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Sponsors: Senators Ryberg, Richardson, Gregory, Fair, Hutto and Ritchie
Document Path: l:\council\bills\ggs\22084htc03.doc
Introduced in the Senate on April 16, 2003
Currently residing in the Senate Committee on Finance
Summary: Retirement Systems Investment Panel
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number ------------------------------------------------------------------------------- 4/16/2003 Senate Introduced and read first time SJ-27 4/16/2003 Senate Referred to Committee on Finance SJ-27
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VERSIONS OF THIS BILL
TO AMEND TITLE 9, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 17 SO AS TO PROVIDE FOR THE ADMINISTRATION OF THE VARIOUS STATE RETIREMENT SYSTEMS BY A DIRECTOR APPOINTED BY AND RESPONSIBLE TO THE STATE BUDGET AND CONTROL BOARD AND TO PROVIDE DEFINITIONS, TO AMEND SECTION 9-11-20, RELATING TO THE ESTABLISHMENT OF THE SOUTH CAROLINA POLICE OFFICERS RETIREMENT SYSTEM, SO AS TO DELETE A REFERENCE MADE OBSOLETE BY THIS ACT, TO AMEND SECTION 9-16-10, RELATING TO DEFINITIONS FOR PURPOSES OF THE FUNDS OF THE SOUTH CAROLINA RETIREMENT SYSTEM, SO AS TO REVISE THE DEFINITIONS OF "FIDUCIARY" AND "PANEL", SO AS TO CONFORM THESE DEFINITIONS TO THE STATE RETIREMENT SYSTEMS INVESTMENT PANEL'S REVISED ROLE AS INVESTMENT AGENT OF THE STATE BUDGET AND CONTROL BOARD, TO AMEND SECTION 9-16-30, RELATING TO DELEGATION OF FUNCTIONS OF THE STATE BUDGET AND CONTROL BOARD AS TRUSTEE OF THE RETIREMENT SYSTEMS, SO AS TO DESIGNATE THE STATE RETIREMENT SYSTEMS INVESTMENT PANEL AS THE BOARD'S AGENT FOR INVESTING RETIREMENT SYSTEM ASSETS, TO AMEND SECTIONS 9-16-50, 9-16-60, 9-16-70, 9-16-80, AND 9-16-90, RELATING TO INVESTMENT CONSIDERATIONS OF THE TRUSTEE, EVALUATION OF THE FIDUCIARY'S COMPLIANCE WITH THE RETIREMENT SYSTEM INVESTMENT LAW, LIABILITY FOR BREACH OF DUTY, MEETINGS OF THE STATE BUDGET AND CONTROL BOARD AS TRUSTEE AND REPORTING REQUIREMENTS, SO AS TO CONFORM THESE PROVISIONS TO THE REVISED ROLE OF THE PANEL, TO AMEND SECTIONS 9-16-310, 9-16-320, 9-16-330, AND 9-16-340, RELATING TO THE STATE RETIREMENT SYSTEMS INVESTMENT PANEL, THE ANNUAL INVESTMENT PLAN, COMPONENTS OF THE INVESTMENT PLAN, AND INVESTMENT FUNCTIONS, SO AS TO ESTABLISH THE PANEL AS THE INVESTMENT AGENT OF THE STATE BUDGET AND CONTROL BOARD WITH FOUR-YEAR STAGGERED TERMS, TO PROVIDE THAT THE PANEL SHALL EMPLOY A CHIEF INVESTMENT OFFICER, LEGAL COUNSEL, AND OTHER NECESSARY PROFESSIONAL, ADMINISTRATIVE, AND CLERICAL PERSONNEL, TO PROVIDE THAT THE PANEL SHALL ACT AS THE AGENT OF THE TRUSTEE IN THE INVESTMENT OF ALL SYSTEM FUNDS, BOTH EQUITIES AND FIXED, AND CONFORM THESE PROVISIONS TO THE NEW ROLE FOR THE PANEL, TO AMEND SECTION 11-9-660, AS AMENDED, RELATING TO LAWFUL INVESTMENTS FOR STATE FUNDS, SO AS TO LIMIT FIXED INCOME INVESTMENTS OF THE PANEL TO THESE SAME INVESTMENTS, TO AMEND SECTION 11-13-30, RELATING TO THE INVESTMENT AUTHORITY OF THE STATE TREASURER, SO AS TO PROVIDE THAT THE PANEL IS AGENT OF THE BOARD IN INVESTING RETIREMENT SYSTEM FUNDS, AND TO REPEAL SECTIONS 9-1-1310, 9-1-1340, 9-8-150, 9-8-160, 9-9-140, 9-9-150, AND 9-11-240, RELATING TO THE ROLE OF THE STATE BUDGET AND CONTROL BOARD AS TRUSTEE OF THE RETIREMENT SYSTEM AND THE POSITION OF DIRECTOR OF THE VARIOUS STATE RETIREMENT SYSTEMS AND MADE OBSOLETE BY PROVISIONS ADDED BY THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 9 of the 1976 Code is amended by adding:
Section 9-17-10. As used in this chapter:
(1) 'board' means the State Budget and Control Board;
(2) 'division' means the Division of Retirement Systems of the board;
(3) 'retirement systems' means the South Carolina Retirement System, Retirement System for Judges and Solicitors, Retirement System for Members of the General Assembly, and Police Officers Retirement System established pursuant to Chapters 1, 8, 9, and 11 of this title.
