Senate Bill 542 amends Tennessee Code Annotated, Title 9, Chapter 4, Part 15, to establish new regulations regarding investments by the Tennessee consolidated retirement system and political subdivision pension plans. The bill introduces definitions for key terms such as "Board," "China," "Company," "Direct holdings," "Divest," and "Restricted entity," among others. It mandates that by January 15, 2026, and annually thereafter, the board and governing bodies must review their direct holdings to identify any restricted investments, specifically those majority-owned by China. If such investments are found, the state treasurer or governing body is required to divest from them and report the actions taken.

Additionally, if divestment cannot be executed promptly, a written divestment plan must be developed by July 1 each year, ensuring compliance with existing fiduciary duties and investment rules. The bill also provides immunity from civil liability for the state, its officers, the retirement system, and governing bodies for actions taken under this section. The act is set to take effect upon becoming law, emphasizing the importance of safeguarding investments from entities associated with the Chinese government.