Trustees of the Illinois Municipal Retirement Fund on behalf of the pension fund, and the dividends and other investment earnings attributable thereto, shall be considered as part of the reserve for the purposes of this Section.

The Board of Trustees of the Illinois Municipal Retirement Fund shall report to the board of each such fund at least annually the financial information on the invested assets and earnings attributable to that pension fund so that the board may make the determinations required under this Article.

(c) If a pension fund has a reserve of less than the accrued liabilities of the fund, the board of the pension fund, in making its annual report to the city council or board of trustees of the municipality, shall designate the amount, calculated as a level percentage of payroll, needed annually to insure the accumulation of the reserve to the level of the fund's accrued liabilities over a period of 40 years from July 1, 1993 for pension funds then in operation, or from the date of establishment in the case of a fund created thereafter, so that the necessary reserves will be attained over such a period.

(Source: P.A. 91-939, eff. 2-1-01.)

(40 ILCS 5/3-132) (from Ch. 108 1/2, par. 3-132)

Sec. 3-132. To control and manage the Pension Fund.

(a) In accordance with the applicable provisions of Articles 1 and 1A and this Article, the board of trustees of the pension fund shall have the authority to control and manage, exclusively, the following:

(1) the pension fund, and

(2) investment expenditures and income, including interest dividends, capital gains and other distributions on the investments, and

(2) (3) all money donated, paid, assessed, or provided by law for the pensioning of disabled and retired police officers, their surviving spouses, minor children, and dependent parents.

All such money received or collected shall be credited by the treasurer of the municipality to the Illinois Municipal Retirement Fund's account of the pension fund and held by the Illinois Municipal Retirement Fund for purposes of investment pursuant to Article 7 of this Code.

(b) Pursuant to rules adopted under Article 7 of this Code, the board of trustees of an eligible pension fund shall make periodic written application to the Board of Trustees of the Illinois Municipal Retirement Fund for receipt and deposit of reserves into the pension fund. Reserves in the amount of 3 months' current liabilities, including annuity and benefit payments and operational expenses owed by the fund, shall be held by the treasurer of the municipality subject to the order and control of the board. The treasurer of the municipality shall maintain a record of all money received, transferred, and held for the account of the board.

(c) In case of any dispute that may arise between the board of trustees of the eligible pension fund and the Illinois Municipal Retirement Fund pursuant to subsection (b) of this Section, the board of trustees of the eligible pension fund shall appeal the dispute to the Director of the Illinois Department of Insurance. If the Director finds that there exists a good faith dispute between the parties, the Director may hold a hearing in accordance with the rules of the Illinois Department of Insurance.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/3-135) (from Ch. 108 1/2, par. 3-135)

Sec. 3-135. To invest, manage, and transfer funds.

(a) Except as provided in subsection (b), Beginning January 1, 1998, the board shall invest funds in accordance with Sections 1-113.1 through 1-113.10 of this Code.

Any pension fund that does not meet the definition of eligible pension fund under Section 1-101.6 of this Code shall retain the authority to control and manage investment expenditures and income, including interest, dividends, capital gains, and other distributions on the investments.

(b) The board of an eligible pension fund that receives a certified investment asset list under Section 3-135.1 shall cease investment activities upon receiving the certified investment asset list and shall transfer all investment assets, minus assets needed to comply with subsection (b) of Section 3-132, to the Board of Trustees of the Illinois Municipal Retirement Fund in the manner prescribed by rules adopted by the Board of Trustees of the Illinois Municipal Retirement Fund under Article 7. Upon completion of the transfer described in this subsection, the investment authority of the board shall terminate.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/3-135.1 new)

Sec. 3-135.1. Certified investment asset list.

(a) Within 18 months of the effective date of this amendatory Act of the 99th General Assembly, the Department of Insurance shall audit the investment assets of each eligible pension fund established under this Article to determine a certified investment asset list. The audit shall be performed by a certified public accountant. The board of the pension fund shall defray the expense of the audit.

