Section 800.5  Authority

 

In accordance with Article 22A of the Illinois Pension Code[40 ILCS 5/Art. 22A] creating the Illinois State Board of Investment, effective October 10, 1969, with authority to manage, invest and reinvest, the reserves, funds, assets, securities and moneys of any pension fund, as provided in this Article, and to perform such other duties as may from time to time be authorized by the General Assembly (Section 22A-101 of the Code) and that the Board may adopt such rules and regulations (not inconsistent with Article 22A) as in its judgment are desirable to implement and properly administer Article 22A (Section 22A-110 of the Code), the Illinois State Board of Investment, with the objective of investing for a total return over the long term, establishes this Part for the direction and administration of its affairs and for the effective operation of the Board.

 

(Source:  Amended at 32 Ill. Reg. 360, effective December 26, 2007)

 

Section 800.110  Offices of the Board

 

General office. The general office of the Board shall be maintained at 180 N. LaSalle St., Suite 2015, Chicago IL 60601. At that office, all accounts, records, files, books, reports, correspondence and other data or documents relating to the operations of the Board and the agency under its jurisdiction shall be kept and all administrative matters shall be processed under the direction and authority of the Director assisted by adequate administrative personnel.

 

(Source:  Amended at 42 Ill. Reg. 19060, effective October 3, 2018)

 

Section 800.120  Meetings

 

a)         Regular meetings.  Meetings of the Board shall be held at least once each calendar quarter, on a date and at a time specified by the Chair.

 

b)         Special meetings.  Special meetings may be called at any time by the Chair or Vice Chair of the Board or by any three members of the Board.

 

c)         Place and hour of meetings.  Meetings of the Board shall be held at the general office of the Board or at any other place selected by the Chair or agreed upon by the Board, at the hour fixed by the Chair or by the members calling a special meeting.

 

d)         Annual meeting.  The annual meeting of the Board shall be held in the month of September, unless otherwise specified by the Chair or agreed upon by the Board.

 

e)         Quorum.  A majority of all members of the Board or Committee appointed and serving on the Board or Committee shall constitute a quorum for the transaction of business at any regular or special meeting of the Board or Committee.

 

f)         Meetings.  All meetings of the Board and any subsidiary body, including without limitation any committee, shall be subject to and conducted in accordance with the Open Meetings Act [5 ILCS 120].

 

g)         Attendance by a means other than physical presence

If a quorum of the members of the Board or any Committee is physically present, a majority of those physically present, as required by Section 2.01 of the Open Meetings Act, may allow a member of the Board to attend the meeting by other means (video or audio conference) if the member is prevented from physically attending because of:

 

1)         personal illness or disability;

 

2)         employment purposes or the business of the Board; or

 

3)         a family or other emergency. [5 ILCS 120/7]

 

h)         Voting.  Each member shall have one vote on any question coming before the Board/Committee at any regular or special meeting at which that member is in attendance.  Concurring votes by a majority of the members at the meeting shall be necessary for the adoption of any resolution or action by the Board/Committee.

 

i)          Roll calls.  The Chair or any member may request a roll call on any motion or resolution involving an expenditure of moneys or the creation of a liability for the Board or on any other motions.  The vote of each member present shall then be recorded in the minutes of the meeting.

 

j)          Reconsideration.  A motion for the reconsideration of any vote shall be in order only if made at the meeting at which the vote sought to be reconsidered is taken or at the next regular meeting.

 

k)         Deferral of reports.  Upon request of any two members of the Board, the consideration of any report presented by any committee shall be deferred for one meeting, and a copy of the report of the committee shall be provided each member of the Board.

 

l)          Record of proceedings. The Board shall keep a full record of all its proceedings in which all of its transactions is recorded.  All resolutions approved by the Board shall be signed by the Chair and Recording Secretary and shall be filed with the minutes of the meeting at which adopted.  At least five days before the date of the next scheduled meeting, the Board's General Counsel shall supply each Board member with a copy of the minutes of the last meeting.  

