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SENATE BILL NO. 979
A bill to amend 1965 PA 314, entitled
"Public employee retirement system investment act,"
by amending section 13 (MCL 38.1133), as amended by 2018 PA 676.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 13. (1) This act supersedes any investment authority 1
previously granted to a system under any other law of this state. 2
(2) The assets of a system may be invested, reinvested, held 3
in nominee form, and managed by an investment fiduciary subject to 4
the terms, conditions, and limitations provided in this act. An 5
investment fiduciary of a defined contribution plan may arrange for 6
May 19, 2026, Introduced by Senators KLINEFELT, GEISS and SHINK and referred to
Committee on Local Government.
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1 or more investment options to be directed by the participants of 1
the defined contribution plan. The limitations on the percentage of 2
total assets for investments provided in this act do not apply to a 3
defined contribution plan in which a participant directs the 4
investment of the assets in his or her the participant's individual 5
account, and that participant is not considered an investment 6
fiduciary under this act. 7
(3) An investment fiduciary shall discharge his or her the 8
investment fiduciary's duties solely in the interest of the 9
participants and the beneficiaries, and shall do all of the 10
following: 11
(a) Act with the same care, skill, prudence, and diligence 12
under the circumstances then prevailing that a prudent person 13
acting in a similar capacity and familiar with those matters would 14
use in the conduct of a similar enterprise with similar aims. 15
(b) Act with due regard for the management, reputation, and 16
stability of the issuer and the character of the particular 17
investments being considered. 18
(c) Make investments for the exclusive purposes of providing 19
benefits to participants and participants' beneficiaries, and of 20
defraying reasonable expenses of investing the assets of the 21
system. 22
(d) Give appropriate consideration to those facts and 23
circumstances that the investment fiduciary knows or should know 24
are relevant to the particular investment or investment course of 25
action involved, including the role the investment or investment 26
course of action plays in that portion of the system's investments 27
for which the investment fiduciary has responsibility; and act 28
accordingly. For purposes of this subsection, "appropriate 29
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consideration" includes, but is not limited to, a determination by 1
the investment fiduciary that a particular investment or investment 2
course of action is reasonably designed, as part of the investments 3
of the system, to further the purposes of the system, taking into 4
consideration the risk of loss and the opportunity for gain or 5
other return associated with the investment or investment course of 6
action; and consideration of the following factors as they relate 7
to the investment or investment course of action: 8
(i) The diversification of the investments of the system. 9
(ii) The liquidity and current return of the investments of the 10
system relative to the anticipated cash flow requirements of the 11
system. 12
(iii) The projected return of the investments of the system 13
relative to the funding objectives of the system. 14
(e) Give appropriate consideration to investments that would 15
enhance the general welfare of this state and its citizens if those 16
investments offer the safety and rate of return comparable to other 17
investments permitted under this act and available to the 18
investment fiduciary at the time the investment decision is made. 19
(f) Prepare and maintain written objectives, policies, and 20
strategies with clearly defined accountability and responsibility 21
for implementing and executing the system's investments. 22
(g) Monitor the investment of the system's assets with regard 23
to the limitations on those investments under this act. Upon 24
discovery that an investment causes the system to exceed a 25
limitation prescribed in this act, the investment fiduciary shall 26
reallocate assets in a prudent manner to comply with the prescribed 27
limitation. 28
(h) Prepare and maintain written policies regarding ethics and 29
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professional training and education, including travel, which 1
policies contain clearly defined accountability and reporting 2
requirements for the system's investment fiduciaries. The written 3
policies in this subdivision must include not less than 8 hours of 4
professional training and education every 2 years, per investment 5
fiduciary. 6
(i) Publish a summary annual report that includes all of the 7
following: 8
(i) The name of the system. 9
(ii) The names of the system's investment fiduciaries. 10
(iii) The names of the system's service providers. 11
(iv) The system's assets and liabilities and changes in net 12
plan assets on a plan-year basis. 13
(v) The system's funded ratio based on the ratio of valuation 14
assets to actuarial accrued liabilities on a plan-year basis. 15
(vi) Except as otherwise provided in this subparagraph, the 16
system's investment performance net of fees on a rolling calendar-17
year basis for the previous 1-, 3-, 5-, 7-, and 10-year periods. 18
For a system for which the state treasurer is the investment 19
fiduciary, the summary annual report must include the system's 20
investment performance net of fees on a rolling calendar-year and 21
