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PRINTER'S NO. 1215
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
982
Session of
2015
INTRODUCED BY TEPLITZ, SCHWANK, COSTA, YUDICHAK AND HUGHES,
AUGUST 25, 2015
REFERRED TO FINANCE, AUGUST 25, 2015
AN ACT
Amending Titles 24 (Education) and 71 (State Government) of the
Pennsylvania Consolidated Statutes, in retirement for school
employees, further providing for the Public School Employees'
Retirement Board, for administrative duties of board and for
management of fund and accounts; and, in retirement for State
employees and officers, further providing for the State
Employees' Retirement Board, for administrative duties of the
board and for management of fund and accounts.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Sections 8501(a) and 8502(b) and (e)(2) of Title
24 of the Pennsylvania Consolidated Statutes are amended and the
sections are amended by adding subsections to read:
§ 8501. Public School Employees' Retirement Board.
(a) Status and membership.--The board shall be an
independent administrative board and shall consist of 15
members: the Secretary of Education, ex officio; the State
Treasurer, ex officio; two Senators; two members of the House of
Representatives; the executive secretary of the Pennsylvania
School Boards Association, ex officio; two to be appointed by
the Governor, one of whom shall have investment expertise and at
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least one of whom shall not be a school employee or an officer
or employee of the State; three to be elected by the active
professional members of the system from among their number; one
to be elected by annuitants from among their number; one to be
elected by the active nonprofessional members of the system from
among their number; and one to be elected by members of
Pennsylvania public school boards from among their number. The
appointments made by the Governor shall be confirmed by the
Senate and each election shall be conducted in a manner approved
by the board. The terms of the appointed and nonlegislative
elected members shall be three years. The members from the
Senate shall be appointed by the President pro tempore of the
Senate and shall consist of one member from the majority and one
member from the minority. The members from the House of
Representatives shall be appointed by the Speaker of the House
of Representatives and shall consist of one member from the
majority and one member from the minority. The legislative
members shall serve on the board for the duration of their
legislative terms and shall continue to serve until 30 days
after the convening of the next regular session of the General
Assembly after the expiration of their respective legislative
terms or until a successor is appointed for the new term,
whichever occurs first. [The chairman of the board shall be
elected by the board members.] Each ex officio member of the
board and each legislative member of the board may appoint a
duly authorized designee to act in his stead.
(a.1) Chairman.--The members of the board shall elect a
chairman from among the members to serve for a fixed term of two
years. A chairman may be elected to serve successive terms.
* * *
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(f) Conflict of interest.--The board shall adopt a conflict
of interest policy and shall provide guidelines applicable to
members of the board to enable them to avoid any perceived or
actual conflict of interest. At a minimum, the policy shall:
(1) Identify the minimum amount of a campaign
contribution that, if made to a member of the board, would
present a potential conflict of interest.
(2) Establish the circumstances under which a member of
the board must publicly disclose a potential conflict of
interest, abstain from voting and disclose on the record the
nature of the potential conflict of interest.
(g) Training.--The board shall maintain a formal training
program for members. The training, at a minimum, shall include
basic, intermediate and advanced investment classes, to be
offered annually. The board shall maintain training records,
including documentation of class attendance and completion.
(h) Governing principles.--To ensure that the accountability
and authority for governance and management of the system is
clearly stated, the board shall formally adopt governing
principles to identify and distinguish among the roles of the
board, its committees and officers and employees of the board,
and shall post the adopted governing principles on its Internet
website.
§ 8502. Administrative duties of board.
* * *
(a.1) Secretary of the board.--In addition to other powers
and duties conferred upon and delegated to the secretary by the
board, for the purpose of assisting members in identifying
specific instances in which a member's vote may violate the
board's conflict of interest policy, the secretary of the board
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shall:
(1) Obtain copies of all campaign finance reports that
members who are elected public officials are required to file
with the Department of State.
(2) Require that the investment firm associated with an
investment consultant, advisor or counselor who provides
services to the board submit a disclosure statement each time
the consultant, advisor or counselor makes a presentation to
the board. The disclosure statement shall include an up-to-
date, comprehensive listing of campaign contributions made to
a member by a principal or employee of the investment firm
within the previous 10 years.