Section 9-17-20. The board shall appoint a director to manage the division. Regardless of the organizational structure of the board, the director is responsible directly to the board."
SECTION 2. Section 9-11-20 of the 1976 Code is amended to read:
(1) A retirement system is hereby created and placed under the administration of the Board board to provide retirement allowances and other benefits for police officers. The System system shall begin operation as of July 1, 1962. It shall have has the power and privileges of a corporation and shall must be known as the South Carolina Police Officers Retirement System, and by such this name all of its business shall must be transacted, all of its funds invested, and all of its cash, securities, and other property held.
(2) There is hereby created an office to be known as Director of the South Carolina Police Officers Retirement System. The Director of the South Carolina Retirement System shall serve as Director of this System."
SECTION 3.A. Section 9-16-10(4)(c) of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"(c) is a member of the State Budget and Control Board when it acts as trustee for the retirement system;
(d) is a member of the State Retirement Systems Investment Panel."
B. Section 9-16-10(6) of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"(6) 'Panel' means the State Retirement Systems Investment Panel established pursuant to Section 9-16-310 and the agent of the board for the investing and reinvesting of retirement system assets."
SECTION 4. Section 9-16-30 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"Section 9-16-30. (A) The trustee may delegate functions that a prudent trustee acting in a like capacity and familiar with those matters could properly delegate under the circumstances. The trustee designates the panel as its agent for the investment and reinvestment of retirement system assets, but final authority to invest
cannot be is not delegated.
(B) The trustee and the panel shall exercise reasonable care, skill, and caution in:
(1) selecting an agent;
(2) establishing the scope and terms of the delegation, consistent with the purposes and terms of the retirement program; and
(3) periodically reviewing the agent's performance and compliance with the terms of the delegation.
(C) In performing a delegated function, an agent owes a duty to the retirement system and to its participants and beneficiaries to comply with the terms of the delegation and, if a fiduciary, to comply with the duties imposed by Section 9-16-40.
(D) A trustee who complies with subsections (A) and (B) is not liable to the retirement system or to its participants or beneficiaries for the decisions or actions of the agent to whom the function was delegated.
(E) By accepting the delegation of a function from the trustee or the panel, an agent submits to the jurisdiction of the courts of this State.
(F) A trustee may limit the authority of an agent to delegate functions under this section."
SECTION 5. Section 9-16-50(A) of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"(A) In investing and managing assets of a retirement system pursuant to Section 9-16-40, the trustee and the panel:"
SECTION 6. Section 9-16-60 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"Section 9-16-60. (A) Compliance by the trustee and the panel or other fiduciary with Sections 9-16-30, 9-16-40, and 9-16-50 must be determined in light of the facts and circumstances existing at the time of the trustee's or fiduciary's decision or action and not by hindsight.
trustee's investment and management decisions of the trustee and the panel must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the retirement system."
SECTION 7. Section 9-16-70 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"Section 9-16-70. (A) The trustee and the panel or other fiduciary who breaches a duty imposed by this chapter is personally liable to the retirement system for any losses resulting from the breach and any profits resulting from the breach or made by the trustee or other fiduciary through use of assets of the system by trustees or other fiduciary. The trustee and the panel or other fiduciary is subject to other equitable remedies as the court considers appropriate, including removal.