 

(Source:  Amended at 42 Ill. Reg. 19060, effective October 3, 2018)

 

Section 800.130  Officers and Their Duties

 

a)         Elective officers. The following named officers shall be elected by the Board biennially at the annual meeting in each odd-numbered year from among the members of the Board: Chair, Vice Chair, Recording Secretary, and Member at Large. Any vacancy occurring during a biennial period shall be filled in like manner for the unexpired term of office.

 

b)         Officers ex officio. The State Treasurer shall be Treasurer of the Board.

 

c)         Chair. The Chair shall be the chief executive officer of the Board; shall preside at all meetings; announce the business before the Board; announce the question under consideration and the result of the vote taken; request a roll call upon any action or resolution as herein provided. He or she shall appoint all necessary committees and see that they perform their assigned duties. The Chair shall exercise general supervision over the operations of the agency.

 

d)         Vice Chair

 

1)         In the absence of the Chair, the Vice Chair shall act as Chair at any regular or special meeting and shall serve in the Chair's stead if the Chair is temporarily unable or unwilling to act.

 

2)         If the Chair or Vice Chair is not available to preside at a meeting, any member selected by a majority vote of those present may act as presiding officer, pro tempore.

 

e)         Recording Secretary. The Recording Secretary shall authenticate with his or her signature any resolutions of the Board and shall perform such other duties as may be prescribed by the rules, orders or resolutions of the Board.

 

f)         Executive Director

The Executive Director shall administer the affairs of the Board pursuant to the provisions of the statute governing the Board, subject to and under supervision of the Board. 

 

(Source:  Amended at 42 Ill. Reg. 19060, effective October 3, 2018)

 

Section 800.140  Committees

 

a)         Investment Policy Committee

 

1)         There shall be an Investment Policy Committee of the Board, consisting of such members of the Board as the Chair of the Board shall appoint, who shall serve a term to end at the time of the next annual meeting of the Board following the election of officers. The Board shall determine delegation of Committee responsibilities. (Examples of such delegation include interviewing investment management firms that are finalists in the Board's competitive bidding process and recommending policies pertaining to the Board's investments, such as the Board's asset allocation study.)

 

2)         It shall be the responsibility of the Committee:

 

A)        to recommend investment policy to the Board, both at its regularly scheduled meetings and whenever recommendations appear, in the judgment of the Committee, to be necessary or desirable;

 

B)        for the ongoing and specific supervision of the internal investment process, including but not limited to advance approval of all long-term investment transactions not falling within certain delegatory guidelines established by Board action; and

 

C)        for ongoing liaison with external investment advisors, together with recommendations concerning the tenure, compensation, fund direction, and retention of the advisors.

 

3)         The Committee shall elect a Chair by vote of a majority of its members.    

 

b)         Emerging Manager Committee

 

1)         There shall be an Emerging Manager Committee of the Board, consisting of such members of the Board as the Chair of the Board shall appoint, who shall serve a term to end at the next annual meeting of the Board following the election of officers.  The Board shall determine the Committee's responsibilities.  (Examples of such delegation include interviewing emerging managers and recommending policies pertaining to the Board's investments, such as the Board's Emerging and Minority Investment Manager and Minority and Illinois Brokerage Policy.)

 

2)         It shall be the policy of the Committee:

 

A)        to increase access to and business with emerging managers;

 

B)         to maximize utilization of minority-owned broker/dealers by the Board's investment managers; and

 

C)         to monitor the utilization of emerging managers, minority-owned, women-owned and person with a disability owned business enterprises and broker dealers and report that utilization to the Board.

 

3)         The committee shall elect a Chair by vote of a majority of its members.