fiscal-year basis for the previous 1-, 3-, 5-, 7-, and 10-year 22
periods. 23
(vii) The system's administrative and investment expenditures 24
pursuant to standards of the Governmental Accounting Standards 25
Board, including, but not limited to, a list of all expenditures 26
made with soft dollars and all expenditures for professional 27
training and education, including travel expenditures, by or on 28
behalf of system board members that are paid by the system, if any. 29
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(viii) The system's itemized budget containing all projected 1
expenditures, including, but not limited to, expenditures for 2
professional training and education, including travel expenditures, 3
by or on behalf of system board members that are paid by the 4
system. 5
(ix) The following information as provided in the system's most 6
recent annual actuarial valuation report: 7
(A) The number of active members. 8
(B) The number of retirees and beneficiaries. 9
(C) The average annual retirement allowance. 10
(D) The total annual retirement allowances being paid. 11
(E) The valuation payroll. 12
(F) The employer's computed normal cost of benefits expressed 13
as a percentage of valuation payroll. 14
(G) The employer's total contribution rate expressed as a 15
percentage of valuation payroll. 16
(H) The weighted average of member contributions, if any. 17
(I) The actuarial assumed rate of investment return. 18
(J) The actuarial assumed rate of long-term wage inflation. 19
(K) The smoothing method utilized to determine the funding 20
value of assets. 21
(L) The amortization method and period utilized for funding 22
the system's unfunded actuarial accrued liabilities, if any. 23
(M) The system's actuarial cost method. 24
(N) Whether system membership is open or closed to specific 25
groups of employees. 26
(O) The actuarial assumed rate of health care inflation. 27
(x) In addition to the expenditures reported under 28
subparagraph (vii), for a large sponsored system a travel report 29
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listing all travel outside this state in the immediately preceding 1
fiscal year that was funded in whole or in part with public funds. 2
The report must include the total expenses for all out-of-state 3
travel funded during the immediately preceding fiscal year and all 4
of the following information for each travel occurrence: 5
(A) The name of each person receiving reimbursement for travel 6
outside this state or whose travel costs were paid by the large 7
sponsored system and funded in whole or in part with public funds. 8
(B) The destination. 9
(C) The dates. 10
(D) A brief statement of the reason for the travel. 11
(E) An itemization of the transportation and related costs, 12
including, but not limited to, the amount for food, lodging, and 13
vehicle rental and listing the names of hotels, restaurants, 14
vehicle rental agencies, and vehicle models. 15
(xi) For a state unit, an executive summary of both of the 16
following: 17
(A) The state unit's unfunded actuarial accrued liabilities 18
for retiree health and pension. 19
(B) The information described in subparagraph (v). 20
(j) An investment fiduciary of a large sponsored system shall 21
submit a summary annual report described in subdivision (i) to the 22
financial review commission created under the Michigan financial 23
review commission act, 2014 PA 181, MCL 141.1631 to 141.1643. 24
(k) For a state unit, submit the executive summary required 25
under subdivision (i)(xi) to the senate and house of representatives 26
appropriations committees and the senate and house fiscal agencies 27
not less than 30 days after publication. 28
(l) For a system other than a state unit, submit the summary 29
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annual report published under subdivision (i) to the department of 1
treasury not less than 30 days after publication. 2
(4) An investment fiduciary who is an investment fiduciary of 3
any of the following shall comply with the divestment from terror 4
act, 2008 PA 234, MCL 129.291 to 129.301, in making investments 5
under this act: 6
(a) The Tier 1 retirement plan available under the state 7
employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69. 8
(b) The Tier 1 retirement plan available under the judges 9
retirement act of 1992, 1992 PA 234, MCL 38.2101 to 38.2670. 10
(c) The Michigan state police retirement system created under 11
the state police retirement act of 1986, 1986 PA 182, MCL 38.1601 12
to 38.1675.38.1674. 13
(d) The Michigan public school employees' retirement system 14
created under the public school employees retirement act of 1979, 15
1980 PA 300, MCL 38.1301 to 38.1437. 16
(5) Subject to section 13g, an investment fiduciary may use a 17
portion of the system's income to defray the costs of investing, 18
managing, and protecting the assets of the system; may retain 19
investment and all other goods and services necessary for the 20
conduct of the affairs of the system, including investment 21
advisors, consultants, custodians, accountants, auditors, 22
attorneys, actuaries, investment personnel, administrators, and 23
physicians; and may enter into contracts for and pay reasonable 24
compensation for those services. Subject to an annual appropriation 25
by the legislature, a deduction from the income of a state-26
administered system resulting from the payment of those costs must 27
be made. 28
(6) Subject to this subsection and subsection (13), an 29
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investment fiduciary may use a portion of the system's income to 1
