SB-0847, As Passed Senate, January 17, 2008
SENATE BILL NO. 847
A bill to amend 1965 PA 314, entitled
"Public employee retirement system investment act,"
by amending section 13 (MCL 38.1133), as amended by 2000 PA 307.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 13. (1) The provisions of this act shall supersede any
investment authority previously granted to a system under any other
law of this state.
(2) The assets of a system may be invested, reinvested, held
in nominee form, and managed by an investment fiduciary subject to
the terms, conditions, and limitations provided in this act. An
investment fiduciary of a defined contribution plan may arrange for
1 or more investment options to be directed by the participants of
the defined contribution plan. The limitations on the percentage of
total assets for investments provided in this act do not apply to a
defined contribution plan in which a participant directs the
investment of the assets in his or her individual account, and that
participant is not considered an investment fiduciary under this
(3) An investment fiduciary shall discharge his or her duties
solely in the interest of the participants and the beneficiaries,
and shall do all of the following:
(a) Act with the same care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person
acting in a similar capacity and familiar with those matters would
use in the conduct of a similar enterprise with similar aims.
(b) Act with due regard for the management, reputation, and
stability of the issuer and the character of the particular
investments being considered.
(c) Make investments for the exclusive purposes of providing
benefits to participants and participants' beneficiaries, and of
defraying reasonable expenses of investing the assets of the
(d) Give appropriate consideration to those facts and
circumstances that the investment fiduciary knows or should know
are relevant to the particular investment or investment course of
action involved, including the role the investment or investment
course of action plays in that portion of the system's investments
for which the investment fiduciary has responsibility; and act
accordingly. For purposes of this subsection, "appropriate
consideration" includes, but is not limited to, a determination by
the investment fiduciary that a particular investment or investment
course of action is reasonably designed, as part of the investments
of the system, to further the purposes of the system, taking into
consideration the risk of loss and the opportunity for gain or
other return associated with the investment or investment course of
action; and consideration of the following factors as they relate
to the investment or investment course of action:
(i) The diversification of the investments of the system.
(ii) The liquidity and current return of the investments of the
system relative to the anticipated cash flow requirements of the
(iii) The projected return of the investments of the system
relative to the funding objectives of the system.
(e) Give appropriate consideration to investments that would
enhance the general welfare of this state and its citizens if those
investments offer the safety and rate of return comparable to other
investments permitted under this act and available to the
investment fiduciary at the time the investment decision is made.
(f) Prepare and maintain written objectives, policies, and
strategies with clearly defined accountability and responsibility
for implementing and executing the system's investments.
(g) Monitor the investment of the system's assets with regard
to the limitations on those investments pursuant to this act. Upon
discovery that an investment causes the system to exceed a
limitation prescribed in this act, the investment fiduciary shall
reallocate assets in a prudent manner in order to comply with the
(4) An investment fiduciary who is an investment fiduciary of
any of the following shall comply with the divestment from terror
act in making investments under this act:
(a) The Tier 1 retirement plan available under the state
employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69.
(b) The Tier 1 retirement plan available under the judges
retirement act of 1992, 1992 PA 234, MCL 38.2101 to 38.2670.
(c) The state police retirement system created under the state
police retirement act of 1986, 1986 PA 182, MCL 38.1601 to 38.1648.
(d) The public school employees retirement system created
under the public school employees retirement act of 1979, 1980 PA
300, MCL 38.1301 to 38.1408.
An investment fiduciary may use a
portion of the
income of the system to defray the costs of investing, managing,
and protecting the assets of the system; may retain investment and
all other services necessary for the conduct of the affairs of the
system; and may pay reasonable compensation for those services.
Subject to an annual appropriation by the legislature, a deduction
from the income of a state administered system resulting from the
payment of those costs shall be made.
The system shall be a separate and
distinct trust fund
and the assets of the system shall be for the exclusive benefit of
the participants and their beneficiaries and of defraying
reasonable expenses of investing the assets of the system. With
respect to a system, an investment fiduciary shall not cause the
system to engage in a transaction if he or she knows or should know
that the transaction is any of the following, either directly or
(a) A sale or exchange or a leasing of any property from the
system to a party in interest for less than the fair market value,
or from a party in interest to the system for more than the fair
(b) A lending of money or other extension of credit from the
system to a party in interest without the receipt of adequate
security and a reasonable rate of interest, or from a party in
interest to the system with the provision of excessive security or
at an unreasonably high rate of interest.
(c) A transfer to, or use by or for the benefit of, the
political subdivision sponsoring the system of any assets of the
system for less than adequate consideration.
(d) The furnishing of goods, services, or facilities from the
system to a party in interest for less than adequate consideration,
or from a party in interest to the system for more than adequate
With respect to a system subject to
this act, an
investment fiduciary shall not do any of the following:
(a) Deal with the assets of the system in his or her own
interest or for his or her own account.
(b) In his or her individual or any other capacity act in any
transaction involving the system on behalf of a party whose
interests are adverse to the interests of the system or the
interest of its participants or participants' beneficiaries.
(c) Receive any consideration for his or her own personal
account from any party dealing with the system in connection with a
transaction involving the assets of the system.
This section does not prohibit an
from doing any of the following:
(a) Receiving any benefit to which he or she may be entitled
as a participant or participant's beneficiary of the system.
(b) Receiving any reimbursement of expenses properly and
actually incurred in the performance of his or her duties for the
(c) Serving as an investment fiduciary in addition to being an
officer, employee, agent, or other representative of the political
subdivision sponsoring the system.
(d) Receiving agreed upon compensation for services from the
Except for an employee of a system,
this state, or the
political subdivision sponsoring a system, when acting in the
capacity as an investment fiduciary, an investment fiduciary who is
qualified under section 12c(1)(b) shall meet 1 of the following
(a) Be a registered investment adviser under either the
advisers act of 1940,
title II of chapter 686, 54 Stat. 847,
15 U.S.C. USC 80b-1
to 80b-21, or the uniform securities act,
1964 PA 265, MCL 451.501 to 451.818.
(b) Be a bank as defined under the investment advisers act of
(c) Be an insurance company qualified under section 16(3).
An investment fiduciary shall not
invest in a debt
instrument issued by a foreign country that has been identified by
the United States state department as engaging in or sponsoring
A system shall annually publish and
to the plan participants and beneficiaries a list of all expenses
paid by soft dollars.
Enacting section 1. This amendatory act does not take effect
unless Senate Bill No. 846 of the 94th Legislature is enacted into