(b) Professional personnel.--The board shall contract for
the services of a chief medical examiner, an actuary, investment
advisors, counselors, an investment coordinator, and such other
professional personnel as it deems advisable. Each contract
shall include a provision requiring the annual submission of a
disclosure statement as set forth under subsection (a.1).
* * *
(e) Records.--
* * *
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment shall not
constitute a public record subject to public inspection under
the act of [June 21, 1957 (P.L.390, No.212), referred to]
February 14, 2008 (P.L.6, No.3), known as the Right-to-Know
Law, if, in the reasonable judgment of the board, the
inspection would:
(i) in the case of an alternative investment or
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alternative investment vehicle involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
vehicle which the fund was able to obtain only upon
agreeing to maintain its confidentiality;
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund, or would cause a breach of the standard
of care or fiduciary duty set forth in this part.
* * *
(n.1) Audit functions.--The board shall establish the
Internal Audit Office as an independent unit. The Internal Audit
Office shall report directly to the system's Executive Director
and the board's Audit and Budget Committee.
(n.2) Audit and Budget Committee.--The board's Audit and
Budget Committee shall:
(1) Ensure and maintain the independence of the internal
audit process.
(2) Ensure that no unjustified restrictions or
limitations are placed on the internal audit staff.
(3) Review the effectiveness of the internal audit
function, including compliance with the most recent standards
of the Institute of Internal Auditors.
(4) Modify the charter of the Internal Audit Office so
that it is consistent with the independence standards of the
Institute of Internal Auditors' Standards for the
Professional Practice of Internal Auditing.
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* * *
Section 2. Section 8521(a) of Title 24 is amended to read:
§ 8521. Management of fund and accounts.
(a) Control and management of fund.--The members of the
board shall be the trustees of the fund. Regardless of any other
provision of law governing the investments of funds under the
control of an administrative board of the State government, the
trustees shall have exclusive control and management of the said
fund and full power to invest the same, in accordance with the
provisions of this section, subject, however, to the [exercise
of that degree of judgment, skill and care under the
circumstances then prevailing which persons of prudence,
discretion and intelligence who are familiar with such matters
exercise in the management of their own affairs not in regard to
speculation, but in regard to the permanent disposition of the
fund, considering the probable income to be derived therefrom as
well as the probable safety of their capital. The trustees shall
have the power to hold, purchase, sell, lend, assign, transfer,
or dispose of any of the securities and investments in which any
of the moneys in the fund shall have been invested as well as of
the proceeds of said investments, including any directed
commissions which have accrued to the benefit of the fund as a
consequence of the investments, and of any moneys belonging to
said fund, subject in every case to meeting the standard of
prudence set forth in this subsection.] prudent investor
provisions of 20 Pa.C.S. § 7203 (relating to prudent investor
rule).
Section 3. Section 5901(a) of Title 71 is amended and the
section is amended by adding subsections to read:
§ 5901. The State Employees' Retirement Board.
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(a) Status and membership.--The board shall be an
independent administrative board and consist of 11 members: the
State Treasurer, ex officio, two Senators, two members of the
House of Representatives and six members appointed by the
Governor, one of whom shall be an annuitant of the system and
one of whom shall have investment expertise, for terms of four
years, subject to confirmation by the Senate. At least five
board members shall be active members of the system, and at
least two shall have ten or more years of credited State
service. [The chairman of the board shall be designated by the
Governor from among the members of the board.] Each member of
the board who is a member of the General Assembly may appoint a
duly authorized designee to act in his stead.
(a.1) Chairman.--The members of the board shall elect a
chairman from among the members to serve for a fixed term of two
years. A chairman may be elected to serve successive terms.
* * *
(f) Conflict of interest.--The board shall adopt a conflict
of interest policy and shall provide guidelines applicable to
members of the board to enable them to avoid any perceived or
actual conflict of interest. At a minimum, the policy shall:
(1) Identify the minimum amount of a campaign
contribution that, if made to a member of the board, would
present a potential conflict of interest.
(2) Establish the circumstances under which a member of
the board must publicly disclose a potential conflict of
interest, abstain from voting and disclose on the record the
nature of the potential conflict of interest.
(g) Training.--The board shall maintain a formal training
program for members. The training, at a minimum, shall include
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basic, intermediate and advanced investment classes, to be
offered annually. The board shall maintain training records,
including documentation of class attendance and completion.
