Bill Text: IL HB3635 | 2019-2020 | 101st General Assembly | Introduced

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Bill Title: Amends the General Provisions and Downstate Firefighter Articles of the Illinois Pension Code. Removes provisions specifying, based on the net assets of the downstate firefighter pension fund, types of investments that a downstate firefighter pension fund may make. Removes certain limitations on the percentage of a downstate firefighter pension fund's net assets that may be invested in certain types of investments. Provides that the board of a firefighter pension fund shall invest funds 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. Makes conforming changes. Effective immediately.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Introduced - Dead) 2019-08-30 - Added Chief Co-Sponsor Rep. Robyn Gabel [HB3635 Detail]

Download: Illinois-2019-HB3635-Introduced.html

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101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 HB3635 Introduced , by Rep. William Davis SYNOPSIS AS INTRODUCED:
40 ILCS 5/1-109.1 from Ch. 108 1/2, par. 1-109.1
40 ILCS 5/1-110 from Ch. 108 1/2, par. 1-110
40 ILCS 5/1-113.1
40 ILCS 5/1-113.2
40 ILCS 5/1-113.3
40 ILCS 5/1-113.4
40 ILCS 5/1-113.4a
40 ILCS 5/1-113.14
40 ILCS 5/1-113.16
40 ILCS 5/1-113.20
40 ILCS 5/1-150
40 ILCS 5/4-128 from Ch. 108 1/2, par. 4-128
Amends the General Provisions and Downstate Firefighter Articles of the Illinois Pension Code. Removes provisions specifying, based on the net assets of the downstate firefighter pension fund, types of investments that a downstate firefighter pension fund may make. Removes certain limitations on the percentage of a downstate firefighter pension fund's net assets that may be invested in certain types of investments. Provides that the board of a firefighter pension fund shall invest funds 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. Makes conforming changes. Effective immediately.
LRB101 10783 RPS 55905 b
FISCAL NOTE ACT MAY APPLY PENSION IMPACT NOTE ACT MAY APPLY
A BILL FOR
HB3635 LRB101 10783 RPS 55905 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
Sections 1-109.1, 1-113.2, 1-113.3, 1-109.1, 1-110, 1-110.6,
1-113.1, 1-113.4, 1-113.4a, 1-113.14, 1-113.16, 1-113.20,
1-150, and 4-128 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

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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

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$10,000,000,000 and is a "minority-owned business",
"women-owned business" or "business owned by a person with a
disability" as those terms are defined in the Business
Enterprise for Minorities, Women, 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.
A On or before January 1, 2010, a retirement system,
pension fund, or investment board subject to this Code, except
those under Article 3 or 4 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)

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emerging investment managers that are women-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,
women-owned businesses, and businesses owned by a person with a
disability, as those terms are defined in the Business
Enterprise for Minorities, Women, 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 under Article 3 or 4

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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
retirement system, pension fund, or investment board shall make
its best efforts to ensure that the racial and ethnic makeup of
its senior administrative staff represents the racial and
ethnic makeup of its membership. Each system, fund, and
investment board shall annually review the goals established
under this subsection.
(6) A On or before January 1, 2010, a retirement system,
pension fund, or investment board subject to this Code, except
those under Article 3 or 4 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,
women, 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, women-owned businesses, and
businesses owned by a person with a disability, as those terms
are defined in the Business Enterprise for Minorities, Women,
and Persons with Disabilities Act. The retirement system,
pension fund, or investment board shall annually review the
goals established under this subsection.
(7) A On or before January 1, 2010, a retirement system,
pension fund, or investment board subject to this Code, except

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those under Article 3 or 4 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", "women-owned
business", or "business owned by a person with a disability",
as those terms are defined in the Business Enterprise for
Minorities, Women, 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 under Article 3 or 4
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; (iv) the policy

HB3635 - 7 - LRB101 10783 RPS 55905 b
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) A On or before February 1, 2015, a retirement system,
pension fund, or investment board subject to this Code, except
those under Article 3 or 4 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", "women-owned business", or
"business owned by a person with a disability", as those terms
are defined in the Business Enterprise for Minorities, Women,
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

HB3635 - 8 - LRB101 10783 RPS 55905 b
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 women-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.
(10) It Beginning January 1, 2016, it shall be the
aspirational goal for a retirement system, pension fund, or
investment board subject to this Code to use emerging
investment managers for not less than 20% of the total funds

