Bill Text: MS HB1099 | 2023 | Regular Session | Introduced
Bill Title: Public retirement systems; require all investment actions to be made exclusively for purpose of providing financial benefits for members of.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2023-01-31 - Died In Committee [HB1099 Detail]
Download: Mississippi-2023-HB1099-Introduced.html
MISSISSIPPI LEGISLATURE
2023 Regular Session
To: Appropriations
By: Representative Criswell
House Bill 1099
AN ACT TO REQUIRE A FIDUCIARY OR THE GOVERNING BOARD OF A PUBLIC RETIREMENT SYSTEM, IN MAKING AND SUPERVISING INVESTMENTS FOR THE PUBLIC RETIREMENT SYSTEM, TO DISCHARGE ITS DUTIES SOLELY IN THE FINANCIAL INTEREST OF THE PARTICIPANTS AND BENEFICIARIES FOR THE EXCLUSIVE PURPOSES OF PROVIDING FINANCIAL BENEFITS TO PARTICIPANTS AND THEIR BENEFICIARIES AND DEFRAYING REASONABLE EXPENSES OF ADMINISTERING THE SYSTEM; TO PROVIDE THAT AN INVESTMENT MANAGER RETAINED BY THE GOVERNING BOARD SHALL BE SUBJECT TO THE SAME FIDUCIARY DUTIES AS THE BOARD; TO REQUIRE A FIDUCIARY TO TAKE INTO ACCOUNT ONLY FINANCIAL FACTORS WHEN DISCHARGING ITS DUTIES WITH RESPECT TO A RETIREMENT PLAN; TO PROVIDE THAT FINANCIAL FACTORS DO NOT INCLUDE ANY ACTION TAKEN, OR FACTOR CONSIDERED, BY A FIDUCIARY WITH ANY PURPOSE TO FURTHER SOCIAL, POLITICAL OR IDEOLOGICAL INTERESTS; TO PROVIDE THAT ALL SHARES HELD DIRECTLY OR INDIRECTLY BY OR ON BEHALF OF A PUBLIC RETIREMENT SYSTEM AND/OR THE PARTICIPANTS AND THEIR BENEFICIARIES SHALL BE VOTED SOLELY IN THE FINANCIAL INTEREST OF PLAN PARTICIPANTS AND THEIR BENEFICIARIES; TO PROVIDE THAT THIS ACT, OR ANY CONTRACT SUBJECT TO THIS ACT, MAY BE ENFORCED BY THE ATTORNEY GENERAL; TO PROVIDE THAT A PERSON OR COMPANY WHO SERVES AS A FIDUCIARY AND WHO VIOLATES THE FIDUCIARY DUTY IMPOSED BY THIS ACT SHALL BE OBLIGATED TO PAY DAMAGES TO THE PUBLIC RETIREMENT SYSTEM IN AN AMOUNT EQUAL TO THREE TIMES ALL MONIES PAID TO THE PERSON OR COMPANY BY THE SYSTEM FOR THE SERVICES OF THE PERSON OR COMPANY; TO AMEND SECTIONS 25-11-121 AND 25-11-407, MISSISSIPPI CODE OF 1972, TO CONFORM TO THE PRECEDING PROVISIONS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Definitions. As used in this act, the following terms shall be defined as provided in this subsection:
(a) "Board" means the board of trustees or other governing board of the public retirement system.
(b) "Fiduciary" includes any person acting on behalf of the board of trustees as an investment manager or proxy advisor.
(c) "Fiduciary commitment" means any evidence of a fiduciary's purpose in managing assets as a fiduciary, including, but not limited to, any of the following in a fiduciary's capacity as a fiduciary:
(i) Advertising, statements, explanations, reports, letters to clients, communications with portfolio companies, statements of principles, or commitments; or
(ii) Participation in, affiliation with, or status as a signatory to, any coalition, initiative, joint statement of principles, or agreement.
(c) "Financial" means having been prudently determined by a fiduciary to have a material effect on the financial risk or the financial return of an investment.
