Bill Text: IL SB1108 | 2019-2020 | 101st General Assembly | Introduced

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Bill Title: 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 24 months after 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.

Spectrum: Bipartisan Bill

Status: (Failed) 2021-01-13 - Session Sine Die [SB1108 Detail]

Download: Illinois-2019-SB1108-Introduced.html

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101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 SB1108 Introduced 2/5/2019, by Sen. Steven M. Landek 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 24 months after 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.
LRB101 00264 RPS 45268 b
FISCAL NOTE ACT MAY APPLY PENSION IMPACT NOTE ACT MAY APPLY STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT
A BILL FOR
SB1108 LRB101 00264 RPS 45268 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 1-113.1, 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 101st 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

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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)

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Sec. 1-113.1. Investment authority of certain pension
funds established under Article 3 or 4.
(a) Beginning 24 months after the effective date of this
amendatory Act of the 101st 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

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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 24 months after the effective date of this
amendatory Act of the 101st 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

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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
certain pension funds with net assets of $2,500,000 or more.
(a) Beginning 24 months after the effective date of this
amendatory Act of the 101st 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:

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(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

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certain pension funds with net assets of $5,000,000 or more.
(a) Beginning 24 months after the effective date of this
amendatory Act of the 101st 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 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

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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.

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(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 certain Article 3 and 4 pension funds with net assets of
$10,000,000 or more.
(a) Beginning 24 months after the effective date of this
amendatory Act of the 101st 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.

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(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,

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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 24 months after the effective date of this
amendatory Act of the 101st 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

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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.

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(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

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(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)

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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,

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and thereafter in perpetuity, the Board of Trustees of the
Illinois Municipal Retirement Fund shall provide all
investment services for that eligible pension fund. Any fees
for these services shall be paid from the respective pension
funds.
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 24 months after the effective date of this
amendatory Act of the 101st 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

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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

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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

SB1108 - 22 - LRB101 00264 RPS 45268 b
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

SB1108 - 23 - LRB101 00264 RPS 45268 b
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 and upon the reasonable request of an eligible pension
fund, 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,

SB1108 - 24 - LRB101 00264 RPS 45268 b
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

SB1108 - 25 - LRB101 00264 RPS 45268 b
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.)

SB1108 - 26 - LRB101 00264 RPS 45268 b
(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 24 months after the effective date of this

SB1108 - 27 - LRB101 00264 RPS 45268 b
amendatory Act of the 101st 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 each 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.

SB1108 - 28 - LRB101 00264 RPS 45268 b
(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 and upon the reasonable request of an eligible pension
fund, 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.
(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:

SB1108 - 29 - LRB101 00264 RPS 45268 b
(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

SB1108 - 30 - LRB101 00264 RPS 45268 b
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

SB1108 - 31 - LRB101 00264 RPS 45268 b
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 24 months after the effective date of this
amendatory Act of the 101st 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

SB1108 - 32 - LRB101 00264 RPS 45268 b
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

SB1108 - 33 - LRB101 00264 RPS 45268 b
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
completion 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

SB1108 - 34 - LRB101 00264 RPS 45268 b
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 8.43 as follows:
(30 ILCS 805/8.43 new)
Sec. 8.43. 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 101st General Assembly.
SB1108 - 35 - LRB101 00264 RPS 45268 b
INDEX
Statutes amended in order of appearance
40 ILCS 5/1-101.6 new
40 ILCS 5/1-101.7 new
40 ILCS 5/1-113.05 new
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 5/1-113.5
40 ILCS 5/1-113.6
40 ILCS 5/1-113.7
40 ILCS 5/3-127 from Ch. 108 1/2, par. 3-127
40 ILCS 5/3-132 from Ch. 108 1/2, par. 3-132
40 ILCS 5/3-135 from Ch. 108 1/2, par. 3-135
40 ILCS 5/3-135.1 new
40 ILCS 5/3-135.2 new
40 ILCS 5/4-120 from Ch. 108 1/2, par. 4-120
40 ILCS 5/4-123 from Ch. 108 1/2, par. 4-123
40 ILCS 5/4-128 from Ch. 108 1/2, par. 4-128
40 ILCS 5/4-128.1 new
40 ILCS 5/4-128.2 new
40 ILCS 5/7-226 new
40 ILCS 5/7-227 new
SB1108 - 36 - LRB101 00264 RPS 45268 b