BILL NUMBER: AB 1052 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 6, 2015
INTRODUCED BY Assembly Member Cooley
FEBRUARY 26, 2015
An act to amend Sections 22203 and 22257 of the Education Code,
and to amend Sections 20172 and 20190 of of,
and to add Section 20211 to, the Government Code, relating to
retirement.
LEGISLATIVE COUNSEL'S DIGEST
AB 1052, as amended, Cooley. Retirement board authority:
investments.
The California Constitution grants the retirement board of a
public pension or retirement system plenary authority and fiduciary
responsibility for investment of moneys and administration of the
system, as specified. The California Constitution also requires the
retirement board of a public pension or retirement system, consistent
with the exclusive fiduciary responsibilities vested in it, to have
the sole and exclusive power to provide for actuarial services in
order to assure the competency of the assets of the public pension or
retirement system.
The Teachers' Retirement Law creates the State Teachers'
Retirement System for the provision of service, disability, and other
benefits to members. The law requires the assets of the plan,
including, but not limited to, employee contributions, employer
contributions, and investment income, to be deposited into the
Teachers' Retirement Fund, and continuously appropriates the fund
for, among other things, the payment of member benefits. The Teachers'
Retirement Law authorizes the board to appoint investment managers
to manage the assets of the fund.
This bill would specify that that, without
regard to state contracting laws, the board is
authorized to enter into agreements contract
for services for the investment of the fund or appoint
investment managers to manage the assets of the fund under the terms
and conditions and utilizing the processes the board deems
necessary and consistent with its fiduciary duties, as specified.
The bill would require the board's processes to be competitive,
except as elected by the board, as specified.
The Public Employees' Retirement Law (PERL) creates the Public
Employees' Retirement System (PERS) and the Public Employees'
Retirement Plan for the provision of pension benefits to members.
PERL requires the assets of the system, including, but not limited
to, employee contributions, employer contributions, and investment
income, to be deposited into the Public Employees' Retirement Fund, a
continuously appropriated fund. PERL grants the Board of
Administration of PERS exclusive control of and fiduciary
responsibility for the investment of the fund and authorizes the
board to retain a bank or trust company to serve as a custodian for
services in connection with the investment of the fund.
This bill would specify that that, without
regard to state contracting laws, the board of administration
is authorized to enter into agreements
contract for services with a bank or trust company for those
custodial services and to invest the assets of the fund
under the terms, conditions, and processes the board deems necessary
and consistent with its fiduciary duties and is not required to
comply with any law or rule pertaining to state contracting to do so.
The bill would require the board's processes to be
competitive, except as elected by the board, as specified. The bill
would specify that the board is authorized to contract with
individuals or outside firms with demonstrated expertise in trade
order management services in connection with investment of the
retirement fund without regard to state contracting laws. The bill
would require the board's processes in this regard to be competitive,
except as elected by the board, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22203 of the Education Code is amended to read:
22203. (a) The board has exclusive control
of the investment of the Teachers' Retirement Fund. Except as
otherwise restricted by the California Constitution and by law, the
board may in its discretion invest the assets of the fund through the
purchase, holding, or sale thereof of any investment, financial
instrument, or financial transaction when the investment, financial
instrument, or financial transaction is prudent in the informed
opinion of the board. Notwithstanding
(b) Notwithstanding any other
law, law pertaining to state contracting,
the board, in exercising its discretion pursuant to this
section, may enter into agreements, contracts, or other
arrangements solely under the terms, conditions, and covenants
contract for services under the terms and conditions
and utilizing the processes the board deems necessary and
consistent with its fiduciary duties.
(c) The processes utilized by the board pursuant to subdivision
(b) shall be competitive except as elected by the board as follows:
(1) Competitive bids or proposals are not required under
subdivision (b) of Section 10340 of the Public Contract Code.
(2) At the time of the contract, an executed contract with an
investment manager qualifies that person as an emerging investment
manager, as defined by the board. The board shall monitor and assess
investment managers selected pursuant to this paragraph in accordance
with all other provisions under this part and consistent with its
fiduciary duties.