(i) The term "financial" does not include any action taken, or factor considered, by a fiduciary with any purpose whatsoever to further social, political or ideological interests.
(ii) A fiduciary may reasonably be determined to have taken an action, or considered a factor, with a purpose to further social, political, or ideological interests based upon evidence indicating such a purpose, including, but not limited to, any fiduciary commitment to further, through portfolio company engagement, board or shareholder votes, or otherwise as a fiduciary, any of the following beyond what controlling federal or state law requires:
1. Eliminating, reducing, offsetting, or disclosing greenhouse gas emissions;
2. Divesting from, limiting investment in, or limiting the activities or investments of, any company, for failing, or not committing, to meet environmental standards or disclosures;
3. Access to abortion, sex or gender change or transgender surgery; or
4. Divesting from, limiting investment in, or limiting the activities or investments of, any company that engages in, facilitates, or supports the manufacture, import, distribution, marketing or advertising, sale, or lawful use of firearms, ammunition or components parts and accessories of firearms or ammunition.
(d) "Governmental entity" means:
(i) The State of Mississippi or any political subdivision of the state; or
(ii) Any school, college, university, administration, authority, or other enterprise operated by the state or any political subdivision of the state.
(e) "Public retirement system," "system" or "plan" means any retirement or pension system or plan maintained, provided or offered by a governmental entity.
SECTION 2. Fiduciary duty. (1) In making and supervising investments of the reserve fund of a public retirement system, a fiduciary or the board shall discharge its duties solely in the financial interest of the participants and beneficiaries for the exclusive purposes of:
(a) Providing financial benefits to participants and their beneficiaries; and
(b) Defraying reasonable expenses of administering the system.
(2) An investment manager retained by the board shall be subject to the same fiduciary duties as the board.
(3) A fiduciary shall take into account only financial factors when discharging its duties with respect to a plan.
(4) All shares held directly or indirectly by or on behalf of a public retirement system and/or the participants and their beneficiaries shall be voted solely in the financial interest of plan participants and their beneficiaries.
(5) Unless no economically practicable alternative is available, the governmental entity that establishes or maintains a public retirement system or the board of the system may not grant proxy voting authority to any person who is not a part of the governmental entity, unless that person has a practice of, and in writing commits to, follow guidelines that match the governmental entity's and the board's obligation to act solely upon financial factors.
(5) Unless no economically practicable alternative is available, public retirement system assets shall not be entrusted to a fiduciary, unless that fiduciary has a practice of, and in writing commits to, follow guidelines, when engaging with portfolio companies and voting shares or proxies, that match the governmental entity's and the board's obligation to act solely upon financial factors.
(6) Unless no economically practicable alternative is available, a fiduciary or the board may not adopt a practice of following the recommendations of a proxy advisor or other service provider, unless such advisor or service provider has a practice of, and in writing commits to, follow proxy voting guidelines that match the governmental entity's and the board's obligation to act solely upon financial factors.
(7) All proxy votes shall be tabulated and reported annually to the board. For each vote, the report shall contain a vote caption, the plan's vote, the recommendation of company management, and, if applicable, the proxy advisor's recommendation. These reports shall be posted on a publicly available webpage on the board's website.
SECTION 3. Enforcement. (1) This act, or any contract subject to this act, may be enforced by the Attorney General.
(2) If the Attorney General has reasonable cause to believe that a person has engaged in, is engaging in, or is about to engage in, a violation of this act, he or she may:
(a) Require such person to file on such forms as he or she prescribes a statement or report in writing, under oath, as to all the facts and circumstances concerning the violation; and
(b) Such other data and information as he or she may deem necessary.
(3) In addition to any other remedies available at law or equity, a person or company who serves as a fiduciary and who violates Section 2 of this act shall be obligated to pay damages to the public retirement system in an amount equal to three (3) times all monies paid to the person or company by the system for the services of the person or company.