(b) Upon completion of the audit, the Department shall provide the certified investment asset list to the eligible pension fund and the Board of Trustees of the Illinois Municipal Retirement Fund. The Department may adopt rules governing the creation and distribution of the certified investment asset list.

(40 ILCS 5/3-135.2 new)

Sec. 3-135.2. To transfer investment funds. At each quarterly meeting of the Board, the Board of trustees of any eligible pension fund shall transfer any available funds for investment to the Board of Trustees of the Illinois Municipal Retirement Fund in accordance with provisions of Article 7 of this Code. Each transfer shall be made within 30 days of the end of the fiscal year quarter and written notice of the transfer shall be given to the Board of Trustees of the Illinois Municipal Retirement Fund.

(40 ILCS 5/4-120) (from Ch. 108 1/2, par. 4-120)

Sec. 4-120. Reserves.

(a) The board shall establish and maintain a reserve to insure the payment of all obligations incurred under this Article. The reserve to be accumulated shall be equal to the estimated total actuarial requirements of the Fund.

(b) In the case of an eligible pension fund that has transferred its investment authority to the Board of Trustees of the Illinois Municipal Retirement Fund under Section 1-113.05 of this Code, the assets invested by the Board of Trustees of the Illinois Municipal Retirement Fund on behalf of the pension fund, and the dividends and other investment earnings attributable thereto, shall be considered as part of the reserve for the purposes of this Section.

The Board of Trustees of the Illinois Municipal Retirement Fund shall report to the board of each such fund at least annually the financial information on the invested assets and earnings to that pension fund so that the board may make the determinations required under this Article.

(Source: P.A. 83-1440.)

(40 ILCS 5/4-123) (from Ch. 108 1/2, par. 4-123)

Sec. 4-123. To control and manage the Pension Fund.

(a) In accordance with the applicable provisions of Articles 1 and 1A and this Article the board of trustees of the pension fund shall have the authority, to control and manage, exclusively, the following:

(1) the pension fund, and

(2) investment expenditures and income, including interest dividends, capital gains, and other distributions on the investments, and

(2) (3) all money donated, paid, assessed, or provided by law for the pensioning of disabled and retired firefighters, their surviving spouses, minor children, and dependent parents. All such money received or collected shall be credited by the treasurer of the municipality to the Illinois Municipal Retirement Fund's account of the pension fund and held by the Fund for purposes of investment pursuant to Article 7 of this Code.

(b) Pursuant to rules adopted under Article 7 of this Code, the board of trustees of an eligible pension fund shall make periodic written application to the Board of Trustees of the Illinois Municipal Retirement Fund for receipt and deposit of reserves into the pension fund. Reserves in the amount of 3 months' current liabilities, including annuity and benefit payments and operational expenses owed by the fund, shall be held by the treasurer of the municipality subject to the order and control of the board. The treasurer of the municipality shall maintain a record of all money received, transferred, and held for the account of the board.

(c) In case of any dispute that may arise between the board of trustees of any eligible pension fund and the Illinois Municipal Retirement Fund pursuant to subsection (b) of this Section, the board of trustees of the pension fund shall appeal the dispute to the Director of the Illinois Department of Insurance. If the Director finds good faith dispute between the parties, the Director may hold a hearing in accordance with the rules of the Illinois Department of Insurance.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128)

Sec. 4-128. To invest and transfer funds.

(a) Except as provided in subsection (b), Beginning January 1, 1998, the board shall invest funds in accordance with Sections 1-113.1 through 1-113.10 of this Code.

Any pension fund that does not meet the definition of eligible pension fund under Section 1-101.6 of this Code shall retain the authority to control and manage investment expenditures and income, including interest, dividends, capital gains, and other distributions on the investments.

(b) The board of an eligible pension fund that receives a certified investment asset list under Section 4-128.1 shall cease investment activities upon receiving the certified investment asset list and shall transfer all investment assets, minus assets needed to comply with subsection (b) of Section 4-123, to the Board of Trustees of the Illinois Municipal Retirement Fund in the manner prescribed by rules adopted by the Board of Trustees of the Illinois Municipal Retirement Fund under Article 7. Upon completion of the transfer described in this subsection, the investment authority of the board shall terminate.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/4-128.1 new)

Sec. 4-128.1. Certified investment asset list.

