REFORMING PUBLIC PENSION SYSTEMS SB364 (Cullerton/Madigan)

REFORMING PUBLIC PENSION SYSTEMS – SB364 (Cullerton/Madigan)

1)Every board member of a public retirement system or pension fund must file a statement of economic interest.

2)Every board member of a public retirement system or pension fund will be governed by our Ethics Act

Currently: only “appointed” members are governed, not elected participants—now, everyone covered
In addition to ethics training under our Act, required to do 8 additional hours of ethics training annually

3)“Consultants” will have fiduciary duty (these are people who help select investment managers or recommend investment strategy)

4)Emerging Investment Managers / Diversity:

Expand definition of emerging investors: (i) include disabled and (ii) must manage between $10mill and $10 bill. (now $2 bill.)
All systems and funds (except downstate police & fire) must adopt policies to increasediversity of its fiduciaries (investment mgrs, minority-broker dealers, consultants, senior staff) and contracts in general
Annual reports detailing policies, goals, and steps taken to increase diversity and minority participation.

5)Conflicts of Interest: Members and employees cannot:

advocate investment through an investment advisor if have direct interest/relationship with that advisor
knowingly have financial interest in investment decision (exception: mutual funds, passive investments)

6)Investment advisors, consultants must be registered under federal Investment Advisors Act (except downstate police/fire)

7)Investment advisers, consultants will be selected by competitive process (substantially similar to the process to select professional, artistic services in Procurement Code)

8)Transparency

Investment advisors, consultants: Written contracts disclosing fees, commissions, affiliates, sub-contractors
Websites: Post list of (i) fiduciaries; (ii) all funds and total assets; (iii) budget, income and expenditures; (iv) contracts; (v) RFP’s and other procurement solicitations. (Not applicable to downstate police, fire unless have website; if no website, must make all this information publicly available.)

9)Ban on Gifts from people seeking business or official action from Board.

(i) Same gift ban as ours—exceptno gifts oftravel; (ii) Board can opt to pay travel costs by majority vote

10)Ban on contingent and placement fees. No entity promoting an investment can be paid on contingent-fee basis.

11)End the terms of the current gubernatorial appointees to TRS, SURS, SERS and ISBI

must nominate new appointees within 60 days (subj. to advice & consent of Senate)
current members of SURS & SERS may hold over no longer than 90 days (when new board is formed)
ISBI TRS appointees can hold over no longer than 60 days (amount of time Governor has to nominate)
Executive Director of TRS will be terminated within 90 days (July 1, 2009)

12)Re-constitute several current systems and boards as follows:

System / Current Board / New Board
Teachers Retirement System
Board changes immediately / Board of 11 trustees as follows:

Superintendent of Education, Chairman;
4 trustees appointed by the Governor, who are not members of the system, who shall not hold an elected state office;
4 trustees who are active participants, who are teachers, elected by active participants who are teachers; and
2 annuitant trustees elected by annuitants

/ Board of 13 trustees:

Superintendent of Education shall be Chairman;
6 trustees appointed by the Governor, who are not members of the system, who shall not hold an elected state office;
4 trustees who are active participants, who are teachers, elected by active participants who are teachers; and
2 annuitant trustees elected by annuitants

Termination of current Executive Director
State Universities Retirement System
Board changes in 90 days (due to elections) / Board of 9 trustees as follows:

2 trustees appointed by the Governor who are active participants
2 trustees appointed by the Governor who are annuitants
5 trustees appointed by the Governor who need not be participants or annuitants of the system

/ Board of 11 trustees as follows:

Chair of Higher Education serves as Chair
4 trustees appointed by the Governor, who are not members of the system, who shall not hold an elected state office
4 trustees who are active participants elected by active participants (max. 2 from U of I)
2 annuitant trustees elected by annuitants (max. 1 from U of I)

State Employees Retirement System
Board changes in 90 days (due to elections) / Board of 7 trustees as follows:

the Director of the GOMB
the State Comptroller
1 trustee appointed by the Governor, who is not a state employee, who shall be Chairman;
1 trustee who is an active participant appointed by the Governor having at least 8 years of creditable service
1 trustee who is an annuitant appointed by the Governor who is age 60 or over
1 trustee who is an active participant, having at least 8 years of creditable service, elected by active participants
1 trustee who is an annuitant, who has been an annuitant for at least one full year, elected by annuitants

/ Board of 13 trustees as follows:

the State Comptroller serves as Chair
6 trustees appointed by the Governor, who are not members of the system, who shall not hold an elected office
4 trustees who are active participants, having at least 8 years of creditable service, elected by active participants
2 annuitants, who has been an annuitant for at least one full year, elected by annuitants

Illinois State Board of Investment
Board changes immediately / Board of 5 trustees as follows:

5 members appointed by the Governor, one shall be age 60 or over

The following serve as ex-officio members:

the State Treasurer
the Chairman of the State Employees’ Retirement System
the Chairman of the Judges’ Retirement System
the Chairman of the General Assembly Retirement System

/ Board of 9 trustees as follows:

5 trustees appointed by the Governor

the State Treasurer
the Chairman of the State Employees’ Retirement System (Comptroller)
the Chairman of the Judges’ Retirement System

the Chairman of the General Assembly Retirement System