PRINTER'S NO. 2029
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1400
Session of
2015
INTRODUCED BY McGINNIS, CALTAGIRONE, COX, EVERETT, GILLEN,
IRVIN, JOZWIAK, KAUFFMAN, KNOWLES, KORTZ, MALONEY, McNEILL,
PETRI, RADER, TRUITT AND WARD, JULY 9, 2015
REFERRED TO COMMITTEE ON STATE GOVERNMENT, JULY 9, 2015
AN ACT
Amending Titles 24 (Education) and 71 (State Government) of the
Pennsylvania Consolidated Statutes, in retirement for school
employees, further providing for Public School Employees'
Retirement Board; providing for pension standards of
practice; and further providing for management of fund and
accounts; and, in retirement for State employees and
officers, further providing for State Employees' Retirement
Board; providing for pension standards of practice; and
further providing for management of fund and accounts.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 8501(a) of Title 24 of the Pennsylvania
Consolidated Statutes is amended and the section is amended by
adding a subsection 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] four to be
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appointed by the Governor[, at least one of whom shall not be a
school employee or an officer or employee of the State]; [three]
one 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) Prerequisites.--
(1) Two board members appointed by the Governor must be
licensed with the Securities and Exchange Commission or the
Financial Industry Regulatory Authority.
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(2) In addition to the requirements of paragraph (1),
two additional board members appointed by the Governor must
be licensed with the Securities and Exchange Commission and
the Financial Industry Regulatory Authority.
* * *
Section 2. Title 24 is amended by adding a section to read:
§ 8510. Pension standards of practice.
(a) Investment advisors and counselors.--Each investment
advisor or counselor that holds a contract with the board under
section 8502(b) (relating to administrative duties of board)
shall:
(1) Carry professional insurance for errors and
omissions and annually provide proof of coverage to the
board.
(2) Verify compliance with applicable laws and
regulations administered by the Securities and Exchange
Commission and the Financial Industry Regulatory Authority.
(b) Grounds for discharge.--
(1) An investment advisor or counselor shall immediately
notify the board regarding any of the following:
(i) A pending lawsuit to which the advisor or
counselor is a party.
(ii) A violation of Federal or State law, regulation
or rule by the advisor or counselor.
(iii) An ongoing investigation of an alleged
violation of a Federal or State law, regulation or rule
by the advisor or counselor.
(2) If an investment advisor or counselor fails to
comply with paragraph (1), the board may terminate its
contract with the advisor or counselor.
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(c) Political contributions.--
(1) It is unlawful for any investment advisor or
counselor or other investment professional, or any officer,
director, associate, partner, limited partner or individual
owner thereof, to make a contribution to a board member.
(2) It is unlawful for any board member to knowingly
accept or receive any contribution prohibited under paragraph
(1).
(d) Annual compliance report.--The board shall prepare and
distribute to each member of the General Assembly an annual
report which includes:
(1) Confirmation that all board members appointed by the
Governor are compliant with the requirements of section
8501(a.1) (relating to Public School Employees' Retirement
Board).
(2) Confirmation that the board members subject to
section 8501(a.1)(2) are compliant with the requirements
thereof.
(e) Public School Pension Education and Ethics Policy
Commission.--
(1) The Public School Pension Education and Ethics
Policy Commission is established and shall be composed of
five members as follows:
(i) One member appointed by the Governor.
(ii) Two members appointed by the President pro
tempore of the Senate.
(iii) Two members appointed by the Speaker of the
House of Representatives.
The individuals appointed as members of the commission shall
be of professional distinction from academic, regulatory or
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institutional positions. No member of the commission may be a
member or beneficiary of the system nor serve, directly or
indirectly, as a financial fiduciary to any member or
beneficiary of the system.
(2) The duties of the Public School Pension Education
and Ethics Policy Commission are as follows:
(i) Review any existing education and ethics
policies applicable to board members.
(ii) Recommend updated or new education and ethics
policies applicable to board members.
(iii) Report its findings and recommendations to the
Governor and the General Assembly within 12 months of the
effective date of this section.
(3) A majority of appointed members shall constitute a
quorum for the purpose of conducting business. The members
shall select one of their number to chairperson and another
to be the vice chairperson.
(f) Definition.--As used in this section, "contribution"
shall have the same meaning as in section 1621 of the act of
June 3, 1937 (P.L.1333, No.320), known as the Pennsylvania
Election Code.
Section 3. Section 8521(h) of Title 24 is amended and the
section is amended by adding subsections to read:
§ 8521. Management of fund and accounts.
