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| Public Act 102-0118
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| HB0232 Enrolled | LRB102 05177 RPS 15198 b |
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AN ACT concerning public employee benefits.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The Illinois Pension Code is amended by |
changing Section 1-110.16 and by adding Section 1-110.17 as |
follows:
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(40 ILCS 5/1-110.16) |
Sec. 1-110.16. Transactions prohibited by retirement |
systems; companies that boycott Israel, for-profit companies |
that contract to shelter migrant children, Iran-restricted |
companies, Sudan-restricted companies, and expatriated |
entities. |
(a) As used in this Section: |
"Boycott Israel" means engaging in actions that are |
politically motivated and are intended to penalize, |
inflict economic harm on, or otherwise limit commercial |
relations with the State of Israel or companies based in |
the State of Israel or in territories controlled by the |
State of Israel. |
"Company" means any sole proprietorship, organization, |
association, corporation, partnership, joint venture, |
limited partnership, limited liability partnership, |
limited liability company, or other entity or business |
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association, including all wholly owned subsidiaries, |
majority-owned subsidiaries, parent companies, or |
affiliates of those entities or business associations, |
that exist for the purpose of making profit. |
"Contract to shelter migrant children" means entering |
into a contract with the federal government to shelter |
migrant children under the federal Unaccompanied Alien |
Children Program or a substantially similar federal |
program. |
"Illinois Investment Policy Board" means the board |
established under subsection (b) of this Section. |
"Direct holdings" in a company means all publicly |
traded securities of that company that are held directly |
by the retirement system in an actively managed account or |
fund in which the retirement system owns all shares or |
interests. |
"Expatriated entity" has the meaning ascribed to it in |
Section 1-15.120 of the Illinois Procurement Code. |
"Indirect holdings" in a company means all securities |
of that company that are held in an account or fund, such |
as a mutual fund, managed by one or more persons not |
employed by the retirement system, in which the retirement |
system owns shares or interests together with other |
investors not subject to the provisions of this Section or |
that are held in an index fund. |
"Iran-restricted company" means a company that meets |
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the qualifications under Section 1-110.15 of this Code. |
"Private market fund" means any private equity fund, |
private equity funds of funds, venture capital fund, hedge |
fund, hedge fund of funds, real estate fund, or other |
investment vehicle that is not publicly traded. |
"Restricted companies" means companies that boycott |
Israel, for-profit companies that contract to shelter |
migrant children, Iran-restricted companies, |
Sudan-restricted companies, and expatriated entities. |
"Retirement system" means a retirement system |
established under Article 2, 14, 15, 16, or 18 of this Code |
or the Illinois State Board of Investment. |
"Sudan-restricted company" means a company that meets |
the qualifications under Section 1-110.6 of this Code. |
(b) There shall be established an Illinois Investment |
Policy Board. The Illinois Investment Policy Board shall |
consist of 7 members. Each board of a pension fund or |
investment board created under Article 15, 16, or 22A of this |
Code shall appoint one member, and the Governor shall appoint |
4 members. |
(c) Notwithstanding any provision of law to the contrary, |
beginning January 1, 2016, Sections 110.15 and 1-110.6 of this |
Code shall be administered in accordance with this Section. |
(d) By April 1, 2016, the Illinois Investment Policy Board |
shall make its best efforts to identify all Iran-restricted |
companies, Sudan-restricted companies, and companies that |
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boycott Israel and assemble those identified companies into a |
list of restricted companies, to be distributed to each |
retirement system. |
These efforts shall include the following, as appropriate |
in the Illinois Investment Policy Board's judgment: |
(1) reviewing and relying on publicly available |
information regarding Iran-restricted companies, |
Sudan-restricted companies, and companies that boycott |
Israel, including information provided by nonprofit |
organizations, research firms, and government entities; |
(2) contacting asset managers contracted by the |
retirement systems that invest in Iran-restricted |
companies, Sudan-restricted companies, and companies that |
boycott Israel; |
(3) contacting other institutional investors that have |
divested from or engaged with Iran-restricted companies, |
Sudan-restricted companies, and companies that boycott |
Israel; and |
(4) retaining an independent research firm to identify |
Iran-restricted companies, Sudan-restricted companies, |