SECTION 4. Section 25-11-121, Mississippi Code of 1972, is amended as follows:
25-11-121. (1) The board shall, from time to time, determine the current requirements for benefit payments and administrative expense which shall be maintained as a cash working balance, except that such cash working balance shall not exceed at any time an amount necessary to meet the current obligations of the system for a period of ninety (90) days. Any amounts in excess of such cash working balance shall be invested, as follows:
(a) Funds may be deposited in any institution insured by the Federal Deposit Insurance Corporation that maintains a facility that takes deposits in the State of Mississippi or a custodial bank;
(b) Corporate bonds and taxable municipal bonds; or corporate short-term obligations of corporations or of wholly owned subsidiaries of corporations, whose short-term obligations are rated A-2 or better by Standard and Poor's, rated P-2 or better by Moody's Investment Service, F-2 or better by Fitch Ratings, Ltd., or the equivalent of these ratings if assigned by another United States Securities and Exchange Commission designated Nationally Recognized Statistical Rating Organization;
(c) Agency and nonagency residential and commercial mortgage-backed securities and collateralized mortgage obligations;
(d) Asset-backed securities;
(e) Bank loans;
(f) Convertible bonds;
(g) Bonds of the Tennessee Valley Authority;
(h) Bonds, notes, certificates and other valid obligations of the United States, and other valid obligations of any federal instrumentality that issues securities under authority of an act of Congress and are exempt from registration with the Securities and Exchange Commission;
(i) Bonds, notes, debentures and other securities issued by any federal instrumentality and fully guaranteed by the United States;
(j) Interest-bearing revenue bonds or notes or bonds or notes which are general obligations of any state in the United States or of any city or county therein;
(k) Bonds of established non-United States companies and foreign government securities. The board may take requisite action to effectuate or hedge transactions or invest in currency through foreign or domestic banks, including the purchase and sale, transfer, exchange, or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments, notwithstanding any other provisions of this article to the contrary;
(l) Shares of stocks, common and/or preferred, of corporations created by or existing under the laws of the United States or any state, district or territory thereof and shares of stocks, common and/or preferred, and convertible securities of non-United States companies; provided:
(i) The maximum investments in stocks shall not exceed eighty percent (80%) of the total book value of the total investment fund of the system;
(ii) The stock of such corporation shall:
1. Be listed on a national stock exchange; or
2. Be traded in the over-the-counter market;
(iii) The outstanding shares of such corporation shall have a total market value of not less than Fifty Million Dollars ($50,000,000.00);
(iv) The amount of investment in any one (1) corporation shall not exceed three percent (3%) of the book value of the assets of the system;
(v) The shares of any one (1) corporation owned by the system shall not exceed five percent (5%) of that corporation's outstanding stock.
The board may take requisite action utilizing foreign currency as an investment vehicle, or to effectuate or hedge transactions for shares of stocks and convertible securities of non-United States companies through foreign or domestic banks, including the purchase and sale, transfer, exchange, or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments, notwithstanding any other provisions of this article to the contrary;
(m) Covered call and put options on securities or indices traded on one or more of the regulated exchanges;
(n) Pooled or commingled funds managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees, and shares of investment companies and unit investment trusts registered under the Investment Company Act of 1940, where such pooled or commingled funds or shares are comprised of common or preferred stocks, bonds, money market instruments or other investments authorized under this section. Such investment in commingled funds or shares shall be held in trust; provided that the total book value of investments under this paragraph shall at no time exceed five percent (5%) of the total book value of all investments of the system. Any investment manager approved by the board of trustees shall invest such commingled funds or shares as a fiduciary in accordance with Sections 1 though 3 of this act;
(o) Pooled or commingled real estate funds or real estate securities managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees. Such investment in commingled funds or shares shall be held in trust; provided that the total book value of investments under this paragraph shall at no time exceed ten percent (10%) of the total book value of all investments of the system. Any investment manager approved by the board of trustees shall invest such commingled funds or shares as a fiduciary in accordance with Sections 1 though 3 of this act. The ten percent (10%) limitation in this paragraph shall not be subject to the five percent (5%) limitation in paragraph (n) of this subsection;
(p) Types of investments not specifically authorized by this subsection if the investments are in the form of a separate account managed by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board; or a limited partnership or commingled fund approved by the board; provided that the total book value of investments under this paragraph shall at no time exceed twenty percent (20%) of the total book value of all investments of the system. Any person or entity who exercises any discretionary authority or discretionary control respecting management of the separate account, limited partnership or commingled fund, or who exercises any authority or control respecting management or disposition of the assets of the separate account, limited partnership or commingled fund, shall exercise such authority or control as a fiduciary in accordance with Sections 1 though 3 of this act.