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under management. Furthermore, it shall be the aspirational
goal that not less than 20% of investment advisors be
minorities, women, and persons with disabilities as those terms
are defined in the Business Enterprise for Minorities, Women,
and Persons with Disabilities Act. It shall be the aspirational
goal to utilize businesses owned by minorities, women, and
persons with disabilities for not less than 20% of contracts
awarded for "information technology services", "accounting
services", "insurance brokers", "architectural and engineering
services", and "legal services" as those terms are defined in
the Act.
(Source: P.A. 99-462, eff. 8-25-15; 100-391, eff. 8-25-17;
100-902, eff. 8-17-18.)
(40 ILCS 5/1-110) (from Ch. 108 1/2, par. 1-110)
Sec. 1-110. Prohibited Transactions.
(a) A fiduciary with respect to a retirement system,
pension fund, or investment board shall not cause the
retirement system or pension fund to engage in a transaction if
he or she knows or should know that such transaction
constitutes a direct or indirect:
(1) Sale or exchange, or leasing of any property from
the retirement system or pension fund to a party in
interest for less than adequate consideration, or from a
party in interest to a retirement system or pension fund
for more than adequate consideration.

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(2) Lending of money or other extension of credit from
the retirement system or pension fund to a party in
interest without the receipt of adequate security and a
reasonable rate of interest, or from a party in interest to
a retirement system or pension fund with the provision of
excessive security or an unreasonably high rate of
interest.
(3) Furnishing of goods, services or facilities from
the retirement system or pension fund to a party in
interest for less than adequate consideration, or from a
party in interest to a retirement system or pension fund
for more than adequate consideration.
(4) Transfer to, or use by or for the benefit of, a
party in interest of any assets of a retirement system or
pension fund for less than adequate consideration.
(b) A fiduciary with respect to a retirement system or
pension fund established under this Code shall not:
(1) Deal with the assets of the retirement system or
pension fund in his own interest or for his own account;
(2) In his individual or any other capacity act in any
transaction involving the retirement system or pension
fund on behalf of a party whose interests are adverse to
the interests of the retirement system or pension fund or
the interests of its participants or beneficiaries; or
(3) Receive any consideration for his own personal
account from any party dealing with the retirement system

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or pension fund in connection with a transaction involving
the assets of the retirement system or pension fund.
(c) Nothing in this Section shall be construed to prohibit
any trustee from:
(1) Receiving any benefit to which he may be entitled
as a participant or beneficiary in the retirement system or
pension fund.
(2) Receiving any reimbursement of expenses properly
and actually incurred in the performance of his duties with
the retirement system or pension fund.
(3) Serving as a trustee in addition to being an
officer, employee, agent or other representative of a party
in interest.
(d) A fiduciary of a pension fund established under Article
3 or 4 shall not knowingly cause or advise the pension fund to
engage in an investment transaction when the fiduciary (i) has
any direct interest in the income, gains, or profits of the
investment adviser through which the investment transaction is
made or (ii) has a business relationship with that investment
adviser that would result in a pecuniary benefit to the
fiduciary as a result of the investment transaction.
Violation of this subsection (d) is a Class 4 felony.
(e) A board member, employee, or consultant with respect to
a retirement system, pension fund, or investment board subject
to this Code, except those under Article 3 or 4 whose
investments are restricted by Section 1-113.2, shall not

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knowingly cause or advise the retirement system, pension fund,
or investment board to engage in an investment transaction with
an investment adviser when the board member, employee,
consultant, or their spouse (i) has any direct interest in the
income, gains, or profits of the investment adviser through
which the investment transaction is made or (ii) has a
relationship with that investment adviser that would result in
a pecuniary benefit to the board member, employee, or
consultant or spouse of such board member, employee, or
consultant as a result of the investment transaction. For
purposes of this subsection (e), a consultant includes an
employee or agent of a consulting firm who has greater than
7.5% ownership of the consulting firm.
Violation of this subsection (e) is a Class 4 felony.
(Source: P.A. 95-950, eff. 8-29-08; 96-6, eff. 4-3-09.)
(40 ILCS 5/1-113.1)
Sec. 1-113.1. Investment authority of pension funds
established under Article 3 or 4. 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

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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 all Article
3 or 4 pension funds. 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

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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

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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

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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

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(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
pension funds with net assets of $2,500,000 or more.
(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

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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
pension funds with net assets of $5,000,000 or more.
(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

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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 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

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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. 100-201, eff. 8-18-17.)
(40 ILCS 5/1-113.4a)
Sec. 1-113.4a. List of additional permitted investments
for Article 3 and 4 pension funds with net assets of
$10,000,000 or more.
(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:

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(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.

