HOUSE BILL No. 5760

 

April 1, 2004, Introduced by Rep. Koetje and referred to the Committee on Commerce.

        

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                 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:                      

                                                                                

1       Sec. 13.  (1)  The provisions of this  This act  shall                      

                                                                                

2   supersede  supersedes any investment authority previously granted           

                                                                                

3   to a system under any other law of this state.                              

                                                                                

4       (2) The assets of a system may be invested, reinvested, held                

                                                                                

5   in nominee form, and managed by an investment fiduciary subject             

                                                                                

6   to the terms, conditions, and limitations provided in this act.             

                                                                                

7   An investment fiduciary of a defined contribution plan may                  

                                                                                

8   arrange for 1 or more investment options to be directed by the              

                                                                                

9   participants of the defined contribution plan.  The limitations             

                                                                                

10  on the percentage of total assets for investments provided in               

                                                                                

11  this act do not apply to a defined contribution plan in which a             

                                                                                


                                                                                

1   participant directs the investment of the assets in his or her              

                                                                                

2   individual account, and that participant is not considered an               

                                                                                

3   investment fiduciary under this act.                                        

                                                                                

4       (3) An investment fiduciary shall discharge his or her                      

                                                                                

5   duties solely in the interest of the participants and the                   

                                                                                

6   beneficiaries, and shall do all of the following:                           

                                                                                

7       (a) Act with the same care, skill, prudence, and diligence                  

                                                                                

8   under the circumstances then prevailing that a prudent person               

                                                                                

9   acting in a similar capacity and familiar with those matters                

                                                                                

10  would use in the conduct of a similar enterprise with similar               

                                                                                

11  aims.                                                                       

                                                                                

12      (b) Act with due regard for the management, reputation, and                 

                                                                                

13  stability of the issuer and the character of the particular                 

                                                                                

14  investments being considered.                                               

                                                                                

15      (c) Make investments for the exclusive purposes of providing                

                                                                                

16  benefits to participants and participants' beneficiaries, and of            

                                                                                

17  defraying reasonable expenses of investing the assets of the                

                                                                                

18  system.                                                                     

                                                                                

19      (d) Give appropriate consideration to those facts and                       

                                                                                

20  circumstances that the investment fiduciary knows or should know            

                                                                                

21  are relevant to the particular investment or investment course of           

                                                                                

22  action involved, including the role the investment or investment            

                                                                                

23  course of action plays in that portion of the system's                      

                                                                                

24  investments for which the investment fiduciary has                          

                                                                                

25  responsibility; and act accordingly.  For purposes of this                  

                                                                                

26  subsection, "appropriate consideration" includes, but is not                

                                                                                

27  limited to, a determination by the investment fiduciary that a              


                                                                                

1   particular investment or investment course of action is                     

                                                                                

2   reasonably designed, as part of the investments of the system, to           

                                                                                

3   further the purposes of the system, taking into consideration the           

                                                                                

4   risk of loss and the opportunity for gain or other return                   

                                                                                

5   associated with the investment or investment course of action;              

                                                                                

6   and consideration of the following factors as they relate to the            

                                                                                

7   investment or investment course of action:                                  

                                                                                

8                                                                                (i) The diversification of the investments of the system.                           

                                                                                

9       (ii) The liquidity and current return of the investments of                  

                                                                                

10  the system relative to the anticipated cash flow requirements of            

                                                                                

11  the system.                                                                 

                                                                                

12      (iii) The projected return of the investments of the system                  

                                                                                

13  relative to the funding objectives of the system.                           

                                                                                

14      (e) Give appropriate consideration to investments that would                

                                                                                

15  enhance the general welfare of this state and its citizens if               

                                                                                

16  those investments offer the safety and rate of return comparable            

                                                                                

17  to other investments permitted under this act and available to              

                                                                                

18  the investment fiduciary at the time the investment decision is             

                                                                                

19  made.                                                                       

                                                                                

20      (f) Prepare and maintain written objectives, policies, and                  

                                                                                

21  strategies with clearly defined accountability and responsibility           

                                                                                

22  for implementing and executing the system's investments.                    

                                                                                

23      (g) Monitor the investment of the system's assets with                      

                                                                                

24  regard to the limitations on those investments pursuant to this             

                                                                                

25  act.  Upon discovery that an investment causes the system to                

                                                                                

26  exceed a limitation prescribed in this act, the investment                  

                                                                                

27  fiduciary shall reallocate assets in a prudent manner in order to           


                                                                                

1   comply with the prescribed limitation.                                      

                                                                                

2       (4) An investment fiduciary may use a portion of the income                 

                                                                                

3   of the system to defray the costs of investing, managing, and               

                                                                                

4   protecting the assets of the system; may retain investment and              

                                                                                

5   all other services necessary for the conduct of the affairs of              

                                                                                

6   the system; and may pay reasonable compensation for those                   

                                                                                

7   services.  Subject to an annual appropriation by the legislature,           

                                                                                

8   a deduction from the income of a state administered system                  

                                                                                

9   resulting from the payment of those costs shall be made.                    