SEC. 2. Section 22257 of the Education Code is amended to read:
22257. (a) Notwithstanding any other law,
law pertaining to state contracting, the board may contract
with or appoint one or more investment managers to manage the assets
of the retirement fund under the terms, conditions, and
covenants terms and conditions and utilizing the
processes the board deems necessary and consistent with its
fiduciary duties. In selecting investment managers, the
processes utilized by the board shall be competitive, pursuant to
subdivision (c) of Section 22203. If the board has acted with
care, skill, prudence, and diligence in meeting the requirements of
Sections 22252 and 22253 in selecting and monitoring the investment
managers, then, notwithstanding Sections 22250, 22252, 22253, 22254,
and 22256, no board member shall be liable for the acts or omissions
of the investment managers or be under any obligation to invest or
otherwise manage any assets of the retirement fund that are subject
to the management of the investment managers.
(b) Incorporation of the fiduciary duty set forth in Section 22250
into the terms of a contract between the system and an investment
manager shall be admissible as evidence that the board has acted with
care, skill, prudence, and diligence in the selection of the
investment manager.
SEC. 3. Section 20172 of the Government Code is amended to read:
20172. Notwithstanding any other law, the board may retain a bank
or trust company to serve as custodian for safekeeping, delivery,
securities valuation, investment performance reporting, and other
services in connection with investment of the retirement fund. The
board, without compliance with any law, rule, provision, or procedure
pertaining to state contracting, may enter into agreements,
contracts, or other arrangements with a bank or trust company for
custodian and custodian-related services under the terms,
conditions, and processes terms and conditions
the board deems necessary and consistent with its fiduciary duties.
In selecting a custodian, the processes utilized by
the board shall be competitive, pursuant to subdivision (c) of
Section 20190. Notwithstanding Section 13340, all moneys in the
fund are continuously appropriated, without regard to fiscal years,
for payments which shall be made upon warrants drawn by the
Controller upon demands made by the board. Upon demand of the board,
warrants shall be drawn for the purpose of making payments by
electronic fund transfers.
SEC. 4. Section 20190 of the Government Code is amended to read:
20190. (a) The board has exclusive control
of the investment of the retirement fund. Except as otherwise
restricted by the California Constitution and by law, the board may,
in its discretion, invest the assets of the fund through the
purchase, holding, or sale thereof of any investment, financial
instrument, or financial transaction when the investment, financial
instrument, or financial transaction is prudent in the informed
opinion of the board. In
(b) In exercising its discretion
pursuant to this section, the board, without compliance with any law,
rule, provision, or procedure pertaining to state contracting, may
enter into agreements, contracts, or other arrangements with
a bank or trust company for custodian and custodian-related services
under the terms, conditions, for the purposes of
investing or managing the assets of the fund under the terms and
conditions and processes the board deems necessary and
consistent with its fiduciary duties.
(c) The processes utilized by the board pursuant to subdivision
(b) shall be competitive except as elected by the board as follows:
(1) Competitive bids or proposals are not required under
subdivision (b) of Section 10340 of the Public Contract Code.
(2) At the time of the contract, an executed contract with an
investment manager qualifies that person as an emerging investment
manager, as defined by the board. The board shall monitor and assess
investment managers selected pursuant to this paragraph in accordance
with all other provisions under this part and consistent with its
fiduciary duties.
SEC. 5. Section 20211 is added to the
Government Code , to read:
20211. The board may contract with individuals or outside firms
with demonstrated expertise to perform trade order management
services in connection with investment of the retirement fund. The
board, without compliance with any law, rule, provision, or procedure
pertaining to state contracting, may enter into agreements,
contracts, or other arrangements for the providing of trade order
management services under the terms and conditions the board deems
necessary and consistent with its fiduciary duties. In selecting an
individual or outside firm for trade order management services, the
processes utilized by the board shall be competitive, pursuant to
subdivision (c) of Section 20190.