 

c)         Defined Contribution Committee

 

1)         There shall be a Defined Contribution Committee of the Board, consisting of such members of the Board as the Chair of the Board shall appoint, who shall serve a term to end at the time of the next annual meeting of the Board following the election of officers. The Board shall determine delegation of Committee responsibilities. (Examples of such delegation include monitoring and evaluating investment performance and determining benchmarks used in the evaluation of investment options.)

 

2)         It shall be the responsibility of the Committee to:

 

A)        oversee the administration of the Deferred Compensation Plan, evaluate the adequacy of the Plan's investment options, and attempt to ensure that the Plan offers participants information and tools necessary in selecting their investments;

 

B)        monitor and evaluate the performance of the Plan's investment managers and all Plan fees;

 

C)        review and respond to recommendations from ISBI staff and the consultant regarding investment options, fees, Plan design, participant communications, and other matters; and

 

D)        determine, through periodic review, whether an action of participant re-enrollment supports the goal of improving participant outcomes.

 

3)         The Committee shall elect a Chair by vote of a majority of its members.

 

(Source:  Amended at 44 Ill. Reg. 17452, effective October 13, 2020)

 

Section 800.210  Functions

 

a)         The functions of the Board are limited to investment management and such other duties and responsibilities as are directed or permitted by statute.  With respect to investment management more specifically:

 

To invest, reinvest, exchange and perform all investment functions with regard to reserves, funds, assets, securities and moneys which the Board is authorized to invest, and to preserve and protect such reserves, funds, assets, securities and moneys, including, but not limited to, authority to vote any stocks, bonds or other securities and to give general or special proxies or powers of attorney with or without power of substitution [40 ILCS 5/22A-106].

 

1)         The Board shall manage investments by executing procedures that include, but are not limited to:

 

A)        Performing due diligence on the investment portfolio.  (Examples of due diligence include monitoring the performance of current investment portfolios, selecting new investment portfolios, determining the asset allocation per portfolio and selecting investment managers to invest portfolio assets.)

 

B)        Adopting an asset allocation policy to achieve efficiently the Board's long-term investment objective.  (Examples of policy considerations include examining all asset classes and their appropriate benchmarks and allocating specific percentages of assets to specific asset classes.)

 

C)        Managing Board expenses.  (Examples of such management include negotiating competitive asset management fees with investment managers and monitoring the Board's operating budget.)

 

D)        Complying with the Illinois Pension Code [40 ILCS 5].  (Examples of compliance include adhering to statutory directives such as the prudent utilization of emerging investment managers in managing assets (see 40 ILCS 5/1-109.1(4)) and refraining from prohibited transactions.)

 

2)         The Board's general policy governing investments shall require that, as fiduciaries, the Board discharge its duties, with respect to pension fund assets it manages, solely in the interest of the participants and beneficiaries.  (Examples of general investment policy include maintaining the long-term investment objective established by the Board; investing with the care, skill, prudence and diligence that a prudent person would use in the conduct of an enterprise of like character with like aims; and diversifying investments to reduce risk, enhance returns and commit meaningful investment positions.) 

 

b)         State Employees Deferred Compensation Plan (Plan)

 

1)         The Board shall be responsible for developing and establishing the Plan (see 40 ILCS 5/24-104). 

 

2)         With respect to developing and establishing the Plan, the Board shall:

 

A)        Review investment offerings and offer acceptable investment offerings as investment options for the Plan; and

 

B)        Supervise the Department of Central Management Services' administration of the Plan.

 

3)         Further explanation regarding the Board's responsibilities with respect to the development and establishment of the Plan are found in the following Board regulations:  80 Ill. Adm. Code 2700: Subpart A (Introduction and Purpose of Plan); Subpart B (Definitions); Subpart C (the Board's general supervision of the administration of the Plan); Subpart G (distributions in the event of an unforeseeable emergency); Subpart I (ability to amend or terminate Plan).

 

c)         These functions shall not encompass any duties or responsibilities related to the operation and administration of the pension funds in any other area than that of investments.