(B) An agreement that purports to limit the liability of a trustee and the panel or other fiduciary for a breach of duty under this chapter is void.
(C) The retirement system may insure a trustee, panel member, fiduciary, or itself against liability or losses occurring because of a breach of duty under this chapter.
(D) A trustee and the panel or other fiduciary may insure against personal liability or losses occurring because of a breach of duty under this chapter if the insurance is purchased or provided by the individual trustee or fiduciary, but a fiduciary who obtains insurance pursuant to this chapter must disclose all terms, conditions, and other information relating to the insurance policy to the retirement system.
(E) Except as otherwise provided, a member of or person employed by the board or the panel shall not have any direct interest in the gains or profits of any retirement system investment. A board or panel member or employee of the board or panel, directly or indirectly, for himself or as an agent in any manner, shall not use the funds of the retirement system except to make current and necessary payments authorized by the board. A member or employee of the board or panel shall not become an endorser or surety or in any manner an obligor for monies loaned or borrowed from the board."
SECTION 8. Section 9-16-80 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"Section 9-16-80. (A) Meetings by the board while acting as trustee of the retirement system, the panel, or by
its their fiduciary agents to deliberate about, or make tentative or final decisions on, investments or other financial matters may be in executive session if disclosure of the deliberations or decisions would jeopardize the ability to implement a decision or to achieve investment objectives.
(B) A record of the board, the panel, or of
its their fiduciary agents that discloses deliberations about, or a tentative or final decision on, investments or other financial matters is exempt from the disclosure requirements of Chapter 4 of Title 30, the Freedom of Information Act, to the extent and so long as its disclosure would jeopardize the ability to implement an investment decision or program or to achieve investment objectives."
SECTION 9. Section 9-16-90 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"Section 9-16-90. (A) The
trustees panel shall provide investment reports at least quarterly during the fiscal year to the panel trustees, the Speaker of the House of Representatives, the President Pro Tempore of the Senate, and other appropriate officials and entities.
(B) In addition to the quarterly reports provided in subsection (A), the
trustees panel shall provide an annual report to the panel trustees, the Speaker of the House of Representatives, members of the House of Representatives or Senate, but only upon their request, the President Pro Tempore of the Senate, and other appropriate officials and entities of the investment status of the retirement systems. The report must contain:
(1) a description of a material interest held by a trustee, panel member, fiduciary, or an employee who is a fiduciary with respect to the investment and management of assets of the system, or by a related person, in a material transaction with the system within the last three years or proposed to be effected;
(2) a schedule of the rates of return, net of total investment expense, on assets of the system overall and on assets aggregated by category over the most recent one-year, three-year, five-year, and ten-year periods, to the extent available, and the rates of return on appropriate benchmarks for assets of the system overall and for each category over each period;
(3) a schedule of the sum of total investment expense and total general administrative expense for the fiscal year expressed as a percentage of the fair value of assets of the system on the last day of the fiscal year, and an equivalent percentage for the preceding five fiscal years; and
(4) a schedule of all assets held for investment purposes on the last day of the fiscal year aggregated and identified by issuer, borrower, lessor, or similar party to the transaction stating, if relevant, the asset's maturity date, rate of interest, par or maturity value, number of shares, costs, and fair value and identifying an asset that is in default or classified as uncollectible.
These disclosure requirements are cumulative to and do not replace other reporting requirements provided by law."
SECTION 10. Section 9-16-310 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"Section 9-16-310. (A) There is created the State Retirement Systems Investment Panel, consisting of five members, one each appointed by the Governor, State Treasurer, Comptroller General, the chairman of the Ways and Means Committee of the House of Representatives, and the chairman of the Senate Finance Committee. The member appointed by the Governor shall serve as chairman. All members appointed to the panel must possess substantial financial investment experience as evidenced by appropriate academic or professional credentials or career experience in the fields of insurance, business, finance, or accounting, or any combination of these fields. No person may be appointed or continue to serve who is an elected or appointed officer or employee of the State or any of its political subdivisions, including school districts. Members shall serve for terms of
two four years and until their successors are appointed and qualify, except for those appointed for terms beginning July 1, 2003, the appointee of the Governor shall serve for a term of one year, the appointee of the State Treasurer shall serve for a term of two years, and the appointee of the House Ways and Means Committee chairman shall serve three years. Vacancies must be filled for the unexpired term in the manner of the original appointment. Members shall serve without compensation, but may receive the mileage, subsistence, and per diem authorized by law for members of state boards, commissions, and committees.