(h) Governing principles.--To ensure that the accountability
and authority for governance and management of the system is
clearly stated, the board shall formally adopt governing
principles to identify and distinguish among the roles of the
board, its committees and officers and employees of the board,
and shall post the adopted governing principles on its Internet
website.
Section 4. Section 5902(b) and (e)(2) of Title 71 are
amended, subsection (a.1) is amended by adding a paragraph and
the section is amended by adding subsections to read:
§ 5902. Administrative duties of the board.
* * *
(a.1) Secretary.--The secretary shall act as chief
administrative officer for the board. In addition to other
powers and duties conferred upon and delegated to the secretary
by the board, the secretary shall:
* * *
(7) For the purpose of assisting members in identifying
specific instances in which a member's vote may violate the
board's conflict of interest policy:
(i) Obtain copies of all campaign finance reports
that members who are elected public officials are
required to file with the Department of State.
(ii) Require that the investment firm associated
with an investment consultant, advisor or counselor who
provides services to the board submit a disclosure
statement each time the consultant, advisor or counselor
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makes a presentation to the board. The disclosure
statement shall include an up-to-date, comprehensive
listing of campaign contributions made to a member by a
principal or employee of the investment firm within the
previous 10 years.
(b) Professional personnel.--The board shall contract for
the services of a chief medical examiner, an actuary, investment
advisors and counselors, and such other professional personnel
as it deems advisable. Each contract shall include a provision
requiring the annual submission of a disclosure statement as set
forth under subsection (a.1)(7). The board may, with the
approval of the Attorney General, contract for legal services.
* * *
(e) Records.--
* * *
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment shall not
constitute a public record subject to public inspection under
the act of [June 21, 1957 (P.L.390, No.212), referred to]
F ebruary 14, 2008 (P.L.6, No.3), known as the Right-to-Know
Law, if, in the reasonable judgment of the board, the
inspection would:
(i) in the case of an alternative investment or
alternative investment vehicle, involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
vehicle which the fund was able to obtain only upon
agreeing to maintain its confidentiality;
(ii) cause substantial competitive harm to the
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person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund or would cause a breach of the standard of
care or fiduciary duty set forth in this part.
* * *
(m.1) Audit functions.--The board shall establish the
Internal Audit Office as an independent unit. The Internal Audit
Office shall report directly to the system's Executive Director
and the board's Audit Committee.
(m.2) Audit Committee.--The board's Audit Committee shall:
(1) Ensure and maintain the independence of the internal
audit process.
(2) Ensure that no unjustified restrictions or
limitations are placed on the internal audit staff.
(3) Review the effectiveness of the internal audit
function, including compliance with the most recent standards
of the Institute of Internal Auditors.
(4) Modify the charter of the Internal Audit Office so
that it is consistent with the independence standards of the
Institute of Internal Auditors' Standards for the
Professional Practice of Internal Auditing.
* * *
Section 5. Section 5931(a) of Title 71 is amended to read:
§ 5931. Management of fund and accounts.
(a) Control and management of fund.--The members of the
board shall be the trustees of the fund. Regardless of any other
provision of law governing the investments of funds under the
control of an administrative board of the State government, the
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trustees shall have exclusive control and management of the said
fund and full power to invest the same in accordance with the
provisions of this section, subject, however, to the [exercise
of that degree of judgment, skill and care under the
circumstances then prevailing which persons of prudence,
discretion and intelligence, who are familiar with such matters,
exercise in the management of their own affairs not in regard to
speculation, but in regard to the permanent disposition of the
funds, considering the probable income to be derived therefrom
as well as the probable safety of their capital. The trustees
shall have the power to hold, purchase, sell, lend, assign,
transfer or dispose of any of the securities and investments in
which any of the moneys in the fund shall have been invested as
well as of the proceeds of said investments, including any
directed commissions which have accrued to the benefit of the
fund as a consequence of the investments, and of any moneys
belonging to said fund, subject in every case to meeting the
standard of prudence set forth in this subsection.] prudent
investor provisions of 20 Pa.C.S. § 7203 (relating to prudent
investor rule).
* * *
Section 6. This act shall take effect in 60 days.
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