and companies that boycott Israel. |
The Illinois Investment Policy Board shall review the list |
of restricted companies on a quarterly basis based on evolving |
information from, among other sources, those listed in this |
subsection (d) and distribute any updates to the list of |
restricted companies to the retirement systems and the State |
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Treasurer. |
By April 1, 2018, the Illinois Investment Policy Board |
shall make its best efforts to identify all expatriated |
entities and include those companies in the list of restricted |
companies distributed to each retirement system and the State |
Treasurer. These efforts shall include the following, as |
appropriate in the Illinois Investment Policy Board's |
judgment: |
(1) reviewing and relying on publicly available |
information regarding expatriated entities, including |
information provided by nonprofit organizations, research |
firms, and government entities; |
(2) contacting asset managers contracted by the |
retirement systems that invest in expatriated entities; |
(3) contacting other institutional investors that have |
divested from or engaged with expatriated entities; and |
(4) retaining an independent research firm to identify |
expatriated entities. |
By July 1, 2022, the Illinois Investment Policy Board |
shall make its best efforts to identify all for-profit |
companies that contract to shelter migrant children and |
include those companies in the list of restricted companies |
distributed to each retirement system. These efforts shall |
include the following, as appropriate in the Illinois |
Investment Policy Board's judgment: |
(1) reviewing and relying on publicly available |
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information regarding for-profit companies that contract |
to shelter migrant children, including information |
provided by nonprofit organizations, research firms, and |
government entities; |
(2) contacting asset managers contracted by the |
retirement systems that invest in for-profit companies |
that contract to shelter migrant children; |
(3) contacting other institutional investors that have |
divested from or engaged with for-profit companies that |
contract to shelter migrant children; and |
(4) retaining an independent research firm to identify |
for-profit companies that contract to shelter migrant |
children. |
(e) The Illinois Investment Policy Board shall adhere to |
the following procedures for companies on the list of |
restricted companies: |
(1) For each company newly identified in subsection |
(d), the Illinois Investment Policy Board shall send a |
written notice informing the company of its status and |
that it may become subject to divestment or shareholder |
activism by the retirement systems. |
(2) If, following the Illinois Investment Policy |
Board's engagement pursuant to this subsection (e) with a |
restricted company, that company ceases activity that |
designates the company to be an Iran-restricted company, a |
Sudan-restricted company, a company that boycotts Israel, |
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or an expatriated entity, or a for-profit company that |
contracts to shelter migrant children, the company shall |
be removed from the list of restricted companies and the |
provisions of this Section shall cease to apply to it |
unless it resumes such activities. |
(f) Except as provided in subsection (f-1) of this Section |
the retirement system shall adhere to the following procedures |
for companies on the list of restricted companies: |
(1) The retirement system shall identify those |
companies on the list of restricted companies in which the |
retirement system owns direct holdings and indirect |
holdings. |
(2) The retirement system shall instruct its |
investment advisors to sell, redeem, divest, or withdraw |
all direct holdings of restricted companies from the |
retirement system's assets under management in an orderly |
and fiduciarily responsible manner within 12 months after |
the company's most recent appearance on the list of |
restricted companies. |
(3) The retirement system may not acquire securities |
of restricted companies. |
(4) The provisions of this subsection (f) do not apply |
to the retirement system's indirect holdings or private |
market funds. The Illinois Investment Policy Board shall |
submit letters to the managers of those investment funds |
containing restricted companies requesting that they |
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consider removing the companies from the fund or create a |
similar actively managed fund having indirect holdings |
devoid of the companies. If the manager creates a similar |
fund, the retirement system shall replace all applicable |
investments with investments in the similar fund in an |
expedited timeframe consistent with prudent investing |
standards. |
(f-1) The retirement system shall adhere to the following |
procedures for restricted companies that are expatriated |
entities or for-profit companies that contract to shelter |
migrant children: |
(1) To the extent that the retirement system believes |
that shareholder activism would be more impactful than |
divestment, the retirement system shall have the authority |