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(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 5/1-113.14)
Sec. 1-113.14. Investment services for retirement systems,
pension funds, and investment boards, except those funds
established under Articles 3 and 4.
(a) For the purposes of this Section, "investment services"
means services provided by an investment adviser or a
consultant other than qualified fund-of-fund management
services as defined in Section 1-113.15.
(b) The selection and appointment of an investment adviser
or consultant for investment services by the board of a
retirement system, pension fund, or investment board subject to

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this Code, except those under Article 3 or 4 whose investments
are restricted by Section 1-113.2, shall be made and awarded in
accordance with this Section. All contracts for investment
services shall be awarded by the board using a competitive
process that is substantially similar to the process required
for the procurement of professional and artistic services under
Article 35 of the Illinois Procurement Code. Each board of
trustees shall adopt a policy in accordance with this
subsection (b) within 60 days after the effective date of this
amendatory Act of the 96th General Assembly. The policy shall
be posted on its web site and filed with the Illinois
Procurement Policy Board. Exceptions to this Section are
allowed for (i) sole source procurements, (ii) emergency
procurements, (iii) at the discretion of the pension fund,
retirement system, or board of investment, contracts that are
nonrenewable and one year or less in duration, so long as the
contract has a value of less than $20,000, and (iv) in the
discretion of the pension fund, retirement system, or
investment board, contracts for follow-on funds with the same
fund sponsor through closed-end funds. All exceptions granted
under this Section must be published on the system's, fund's,
or board's web site, shall name the person authorizing the
procurement, and shall include a brief explanation of the
reason for the exception.
A person, other than a trustee or an employee of a
retirement system, pension fund, or investment board, may not

HB3635 - 24 - LRB101 10783 RPS 55905 b
act as a consultant or investment adviser under this Section
unless that person is registered as an investment adviser under
the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
et seq.) or a bank, as defined in the federal Investment
Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
(c) Investment 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
or consultant and the board.
The contract shall include all of the following:
(1) Acknowledgement in writing by the investment
adviser or consultant that he or she is a fiduciary with
respect to the pension fund or retirement system.
(2) The description of the board's investment policy
and notice that the policy is subject to change.
(3) (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 consultant in connection with the provision
of services to the pension fund or retirement system and
(ii) a requirement that the consultant update the
disclosure promptly after a modification of those payments
or an additional payment.
(4) A requirement that the investment adviser or
consultant, in conjunction with the board's staff, submit
periodic written reports, on at least a quarterly basis,

HB3635 - 25 - LRB101 10783 RPS 55905 b
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.
(5) Disclosure of the names and addresses of (i) the
consultant or investment adviser; (ii) any entity that is a
parent of, or owns a controlling interest in, the
consultant or investment adviser; (iii) any entity that is
a subsidiary of, or in which a controlling interest is
owned by, the consultant or investment adviser; (iv) any
persons who have an ownership or distributive income share
in the consultant or investment adviser that is in excess
of 7.5%; or (v) serves as an executive officer of the
consultant or investment adviser.
(6) A disclosure of the names and addresses of all
subcontractors, if applicable, and the expected amount of
money each will receive under the contract, including an
acknowledgment that the contractor must promptly make
notification, in writing, if at any time during the term of
the contract a contractor adds or changes any
subcontractors. For purposes of this subparagraph (6),
"subcontractor" does not include non-investment related
professionals or professionals offering services that are
not directly related to the investment of assets, such as
legal counsel, actuary, proxy-voting services, services
used to track compliance with legal standards, and

HB3635 - 26 - LRB101 10783 RPS 55905 b
investment fund of funds where the board has no direct
contractual relationship with the investment advisers or
partnerships.
(7) A description of service to be performed.
(8) A description of the need for the service.
(9) A description of the plan for post-performance
review.
(10) A description of the qualifications necessary.
(11) The duration of the contract.
(12) The method for charging and measuring cost.
(d) Notwithstanding any other provision of law, a
retirement system, pension fund, or investment board subject to
this Code, except those under Article 3 or 4 whose investments
are restricted by Section 1-113.2 of this Code, shall not enter
into a contract with a consultant that exceeds 5 years in
duration. No contract to provide consulting services may be
renewed or extended. At the end of the term of a contract,
however, the consultant is eligible to compete for a new
contract as provided in this Section. No retirement system,
pension fund, or investment board shall attempt to avoid or
contravene the restrictions of this subsection (d) by any
means.
(e) Within 60 days after the effective date of this
amendatory Act of the 96th General Assembly, each investment
adviser or consultant currently providing services or subject
to an existing contract for the provision of services must