(2) All investments shall be acquired at prices not exceeding the prevailing market values for such investments.
(3) Any limitations herein set forth shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time. All investments shall be clearly marked to indicate ownership by the system and to the extent possible shall be registered in the name of the system.
(4) Subject to the above terms, conditions, limitations and restrictions, the board shall have power to sell, assign, transfer and dispose of any of the securities and investments of the system, provided that said sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services or other such services as determined by the board to be necessary for the effective and efficient operation of the system.
(5) Except as otherwise provided herein, no trustee and no employee of the board shall have any direct or indirect interest in the income, gains or profits of any investment made by the board, nor shall any such person receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board shall become an endorser or surety, or in any manner an obligor for money loaned by or borrowed from the system.
(6) All interest derived from investments and any gains from the sale or exchange of investments shall be credited by the board to the account of the system.
(7) The board of trustees shall credit regular interest to the annuity savings account monthly. Regular interest shall mean such per centum rate to be compounded annually as set by the board of trustees through regulation.
(8) The board of trustees shall be the custodian of the funds of the system. All retirement allowance payrolls shall be certified by the executive director who shall furnish the board a surety bond in a company authorized to do business in Mississippi in such an amount as shall be required by the board, the premium to be paid by the board from the expense account.
(9) For the purpose of meeting disbursements for retirement allowances, annuities and other payments, cash may be kept available, not exceeding the requirements of the system for a period of ninety (90) days, on deposit in one or more banks or trust companies organized under the laws of the State of Mississippi or the laws of the United States, provided that the sum on deposit in any one (1) bank or trust company shall not exceed thirty-five percent (35%) of the paid-up capital and regular surplus of such bank or trust company.
(10) The board, the executive director and employees shall discharge their duties with respect to the investments of the system solely for the interest of the system with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent investor acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, including diversifying the investments of the system so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. The board, the executive director and employees shall discharge their duties under this subsection in accordance with Sections 1 though 3 of this act.
(11) Documentary material or data made or received by the system which consists of trade secrets or commercial or financial information that relates to the investments of the system shall be exempt from the Mississippi Public Records Act of 1983 if the disclosure of the material or data is likely to impair the system's ability to obtain such information in the future, or is likely to cause substantial harm to the competitive position of the person or entity from whom the information was obtained.
SECTION 5. Section 25-11-407, Mississippi Code of 1972, is amended as follows:
25-11-407. The Board of Trustees of the Public Employees' Retirement System shall designate not less than three (3) nor more than five (5) companies to provide annuity contracts, mutual fund accounts or similar investment products, and the types of investment contracts or funds that may be offered by those companies. In making those designations, the board of trustees shall consider and be guided by:
(a) The nature and extent of the rights and benefits to be provided by those contracts or accounts, or both, for participants and their beneficiaries;
(b) The relation of those rights and benefits to the amount of contributions to be made;
(c) The suitability of those rights and benefits to the needs of the participants;
(d) The efficacy of the contracts or accounts, or both, in the recruitment and retention of faculty and administrators;
(e) The ability and experience of the designated companies in providing those suitable rights and benefits under those contracts or accounts, or both; and
(f) The ability and experience of the designated companies to provide both suitable participant investment guidance and investment options.
The companies shall act in a fiduciary capacity in accordance with Sections 1 through 3 of this act in selecting investment products that are suitable for the optional retirement program. It shall be the duty of the companies to report to and seek approval from the board for the investment products made available under this paragraph and to report the participant use of those options annually. The board reserves the right to refuse or discontinue any product offered by those companies.
SECTION 6. This act shall take effect and be in force from and after July 1, 2023.
