SB-0847, As Passed Senate, January 17, 2008

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

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

 

act.

 

     (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

 

system.

 

     (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

 

system.

 

     (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

 

prescribed limitation.

 


     (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.

 

     (5) (4) 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.

 

     (6) (5) 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

 


indirectly:

 

     (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

 

market value.

 

     (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

 

consideration.

 

     (7) (6) 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.

 

     (8) (7) This section does not prohibit an investment fiduciary

 

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

 

system.

 

     (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

 

system.

 

     (9) (8) 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

 

requirements:

 

     (a) Be a registered investment adviser under either the

 

investment 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

 

1940.

 

     (c) Be an insurance company qualified under section 16(3).

 

     (10) (9) 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

 

terrorism.

 

     (11) (10) A system shall annually publish and make available

 

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

 

law.