HB3635 - 27 - LRB101 10783 RPS 55905 b
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. The person shall update the disclosure
promptly after a modification of those payments or an
additional payment. The disclosures required by this
subsection (e) 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.
(f) The retirement system, pension fund, or board of
investment shall develop uniform documents that shall be used
for the solicitation, review, and acceptance of all investment
services. The form shall include the terms contained in
subsection (c) of this Section. All such uniform documents
shall be posted on the retirement system's, pension fund's, or
investment board's web site.
(g) A description of every contract for investment services
shall be posted in a conspicuous manner on the web site of the
retirement system, pension fund, or investment board. The
description must include the name of the person or entity
awarded a contract, the total amount applicable to the
contract, the total fees paid or to be paid, and a disclosure
approved by the board describing the factors that contributed
to the selection of an investment adviser or consultant.

HB3635 - 28 - LRB101 10783 RPS 55905 b
(Source: P.A. 98-433, eff. 8-16-13.)
(40 ILCS 5/1-113.16)
Sec. 1-113.16. Investment transparency.
(a) The purpose of this Section is to provide for
transparency in the investment of retirement or pension funds
and require the reporting of full and complete information
regarding the investments by pension funds, retirement
systems, and investment boards.
(b) A retirement system, pension fund, or investment board
subject to this Code and any committees established by such
system, fund, or board must comply with the Open Meetings Act.
(c) Any retirement system, pension fund, or investment
board subject to this Code that establishes a committee shall
ensure that the majority of the members on such committee are
board members. If any member of a committee is not a member of
the board for the system, fund, or board, then that committee
member shall be a fiduciary.
(d) A retirement system, pension fund, or investment board
subject to this Code, except those under Article 3 or 4 whose
investments are restricted by Section 1-113.2, shall maintain
an official web site and make available in a clear and
conspicuous manner, and update at least quarterly, all of the
following information concerning the investment of funds:
(1) The total amount of funds held by the pension fund,
retirement system, or investment board.

HB3635 - 29 - LRB101 10783 RPS 55905 b
(2) The asset allocation for the investments made by
the pension fund, retirement system, or investment board.
(3) Current and historic return information.
(4) A detailed listing of the investment advisers for
all asset classes.
(5) Performance of investments compared against
established benchmarks.
(6) A detailed list of all consultants doing business
with the retirement system, pension fund, or investment
board.
(7) A detailed list of all contractors, other than
investment advisers and consultants, doing business with
the retirement system, pension fund, or investment board.
(8) Any requests for investment services.
(9) The names and email addresses of all board members,
directors, and senior staff.
(10) The report required under Section 1-109.1 of this
Code, if applicable.
(11) The description of each contract required under
subsection (g) of Section 1-113.14 of this Code, if
applicable.
(e) A pension fund under Article 3 or 4 whose investments
are restricted by Section 1-113.2 of this Code shall make the
information required in subsection (d) of this Section
available on its web site or in a location that allows the
information to be available for inspection by the public.

HB3635 - 30 - LRB101 10783 RPS 55905 b
(f) Nothing in this Section requires the pension fund,
retirement system, or investment board to make information
available on the Internet that is exempt from inspection and
copying under the Freedom of Information Act.
(Source: P.A. 96-6, eff. 4-3-09.)
(40 ILCS 5/1-113.20)
Sec. 1-113.20. Investment strategies; explicit and
implicit costs. Every pension fund, retirement system, and
investment board created under this Code, except those under
Article 3 or 4 whose investments are restricted by Section
1-113.2 of this Code, shall instruct the fund's, system's, or
board's investment advisors to utilize investment strategies
designed to ensure that all securities transactions are
executed in such a manner that the total explicit and implicit
costs and total proceeds in every transaction are the most
favorable under the circumstances.
(Source: P.A. 96-753, eff. 8-25-09.)
(40 ILCS 5/1-150)
Sec. 1-150. Approval of travel or educational mission. The
expenses for travel or educational missions of a board member
of a retirement system, pension fund, or investment board
created under this Code, except those under Article 3 or 4
whose investments are restricted by Section 1-113.2 of this
Code, must be approved by a majority of the board prior to the

HB3635 - 31 - LRB101 10783 RPS 55905 b
travel or educational mission.
(Source: P.A. 96-6, eff. 4-3-09.)
(40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128)
Sec. 4-128. To invest funds. The board shall invest funds
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 Beginning January 1, 1998, the board shall
invest funds in accordance with Sections 1-113.1 through
1-113.10 of this Code.
(Source: P.A. 90-507, eff. 8-22-97.)
Section 99. Effective date. This Act takes effect upon
becoming law.