(a) Within 18 months of the effective date of this amendatory Act of the 99th General Assembly, the Department of Insurance shall audit the investment assets of each eligible pension fund established under this Article to determine a certified investment asset list. The audit shall be performed by a certified public accountant. The board of the pension fund shall defray the expense of the audit.

(b) Upon completion of the audit, the Department shall provide the certified investment asset list to the eligible pension fund and the Board of Trustees of the Illinois Municipal Retirement Fund. The Department may adopt rules governing the creation and distribution of the certified investment asset list.

(40 ILCS 5/4-128.2 new)

Sec. 4-128.2. To transfer investment funds. At each quarterly meeting of the Board, the Board of trustees of any eligible pension fund shall transfer any available funds for investment to the Board of Trustees of the Illinois Municipal Retirement Fund in accordance with provisions of Article 7 of this Code. Each transfer shall be made within 30 days of the end of the fiscal year quarter and written notice of the transfer shall be given to the Board of Trustees of the Illinois Municipal Retirement Fund.

(40 ILCS 5/7-226 new)

Sec. 7-226. Transfer from Article 3 or 4 fund.

(a) Upon receipt of a certified investment asset list provided under Section 3-135.1 or 4-128.1 of this Code for an eligible pension fund, the Board of the Illinois Municipal Retirement Fund shall, as soon as practicable, initiate the transfer of assets from the board of trustees of the eligible fund, and the board of trustees of the eligible fund shall transfer to the Board of Trustees of the Illinois Municipal Retirement Fund for management and investment all of its securities including securities for which commitments have been made, and all funds, assets, or money representing permanent or temporary investments, and cash reserves maintained for the purpose of obtaining income thereon.

(b) Upon the transfer of securities and assets from a board of trustees under this Section, the custody and control of the Board of Trustees of the Illinois Municipal Retirement Fund over the present and future assets of the pension fund shall take effect. The transfer shall be receipted for in detail by the Board of the Illinois Municipal Retirement Fund and the receipt shall be provided to the board of trustees of the pension fund within 30 days of the effective date of the transfer.

(c) Each pension fund established under Article 3 and 4 of this Code that is under the investment authority of the Board of Trustees of the Illinois Municipal Retirement Fund shall report to the Board of Trustees of the Illinois Municipal Retirement Fund, at the end of each quarter of the pension fund's fiscal year, the amount of funds available for investment. These amounts shall be transferred within 30 days of the end of the quarter to the Board of Trustees of the Illinois Municipal Retirement Fund in a manner prescribed by the Board. Notice to the Board of Trustees of the Illinois Municipal Retirement Fund of each such transfer shall be given by the pension fund as the transfer occurs.

(40 ILCS 5/7-227 new)

Sec. 7-227. Audit of transition. Within 6 months of the transfer of investment assets from an eligible pension fund established under Article 3 or 4 of this Code to the control of the Board, the books, records, accounts, and securities of the board shall be audited by a certified public accountant designated by the Illinois Auditor General. The audit shall include, but is not limited to, the following: (i) a full description of the investments acquired, showing average costs; (ii) a full description of the securities sold or exchanged, showing average proceeds or other conditions of an exchange; (iii) gains or losses realized during the period; (iv) income from investments; (v) administrative expenses of the board; and (vi) the proportion of administrative expenses allocable to each pension fund. The audit report shall be published on the Board's website and filed with the Illinois Department of Insurance.

Section 90. The State Mandates Act is amended by adding Section 8.40 as follows:

(30 ILCS 805/8.40 new)

Sec. 8.40. Exempt mandate. Notwithstanding Sections 6 and 8 of this Act, no reimbursement by the State is required for the implementation of any mandate created by this amendatory Act of the 99th General Assembly.