BILL NUMBER: AB 1052 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 17, 2015
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 Section
20172 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, without regard to state contracting
laws, the board is authorized to 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, without regard to state contracting
laws, the board of administration is authorized to 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.
(b) Notwithstanding any other law pertaining to state
contracting, the board, in exercising its discretion pursuant to this
section, may 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 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 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 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. except where a competitive bid or
proposal is not required under subdivision (b) of Section 10340 of
the Public Contract Code. 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.
(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 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. SEC. 4. 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. except
where a competitive bid or proposal is not required under subdivision
(b) of Section 10340 of the Public Contract Code.