 

(Source:  Amended at 42 Ill. Reg. 19060, effective October 3, 2018)

 

Section 800.220  Fiduciary Aspects

 

The Board shall have a fiduciary identity and trust aspects. By the name of "Illinois State Board of Investment," or its designated nominee, all its business shall be transacted, all funds coming under its custody and control shall be invested, and all securities and other property which it acquires shall be held in trust for the specific purposes set forth in the governing statute.

 

Section 800.230  Delegation of Authority

 

The Board shall manage the investments of any pension fund for the purpose of obtaining a total return on investments for the long term.  It also shall perform other functions as may be assigned or directed by the General Assembly.  The Board may not delegate its management functions.  For the purpose of seeking a broad spectrum of advice and fostering competitive performance, and to assist the Board in fully implementing the provisions of the applicable law, the Board may contract, for compensation, advisory investment service providers as authorized by Section 22A-111 of the Illinois Pension Code and consistent with the requirements of that Code, including but not limited to, utilizing a competitive process, when required, that is substantially similar to the process required for the procurement of professional and artistic services under Article 35 of the Illinois Procurement Code [30 ILCS 500], as required by Section 1-113.14 of the Illinois Pension Code.

 

(Source:  Amended at 42 Ill. Reg. 19060, effective October 3, 2018)

 

Section 800.240  Budget (Repealed)

 

(Source:  Repealed at 42 Ill. Reg. 19060, effective October 3, 2018)

 

Section 800.310  Investment Account

 

a)         For the purpose of achieving the maximum advantages of investment management, the invested assets for any fund under the jurisdiction and authority of the Board may be commingled and maintained in one or more investment accounts, to the extent dictated by basic investment considerations, with a distribution made according to types of securities as may be dictated by practical investment procedure.  The distribution of assets shall be dictated by the Board in accordance with its asset allocation policy.  The commingling of investment assets shall allow:

 

1)         Control over the Board's investment policies through increased flexibility in asset allocation; and

 

2)         Simplified accounting and reporting procedures.

 

b)         Unless the Board directs otherwise, fixed income investments shall be carried at amortized book value according to established accounting practices and actuarial requirements.  (Governmental entities, including governmental external pools, shall report investments at fair value on the balance sheet, rather than at amortized book value or cost.  Fair value shall be defined as the amount at which an investment could be exchanged in a current transaction between willing parties, other than a forced sale or liquidation (Governmental Accounting Standards Board, 401 Merritt 7, P.O. Box 5116, Norwalk CT 06856-5116, GASB Statement No. 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools", June 15, 1997, no subsequent dates or editions).)  Equity investments shall be carried at original cost.  Investments initially transferred to the Board shall be valued for its books of account on the foregoing basis.

 

(Source:  Amended at 37 Ill. Reg. 2720, effective February 25, 2013)

 

Section 800.320  Fund Credits

 

a)         Each fund transferring invested assets to the Board shall receive credit in an appropriate reserve account in the amounts established by the Board.  The credit shall constitute the initial value of the investment account of the particular fund.  As new investments are made from additional moneys made available to the Board for that purpose, proper credit in the established reserve account shall be given to each fund for the proportionate amount applicable to each fund according to the amounts of moneys creditable to each fund.  Reserve amounts shall be determined by:

 

1)         Allocating expenses and advances on an equitable, proportional basis, taking into account the net asset values of each member retirement system, or any other fund under the jurisdiction and authority of the Board;

 

2)         Allocating the net change in realized and unrealized gains and losses to each member retirement system, or any other fund under the jurisdiction and authority of the Board, on the 15^th of each calendar month, based on the final percentage of ownership of each member retirement system, or any other fund under the jurisdiction and authority of the Board, for the prior calendar month; and

 

3)         Allocating the net change in income and expenses for the calendar month to each member retirement system, or any other fund under the jurisdiction and authority of the Board, on the 30^th of each calendar month, taking into account any purchases or redemptions in ownership shares from each member retirement system, or any other fund under the jurisdiction and authority of the Board, during that calendar month.

