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.)