defray the costs of professional training and education, including 2
travel costs, of system board members, which professional training 3
and education, including travel, are directly related to the 4
administration, management, and operation of the system. The 5
governing board vested with the general administration, management, 6
and operation of the system or other decision-making body that is 7
responsible for implementation and supervision of the system shall 8
adopt an annual budget for professional training and education, 9
including travel, authorized under this subsection. The budget 10
adopted under this subsection must reflect the number of board 11
members, the size of the system, and the educational objectives of 12
the system. The system's total aggregate cost for professional 13
training and education, including travel costs, authorized under 14
this subsection for a fiscal year must not exceed $150,000.00 or an 15
amount that is equal to the total number of system board members 16
multiplied by $12,000.00, whichever is less. The system's total 17
cost for professional training and education, including travel 18
costs, authorized under this subsection for an individual system 19
board member in a fiscal year must not exceed $30,000.00. Beginning 20
January 1, 2013, the department of treasury shall adjust the dollar 21
amounts in this subsection by an amount determined by the state 22
treasurer at the end of the immediately preceding calendar year to 23
reflect the cumulative annual percentage change in the Consumer 24
Price Index. As used in this subsection, "Consumer Price Index" 25
means the most comprehensive index of consumer prices available for 26
this state from the Bureau of Labor Statistics of the United States 27
Department of Labor. 28
(7) Before any investment services are provided, an investment 29
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service provider shall provide the investment fiduciary of the 1
system with a complete written disclosure of all fees or other 2
compensation associated with its relationship with the system. 3
After investment services are provided to the investment fiduciary 4
of the system, an investment service provider shall provide on an 5
annual basis written disclosure of all fees including, but not 6
limited to, commissions, 12b-1 and related fees, compensation paid 7
or to be paid to third parties, and any other compensation paid by 8
the system to the investment fiduciary of the system. As used in 9
this subsection, "investment service provider" means any 10
individual, third-party agent or consultant, or other entity that 11
receives direct or indirect compensation for consulting, investment 12
management, brokerage, or custody services related to the system's 13
assets. For purposes of this section only, investment service 14
provider does not include a retirement system. 15
(8) The system must be a separate and distinct trust fund and 16
the assets of the system must be for the exclusive benefit of the 17
participants and their beneficiaries and of defraying reasonable 18
expenses of investing the assets of the system. With respect to a 19
system, an investment fiduciary shall not cause the system to 20
engage in a transaction if he or she the investment fiduciary knows 21
or should know that the transaction is any of the following, either 22
directly or indirectly: 23
(a) A sale or exchange or a leasing of any property from the 24
system to a party in interest for less than the fair market value, 25
or from a party in interest to the system for more than the fair 26
market value. 27
(b) A lending of money or other extension of credit from the 28
system to a party in interest without the receipt of adequate 29
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security and a reasonable rate of interest, or from a party in 1
interest to the system with the provision of excessive security or 2
at an unreasonably high rate of interest. 3
(c) A transfer to, or use by or for the benefit of, the 4
political subdivision sponsoring the system of any assets of the 5
system for less than adequate consideration. 6
(d) The furnishing of goods, services, or facilities from the 7
system to a party in interest for less than adequate consideration, 8
or from a party in interest to the system for more than adequate 9
consideration. 10
(9) With respect to a system subject to this act, an 11
investment fiduciary shall not do any of the following: 12
(a) Deal with the assets of the system in his or her the 13
investment fiduciary's own interest or for his or her the 14
fiduciary's own account. 15
(b) In his or her the investment fiduciary's individual or any 16
other capacity act in any transaction involving the system on 17
behalf of a party whose interests are adverse to the interests of 18
the system or the interest of its participants or participants' 19
beneficiaries. 20
(c) Receive any consideration for his or her the investment 21
fiduciary's own personal account from any party dealing with the 22
system in connection with a transaction involving the assets of the 23
system. 24
(10) This section does not prohibit an investment fiduciary 25
from doing any of the following: 26
(a) Receiving any benefit to which he or she the investment 27
fiduciary may be entitled as a participant or participant's 28
beneficiary of the system. 29
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(b) Receiving any reimbursement of expenses properly and 1
actually incurred in the performance of his or her the investment 2
fiduciary's duties for the system. 3