 

b)         Periodic interest collections on fixed investments and dividend payments on equities shall be credited to each fund directly on the initial investments transferred to the Board if applicable to those investments, except in the case of commingled investments on which a proportionate amount shall be credited.  New investments may be commingled on a proportionate basis beginning July 1, 1970, with income from the investments distributed accordingly.

 

(Source:  Amended at 37 Ill. Reg. 2720, effective February 25, 2013)

 

Section 800.330  Fund Charges

 

a)         Each fund shall be charged with its share of all expenses of the Board, including the amount repayable to the State of the initial appropriation made to meet organization expenses, at quarter-yearly periods, on a pro-rata basis, according to the value of the investments held for the respective fund at the beginning of each quarter-yearly period, or on any other equitable basis as may be determined by the Board.

 

b)         A statement setting forth the amount of the expense charge made by the Board shall be provided to each pension fund as prescribed by Section 22A-114 of the Pension Code.

 

(Source:  Amended at 37 Ill. Reg. 2720, effective February 25, 2013)

 

Section 800.340  Reserve Balances

 

This Subpart is specifically designed to establish and maintain for each fund a reserve representing an equitable share of the net assets of the Board to the end that each fund shall, at all times, receive full credit for all moneys creditable to that fund in the form of invested assets or free cash balances or any other applicable assets that may exist at any given date.

 

(Source:  Amended at 37 Ill. Reg. 2720, effective February 25, 2013)

 

Section 800.410  Fiscal Reporting

 

An annual report shall be made by the Board following the close of each fiscal year. The Board shall approve the report and direct that it be filed by the Executive Director with the Department of Insurance or any other regulatory body as provided by law. The report shall embody a review of investment operations for the year, including a listing of all invested assets showing their book values and market values, the balances applicable to the several funds under the jurisdiction and authority of the Board, comment on the policies and procedures maintained by the Board during the year, and recommendations on any possible future changes in the governing statute or Board policies.

 

(Source:  Amended at 42 Ill. Reg. 19060, effective October 3, 2018)

 

Section 800.420  Audits

 

In accordance with established State policy, the books and accounts of the Board shall be audited at least annually by a certified public accountant designated by the Auditor General of the State of Illinois.  The scope of the audit may, upon suggestion of the Board, extend beyond the limitations prescribed by the Auditor General.  The results of the audit shall be reported in the annual report of the Board.  Copies of the audit report shall be made available to the several funds under the jurisdiction and authority of the Board.

 

(Source:  Amended at 37 Ill. Reg. 2720, effective February 25, 2013)

 

Section 800.510  Amendments

 

Amendments to this Part may be proposed by any member of the Board, shall be submitted to the Board's General Counsel in writing, and shall be acted upon in the following manner:

 

a)         Upon receipt of a proposal for an amendment, the Board's General Counsel shall distribute a copy to each member of the Board setting forth in full the proposed amendment at least 10 days prior to the date of any regular or special meeting at which the proposal will be submitted for consideration.

 

b)         At the next regular or special meeting following the distribution of the notice, or at any meeting thereafter to which consideration of the amendment has been postponed, the amendment may be adopted by a vote of at least a majority of all members of the Board.  At the meeting, the proposed amendment may be modified before being acted upon, without the necessity of any further notice to the members, provided that the amendment as modified shall be applicable only to those Sections or subsections to which the notice specifically referred, and provided further that any modification shall be approved by at least a majority of all members of the Board.

 

c)         When the Board has approved a proposal to amend this Part, the amendment shall be proposed and adopted as required by the Illinois Administrative Procedure Act [5 ILCS 100].

 

(Source:  Amended at 42 Ill. Reg. 19060, effective October 3, 2018)