* * *
(h) Venture capital, private placement and alternative
investments.--The board in its prudent discretion may make any
venture capital investment, private placement investment or
other alternative investment of any kind, structure or manner
which meets the standard of prudence set forth in subsection (a)
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[.], except that investments under this subsection shall be
limited to not more than 2% of the book value of the total
assets of the fund.
* * *
(k) Interest rate swaps.--The board may not enter into any
interest rate swap agreement.
(l) Cross referencing of investments.--The board shall cross
reference all investments among all investment advisors and
counselors for overlap to minimize risk.
Section 4. Section 5901(a) of Title 71 is amended and the
section is amended by adding a subsection to read:
§ 5901. The State Employees' Retirement Board.
(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, for
terms of four years, subject to confirmation by the Senate. At
least [five] two board members shall be active members of the
system, and at least [two] one 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) Prerequisites.--
(1) Two board members appointed by the Governor must be
licensed with the Securities and Exchange Commission or the
Financial Industry Regulatory Authority.
(2) In addition to the requirements of paragraph (1),
two additional board members appointed by the Governor must
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be licensed with the Securities and Exchange Commission and
the Financial Industry Regulatory Authority.
* * *
Section 5. Title 71 is amended by adding a section to read:
§ 5909. Pension standards of practice.
(a) Investment advisors and counselors.--Each investment
advisor or counselor that holds a contract with the board under
section 5902(b) (relating to administrative duties of the board)
shall:
(1) Carry professional insurance for errors and
omissions and annually provide proof of coverage to the
board.
(2) Verify compliance with applicable laws and
regulations administered by the Securities and Exchange
Commission and the Financial Industry Regulatory Authority.
(b) Grounds for discharge.--
(1) An investment advisor or counselor shall immediately
notify the board regarding any of the following:
(i) A pending lawsuit to which the advisor or
counselor is a party.
(ii) A violation of Federal or State law, regulation
or rule by the advisor or counselor.
(iii) An ongoing investigation of an alleged
violation of a Federal or State law, regulation or rule
by the advisor or counselor.
(2) If an investment advisor or counselor fails to
comply with paragraph (1), the board may terminate its
contract with the advisor or counselor.
(c) Political contributions.--
(1) It is unlawful for any investment advisor or
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counselor or other investment professional, or any officer,
director, associate, partner, limited partner or individual
owner thereof to make a contribution to a board member.
(2) It is unlawful for any board member to knowingly
accept or receive any contribution prohibited under paragraph
(1).
(d) Annual compliance report.--The board shall prepare and
distribute to each member of the General Assembly an annual
report which includes:
(1) Confirmation that all board members appointed by the
Governor are compliant with the requirements of section
5901(a.1) (relating to State Employees' Retirement Board).
(2) Confirmation that the board members subject to
section 5901(a.1)(2) are compliant with the requirements
thereof.
(e) State Employee Pension Education and Ethics Policy
Commission.--
(1) The State Employee Pension Education and Ethics
Policy Commission is established and shall be composed of
five members as follows:
(i) One member appointed by the Governor.
(ii) Two members appointed by the President pro
tempore of the Senate.
(iii) Two members appointed by the Speaker of the
House of Representatives.
The individuals appointed as members of the commission shall
be of professional distinction from academic, regulatory or
institutional positions. No member of the commission may be a
member or beneficiary of the system nor serve, directly or
indirectly, as a financial fiduciary to any member or
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beneficiary of the system.
(2) The duties of the State Employee Pension Education
and Ethics Policy Commission are as follows:
(i) Review any existing education and ethics
policies applicable to board members.
(ii) Recommend updated or new education and ethics
policies applicable to board members.
(iii) Report its findings and recommendations to the
Governor and the General Assembly within 12 months of the
effective date of this section.
(3) A majority of appointed members shall constitute a
quorum for the purpose of conducting business. The members
shall select one of their number to be chairperson and
another to be the vice chairperson.
(f) Definition.--As used in this section, "contribution"
shall have the same meaning as in section 1621 of the act of
June 3, 1937 (P.L.1333, No.320), known as the Pennsylvania
Election Code.
Section 6. Section 5931(h) of Title 71 is amended and the
section is amended by adding subsections to read:
§ 5931. Management of fund and accounts.
* * *
(h) Venture capital, private placement and alternative
investments.--The board in its prudent discretion may make any
venture capital investment, private placement investment or
other alternative investment of any kind, structure or manner
which meets the standard of prudence set forth in subsection (a)
[.], except that investments under this subsection shall be
limited to not more than 2% of the book value of the total
assets of the fund.
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* * *
(k) Interest rate swaps.--The board may not enter into any
interest rate swap agreement.
(l) Cross referencing of investments.--The board shall cross
reference all investments among all investment advisors and
counselors for overlap to minimize risk.
Section 7. This act shall take effect in 60 days.
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