(c) Serving as an investment fiduciary in addition to being an 4
officer, employee, agent, or other representative of the political 5
subdivision sponsoring the system. 6
(d) Receiving agreed upon compensation for services from the 7
system. 8
(11) Except for an employee of a system, this state, or the 9
political subdivision sponsoring a system, when acting in the 10
capacity as an investment fiduciary, an investment fiduciary who is 11
qualified under section 12c(1)(b) shall meet 1 of the following 12
requirements: 13
(a) Be a registered investment adviser under the investment 14
advisers act of 1940, 15 USC 80b-1 to 80b-21, or the uniform 15
securities act (2002), 2008 PA 551, MCL 451.2101 to 451.2703. 16
(b) Be a bank as defined under the investment advisers act of 17
1940, 15 USC 80b-1 to 80b-21. 18
(c) Be an insurance company qualified under section 16(3). 19
(12) An investment fiduciary shall not invest in a debt 20
instrument issued by a foreign country that has been designated by 21
the United States Department of State as a state sponsor of terror. 22
(13) A large sponsored system shall not pay the expenses for a 23
person to travel outside this state from funds under its control 24
unless 1 or more of the following conditions apply to the travel: 25
(a) It is required by legal mandate or court order or for law 26
enforcement purposes. 27
(b) It is necessary to protect the health or safety of 28
citizens of, or visitors to, this state or to assist other states 29
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in similar circumstances. 1
(c) It is necessary to produce budgetary savings or to 2
increase revenues, including protecting existing federal funds or 3
securing additional federal funds. 4
(d) It is necessary to secure specialized training for the 5
person that is substantially related to performing the duties of 6
the position and is not available within this state. 7
(14) Subject to section 13g, an investment fiduciary of a 8
large sponsored system that invests or has invested in a hazardous 9
waste deep disposal well facility regulated under part 111 or 121 10
of the natural resources and environmental protection act, 1994 PA 11
451, MCL 324.11101 to 324.11153 and 324.12101 to 324.12117, is 12
subject to all of the following: 13
(a) The investment fiduciary shall not make an additional 14
investment in the hazardous waste deep disposal well facility 15
unless the investment is solely to prepare the property on which 16
the hazardous waste deep disposal well facility is located for sale 17
for purposes other than operation as a hazardous waste deep 18
disposal well facility or similar hazardous facility. 19
(b) The investment fiduciary shall sell, redeem, divest, or 20
withdraw all investments in the hazardous waste deep disposal well 21
facility within 180 days after any of the following circumstances 22
occur: 23
(i) The operator of the hazardous waste deep disposal well 24
facility files for bankruptcy. 25
(ii) The sale, transfer, purchase, or acquisition of a 26
controlling interest in the operator of the hazardous waste deep 27
disposal well facility. 28
(iii) An Environmental Protection Agency action for a violation 29
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at the hazardous waste deep disposal well facility. 1
(iv) An Environmental Protection Agency revocation of the 2
operator's license. 3
(v) An Environmental Protection Agency or department of 4
environmental quality environment, Great Lakes, and energy order to 5
terminate operations at the hazardous waste deep disposal well 6
facility. 7
(15) For a state unit, a representative of the office of 8
retirement services in the department of technology, management, 9
and budget shall appear before the senate and house of 10
representatives appropriations committees on request of the 11
committee chair to testify about the system's summary annual report 12
required under subsection (3). 13
(16) The department of treasury shall post on its website an 14
executive summary of each summary annual report submitted to the 15
department of treasury under subsection (3)(l). The executive 16
summary must include the applicable system's unfunded actuarial 17
accrued liability for pension. The department of treasury shall 18
submit each executive summary required under this subsection to the 19
senate and the house of representatives appropriations committees 20
and the senate and house fiscal agencies not less than 30 days 21
after posting. 22
(17) The plan administrator of a system shall establish a 23
written policy to provide for corrective action if an investment 24
fiduciary of the system fails to meet the professional training and 25
education requirements under subsection (3)(h). 26
(18) (17) As used in this section: , "state 27
(a) "Professional training and education" means instructional 28
courses designed to bring investment fiduciaries up to date on 29
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areas of knowledge and skills, including, but not limited to, any 1
of the following: 2
(i) Fiduciary responsibility. 3
(ii) Investment of plan assets. 4
(iii) Actuarial topics related to pension systems. 5
(iv) Legal topics related to pension systems. 6
(v) Plan administration. 7
(b) "State unit" means a system established under the state 8
employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69, the 9
public school employees retirement act of 1979, 1980 PA 300, MCL 10
38.1301 to 38.1437, the judges retirement act of 1992, 1992 PA 234, 11
MCL 38.2101 to 38.2670, and the state police retirement act of 12
1986, 1986 PA 182, MCL 38.1601 to 38.1675.38.1674. 13