                                                                                

10      (5) The system shall be a separate and distinct trust fund                  

                                                                                

11  and the assets of the system shall be for the exclusive benefit             

                                                                                

12  of the participants and their beneficiaries and of defraying                

                                                                                

13  reasonable expenses of investing the assets of the system.  With            

                                                                                

14  respect to a system, an investment fiduciary shall not cause the            

                                                                                

15  system to engage in a transaction if he or she knows or should              

                                                                                

16  know that the transaction is any of the following, either                   

                                                                                

17  directly or indirectly:                                                     

                                                                                

18      (a) A sale or exchange or a leasing of any property from the                

                                                                                

19  system to a party in interest for less than the fair market                 

                                                                                

20  value, or from a party in interest to the system for more than              

                                                                                

21  the fair market value.                                                      

                                                                                

22      (b) A lending of money or other extension of credit from the                

                                                                                

23  system to a party in interest without the receipt of adequate               

                                                                                

24  security and a reasonable rate of interest, or from a party in              

                                                                                

25  interest to the system with the provision of excessive security             

                                                                                

26  or at an unreasonably high rate of interest.                                

                                                                                

27      (c) A transfer to, or use by or for the benefit of, the                     


                                                                                

1   political subdivision sponsoring the system of any assets of the            

                                                                                

2   system for less than adequate consideration.                                

                                                                                

3       (d) The furnishing of goods, services, or facilities from                   

                                                                                

4   the system to a party in interest for less than adequate                    

                                                                                

5   consideration, or from a party in interest to the system for more           

                                                                                

6   than adequate consideration.                                                

                                                                                

7       (6) With respect to a system subject to this act, an                        

                                                                                

8   investment fiduciary shall not do any of the following:                     

                                                                                

9       (a) Deal with the assets of the system in his or her own                    

                                                                                

10  interest or for his or her own account.                                     

                                                                                

11      (b) In his or her individual or any other capacity act in                   

                                                                                

12  any transaction involving the system on behalf of a party whose             

                                                                                

13  interests are adverse to the interests of the system or the                 

                                                                                

14  interest of its participants or participants' beneficiaries.                

                                                                                

15      (c) Receive any consideration for his or her own personal                   

                                                                                

16  account from any party dealing with the system in connection with           

                                                                                

17  a transaction involving the assets of the system.                           

                                                                                

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

                                                                                

19  from doing any of the following:                                            

                                                                                

20      (a) Receiving any benefit to which he or she may be entitled                

                                                                                

21  as a participant or participant's beneficiary of the system.                

                                                                                

22      (b) Receiving any reimbursement of expenses properly and                    

                                                                                

23  actually incurred in the performance of his or her duties for the           

                                                                                

24  system.                                                                     

                                                                                

25      (c) Serving as an investment fiduciary in addition to being                 

                                                                                

26  an officer, employee, agent, or other representative of the                 

                                                                                

27  political subdivision sponsoring the system.                                


                                                                                

1       (d) Receiving agreed upon compensation for services from the                

                                                                                

2   system.                                                                     

                                                                                

3       (8) Except for an employee of a system, this state, or the                  

                                                                                

4   political subdivision sponsoring a system, when acting in the               

                                                                                

5   capacity as an investment fiduciary, an investment fiduciary who            

                                                                                

6   is qualified under section 12c(1)(b) shall meet 1 of the                    

                                                                                

7   following requirements:                                                     

                                                                                

8       (a) Be a registered investment adviser under either the                     

                                                                                

9   investment advisers act of 1940,  title II of chapter 686, 54               

                                                                                

10  Stat. 847,  15  U.S.C.  USC 80b-1 to 80b-21,  or  the uniform               

                                                                                

11  securities act, 1964 PA 265, MCL 451.501 to 451.818, or the                 

                                                                                

12  uniform securities act (2002), MCL 451.2101 to 451.2703.                    

                                                                                

13      (b) Be a bank as defined under the investment advisers act                  

                                                                                

14  of 1940, 15 USC 80b-1 to 80b-21.                                            

                                                                                

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

                                                                                

16      (9) An investment fiduciary shall not invest in a debt                      

                                                                                

17  instrument issued by a foreign country that has been identified             

                                                                                

18  by the United States state department as engaging in or                     

                                                                                

19  sponsoring terrorism.                                                       

                                                                                

20      (10) A system shall annually publish and make available to                  

                                                                                

21  the plan participants and beneficiaries a list of all expenses              

                                                                                

22  paid by soft dollars.                                                       

                                                                                

23      Enacting section 1.  This amendatory act does not take                      

                                                                                

24  effect unless Senate Bill No. _____ or House Bill No. 5746                  

                                                                                

25  (request no. 06004'03) of the 92nd Legislature is enacted into              

                                                                                

26  law.