AB 1052,
as amended, Cooley. begin deleteRetirement end deletebegin insertState Teachers’ Retirement System: end insertboardbegin delete authority:end deletebegin insert of administration:end insert 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 wouldbegin delete specifyend deletebegin insert provideend insert that, without regard to state contracting laws,begin insert except as specified,end insert the board is authorized to contract for services for the investment of the fundbegin delete or appoint investment managers to manage the assets of the fundend delete under the terms and conditions and utilizing the processes the board deems necessary and
consistent with its fiduciarybegin delete duties, as specified.end deletebegin insert
duties.end insert The bill would require the board’s processes to bebegin delete competitive, except as elected by the board, as specified.end deletebegin insert competitive, except as specified, and would prescribe standards for those processes. The bill would grant an investment manager, as specified, who is not selected in the course of a noncompetitive contract process for investment services to have the opportunity to protest. The bill would also make conforming changes. end insert
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.
end deleteThis 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 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 specified.
end deleteVote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 22203 of the Education Code is amended
2to read:
(a) The board has exclusive control of the investment
4of the Teachers’ Retirement Fund. Except as otherwise restricted
5by the California Constitution and by law, the board may in its
6discretion invest the assets of the fund through the purchase,
7holding, or sale thereof of any investment, financial instrument,
8or financial transaction when the investment, financial instrument,
9or financial transaction is prudent in the informed opinion of the
10board.
11(b) Notwithstanding any other law pertaining to state
12begin delete contracting,end deletebegin insert
contracting, except for Section 8546.7 of the
13Government Code,end insert the board, in exercising its discretion pursuant
14to this section, may contract forbegin insert investmentend insert services under the
15terms and conditions and utilizing the processes the board deems
16necessary and consistent with its fiduciary duties.
17(c) The processes utilized by the board pursuant to subdivision
18(b) shall be competitive except asbegin delete elected by the board as follows:end delete
19
begin insert provided in paragraph (2).end insert
20
(1) The competitive processes utilized shall include all of the
21following:
22
(A) Standardized solicitation documents.
23
(B) Minimum qualifications.
24
(C) Public advertisement.
25
(D) Opportunity for protest.
26
(2) The board may contract for investment services pursuant to
27this section without utilizing a competitive process under any of
28the following circumstances:
29(1)
end delete
30begin insert(A)end insert Competitive bids or proposals are not required under
31subdivision (b) of Section 10340 of the Public Contract Code.
32(2)
end delete
P4 1begin insert(B)end insert At the time of the contract, an executed contract with an
2
investment manager qualifies that person as an emerging
3investment manager, as defined by thebegin delete board.end deletebegin insert board pursuant to
4subdivision (c) of Section 22228.end insert The board shall monitor and
5assess investment managers selected pursuant to thisbegin delete paragraphend delete
6begin insert subparagraphend insert in accordance with all other provisions under this
7part and consistent with its fiduciary duties.begin insert An investment manager
8with a contract that qualified that person as an emerging
9investment manager who is not selected pursuant to this paragraph
10
shall have the opportunity to protest any selection made pursuant
11to this subparagraph.end insert
12
(d) Nothing in this section shall modify any other law restricting
13the eligibility of persons or entities to bid or be awarded a contract
14with the board.
Section 22257 of the Education Code is amended to
16read:
(a) begin deleteNotwithstanding any other law pertaining to state begin insertThe end insertboard may contract with or appoint one or
18contracting, the end delete
19more investment managers to manage the assets of the retirement
20fundbegin delete under the terms and conditions and utilizing the processes pursuant to
21the board deems necessary and consistent with its fiduciary duties.
22In selecting investment managers, the processes utilized by the
23board shall be competitive,end deletebegin delete subdivision (c)
ofend delete
2422203. If the board has acted with care, skill, prudence, and
25diligence in meeting the requirements of Sections 22252 and 22253
26in selecting and monitoring the investment managers, then,
27notwithstanding Sections 22250, 22252, 22253, 22254, and 22256,
28no board member shall be liable for the acts or omissions of the
29investment managers or be under any obligation to invest or
30otherwise manage any assets of the retirement fund that are subject
31to the management of the investment managers.
32(b) Incorporation of the fiduciary duty set forth in Section 22250
33into the terms of a contract between the system and an investment
34manager shall be admissible as evidence that the board has acted
35with care, skill, prudence, and diligence in the selection of the
36investment manager.
Section 20172 of the Government Code is amended
38to read:
Notwithstanding any other law, the board may retain
40a bank or trust company to serve as custodian for safekeeping,
P5 1delivery, securities valuation, investment performance reporting,
2and other services in connection with investment of the retirement
3fund. The board, without compliance with any law, rule, provision,
4or procedure pertaining to state contracting, may enter into
5agreements, contracts, or other arrangements with a bank or trust
6company for custodian and custodian-related services under the
7terms and conditions the board
deems necessary and consistent
8with its fiduciary duties. In selecting a custodian, the processes
9utilized by the board shall be competitive, except where a
10competitive bid or proposal is not required under subdivision (b)
11of Section 10340 of the Public Contract Code. Notwithstanding
12Section 13340, all moneys in the fund are continuously
13appropriated, without regard to fiscal years, for payments which
14shall be made upon warrants drawn by the Controller upon
15demands made by the board. Upon demand of the board, warrants
16shall be drawn for the purpose of making payments by electronic
17fund transfers.
Section 20211 is added to the Government Code, to
19read:
The board may contract with individuals or outside
21firms with demonstrated expertise to perform trade order
22management services in connection with investment of the
23retirement fund. The board, without compliance with any law,
24rule, provision, or procedure pertaining to state contracting, may
25enter into agreements, contracts, or other arrangements for the
26providing of trade order management services under the terms and
27conditions the board deems necessary and consistent with its
28fiduciary duties. In selecting an individual or outside firm for trade
29order management services, the processes utilized by the board
30shall be competitive,
except where a competitive bid or proposal
31is not required under subdivision (b) of Section 10340 of the Public
32Contract Code.
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