to engage with a restricted company prior to divesting. |
(2) Subject to any applicable State or Federal laws, |
methods of shareholder activism utilized by the retirement |
system may include, but are not limited to, bringing |
shareholder resolutions and proxy voting on shareholder |
resolutions. |
(3) The retirement system shall report on its |
shareholder activism and the outcome of such efforts to |
the Illinois Investment Policy Board by April 1 of each |
year. |
(4) If the engagement efforts of the retirement system |
are unsuccessful, then it shall adhere to the procedures |
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under subsection (f) of this Section. |
(g) Upon request, and by April 1 of each year, each |
retirement system shall provide the Illinois Investment Policy |
Board with information regarding investments sold, redeemed, |
divested, or withdrawn in compliance with this Section. |
(h) Notwithstanding any provision of this Section to the |
contrary, a retirement system may cease divesting from |
companies pursuant to subsection (f) if clear and convincing |
evidence shows that the value of investments in such companies |
becomes equal to or less than 0.5% of the market value of all |
assets under management by the retirement system. For any |
cessation of divestment authorized by this subsection (h), the |
retirement system shall provide a written notice to the |
Illinois Investment Policy Board in advance of the cessation |
of divestment, setting forth the reasons and justification, |
supported by clear and convincing evidence, for its decision |
to cease divestment under subsection (f). |
(i) The cost associated with the activities of the |
Illinois Investment Policy Board shall be borne by the boards |
of each pension fund or investment board created under Article |
15, 16, or 22A of this Code. |
(j) With respect to actions taken in compliance with this |
Section, including all good-faith determinations regarding |
companies as required by this Section, the retirement system |
and Illinois Investment Policy Board are exempt from any |
conflicting statutory or common law obligations, including any |
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fiduciary duties under this Article and any obligations with |
respect to choice of asset managers, investment funds, or |
investments for the retirement system's securities portfolios. |
(k) It is not the intent of the General Assembly in |
enacting this amendatory Act of the 99th General Assembly to |
cause divestiture from any company based in the United States |
of America. The Illinois Investment Policy Board shall |
consider this intent when developing or reviewing the list of |
restricted companies. |
(l) If any provision of this amendatory Act of the 99th |
General Assembly or its application to any person or |
circumstance is held invalid, the invalidity of that provision |
or application does not affect other provisions or |
applications of this amendatory Act of the 99th General |
Assembly that can be given effect without the invalid |
provision or application.
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(m) If any provision of Public Act 100-551 this amendatory |
Act of the 100th General Assembly or its application to any |
person or circumstance is held invalid, the invalidity of that |
provision or application does not affect other provisions or |
applications of Public Act 100-551 this amendatory Act of the |
100th General Assembly that can be given effect without the |
invalid provision or application. |
If any provision of this amendatory Act of the 102nd |
General Assembly or its application to any person or |
circumstance is held invalid, the invalidity of that provision |
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or application does not affect other provisions or |
applications of this amendatory Act of the 102nd General |
Assembly that can be given effect without the invalid |
provision or application. |
(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)
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(40 ILCS 5/1-110.17 new) |
Sec. 1-110.17. Expiration of prohibited transactions. If, |
at least 4 years after the effective date of an amendatory Act |
that initially establishes a prohibited transaction under this |
Article, the Illinois Investment Policy Board concludes that |
divestment is no longer necessary due to achievement of the |
underlying goals of the amendatory Act establishing the |
prohibited transaction, changes in status surrounding the |
prohibited transactions, or other verifiable reasons, the |
Illinois Investment Policy Board may cease actions to require |
divestment, identify restricted companies, or prohibit |
transactions by a majority vote of the Illinois Investment |
Policy Board if: (1) no less than one year prior to the change |
in policy, the Illinois Investment Policy Board notifies, in |
writing, the General Assembly of the change in policy and |
lists the reasons for changing the policy; and (2) the General |
Assembly does not, before the change in policy, adopt a House |
Resolution or a Senate Resolution instructing the Illinois |
Investment Policy Board to not change the policy.
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