(B) The panel is the agent of the board for the investment of the funds of the retirement system, and shall invest and reinvest these funds, subject to all the terms, conditions, limitations, and restrictions imposed by Article 7, Chapter 9, Title 11, upon the investment of sinking funds of the State and, subject to like terms, conditions, limitations, and restrictions, may hold, purchase, sell, assign, transfer, and dispose of any of the securities and investments in which the various retirement funds established pursuant to this title have been invested, plus the proceeds of these investments and any monies belonging to these funds. Additionally, and without regard to the limitations imposed pursuant to Article 7, Chapter 9, Title 11, the panel may invest and reinvest the funds of the system in equity securities of a corporation within the United States that is registered on a national securities exchange as provided in the Securities Exchange Act, 1934, or a successor act, or quoted through the National Association of Securities Dealers Automatic Quotations System, or a similar service.
(C) The panel shall employ a chief investment officer, legal counsel, and such other professional, administrative, and clerical employees as it determines necessary for the performing of its duties."
SECTION 11. Section 9-16-320(E) and (F) of the 1976 Code, as added by Act 371 of 1998, is amended to read:
"(E) The costs of administering the duties of the panel must be paid from the investment earnings of these systems.
Administrative and clerical assistance to the panel must be provided. The board must approve all reasonable expenses of the panel in performing its duties under this section.
The panel does not act as a fiduciary with respect to the funds of the retirement system, but must exercise reasonable care and skill in carrying out its duties."
SECTION 12. Section 9-16-330 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
Section 9-16-330. (A) The board shall provide the panel with a statement of actuarial assumptions and general investment objectives, including cash requirements. The board shall review the statement annually for the purpose of affirming or changing it and advise the panel of its actions.
(B) The panel's annual investment plan must be consistent with actions taken by the board pursuant to subsection (A) and must include, but is not limited to, the following components:
(1) general operational and investment policies;
(2) investment objectives and performance standards;
(3) investment strategies, which may include indexed or enhanced indexed strategies as the preferred or exclusive strategies for equity investing, and an explanation of the reasons for the selection of each strategy;
(4) industry sector, market sector, issuer, and other allocations of assets that provide diversification in accordance with prudent investment standards, including desired rates of return and acceptable levels of risks for each asset class;
(5) policies and procedures providing flexibility in responding to market contingencies;
(6) procedures and policies for selecting, monitoring, compensating, and terminating investment consultants, equity investment managers, and other necessary professional service providers; and
(7) methods for managing the costs of the investment activities.
(C) In developing the annual investment plan, the panel shall:
(1) diversify the investments of the retirement systems, unless the panel reasonably determines that, because of special circumstances, it is clearly not prudent to do so; and
(2) make a reasonable effort to verify facts relevant to the investment of assets of the retirement systems.
(D) The plan adopted must provide:
(1) the minimum and maximum portions of system assets that may be allocated to equity investments on an ongoing basis not to exceed forty percent and the minimum and maximum portions of system assets not to exceed ten percent that may be allocated to additional equity investment during the plan's fiscal year. When investments in equities attain the maximum allocation allowed by this item, up to forty percent of current member and employer contributions to the retirement system may be invested in equities. If, due to growth in value of equity investments, equity investments exceed forty percent of the total assets of the retirement system, this subsection does not require the sale of equities to reduce the percentage of equities to forty percent;
(2) preference to brokerage firms domiciled in this State for conducting nondiscretionary brokerage transactions if these brokerage firms are able to meet the test of equal service and best execution in the purchase and sale of authorized investments."
SECTION 13. Section 9-16-340 of the 1976 Code, as added by Act 371 of 1998, is amended to read:
(A) The State Budget and Control Board panel, as trustee of the retirement system the agent of the board, shall invest and reinvest all of the assets of the retirement systems as provided in Section 9-1-1310 9-16-310(B). The State Treasurer shall serve as the agent of the board with respect to investments made pursuant to Article 7, Chapter 9, Title 11. Investments allowed by law in equities may be made by the board panel in the manner it shall determine, consistent with Section 9-16-330 and consistent with its fiduciary duties with respect to the retirement funds. The board panel may employ or retain administrators, agents, consultants, or other advisors it considers necessary with respect to making equity investments. The board panel is subject to the provisions of Chapter 23 of Title 1, the Administrative Procedures Act, in the implementation of this article.
(B) After receiving the proposed plan of the panel, the board shall adopt an annual investment plan, which must be implemented by the board. The board shall regularly review the plan implementation and make amendments as it considers appropriate.
(C) The plan adopted must provide:
(1) the minimum and maximum portions of system assets that may be allocated to equity investments on an ongoing basis not to exceed forty percent and the minimum and maximum portions of system assets not to exceed ten percent that may be allocated to additional equity investment during the plan fiscal year. When investments in equities attain the maximum allocation allowed by this item, up to forty percent of current member and employer contributions to the retirement system may be invested in equities. If, due to growth in value of equity investments, equity investments exceed forty percent of the total assets of the retirement system, this subsection does not require the sale of equities to reduce the percentage of equities to forty percent;
(2) preference to brokerage firms domiciled in this State for conducting nondiscretionary brokerage transactions if these brokerage firms are able to meet the test of equal service and best execution in the purchase and sale of authorized investments."
SECTION 14. Section 11-9-660 of the 1976 Code, as last amended by Act 28 of 2001, is further amended to read:
"Section 11-9-660. (A) Except as provided in subsection (D), the State Treasurer has full power to invest and reinvest all funds of the State in any of the following:
(1) obligations of the United States, its agencies and instrumentalities;
(2) obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, the African Development Bank, and the Asian Development Bank;
(3) obligations of a corporation, state, or political subdivision denominated in United States dollars, if the obligations bear an investment grade rating of at least two nationally recognized rating services;
(4) certificates of deposit, if the certificates are secured collaterally by securities of the types described in items (1) and (3) of this section and held by a third party as escrow agent or custodian and are of a market value not less than the amount of the certificates of deposit so secured, including interest; except that this collateral is not required to the extent the certificates of deposit are insured by an agency of the federal government;
(5) repurchase agreements, if collateralized by securities of the types described in items (1) and (3) of this section and held by a third party as escrow agent or custodian and of a market value not less than the amount of the repurchase agreement so collateralized, including interest; and
(6) guaranteed investment contracts issued by a domestic or foreign insurance company or other financial institution, whose long-term unsecured debt rating bears the two highest ratings of at least two nationally recognized rating services.
(B) The State Treasurer may contract to lend securities invested pursuant to this section.
(C) The State Treasurer shall not invest in obligations issued by any country or corporation principally located in any country which the United States Department of State determines commits major human rights violations based on the Country Reports on Human Rights Practices by the Bureau of Democracy, Human Rights and Labor of the U. S. Department of State.
(D) The State Retirement Systems Investment Panel, as agent of the trustee, in making nonequity investments of funds of the retirement system as defined in Section 9-16-10(8), has the same authority, and is subject to the same limitations provided in this section with respect to the State Treasurer."
SECTION 15. Section 11-13-30 of the 1976 Code is amended to read:
"Section 11-13-30. To facilitate the management, investment, and disbursement of public funds, no board, commission, agency, or officer within the state government, except the State Treasurer
shall be authorized to may invest and deposit funds from any source , including, but not limited to, funds for which he is custodian, such funds to draw the best rate of interest obtainable.
This section does not apply to the State Retirement Systems Investment Panel acting as agent of the State Budget and Control Board with respect to the investments of funds of the retirement system as defined in Section 9-16-10(8)."
SECTION 16. Sections 9-1-1310, 9-1-1340, 9-8-150, 9-8-160, 9-9-140, 9-9-150, and 9-11-240, all of the 1976 Code, are repealed.
SECTION 17. This act takes effect July 1, 2003. The terms of members of the State Retirement Systems Investment Panel established pursuant to Article X, Section 16 of the Constitution of this State and Section 9-16-310 of the 1976 Code are terminated effective July 1, 2003, and their successors must be appointed as provided in Section 9-16-310 of the 1976 Code as amended by this act.
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