LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 6722 NOTE PREPARED: Dec 21, 2020
BILL NUMBER: SB 317 BILL AMENDED:
SUBJECT: Prohibited Pension System Investments.
FIRST AUTHOR: Sen. Garten BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED: GENERAL IMPACT: State
X DEDICATED
FEDERAL
Summary of Legislation: The bill prohibits the Indiana Public Retirement System (INPRS) from investing
in companies controlled by the People's Republic of China or the Chinese Communist Party.
Effective Date: Upon passage.
Explanation of State Expenditures: INPRS: The bill’s requirements represent an additional workload and
expenditure on the agency outside of the agency’s routine administrative functions. The costs to implement
the proposal are indeterminate at this time and will depend on administrative actions. The administrative
costs of the affected funds are paid from the respective funds. Administrative costs for the defined
contribution accounts are paid by members of the funds through monthly administrative fees. [In 2020, the
monthly administrative fee was $3.75.]
The bill requires INPRS to determine which businesses would be restricted investments under the proposal,
divest from restricted investments, track and report on the divestment activities, and provide for an audit of
compliance. The bill also allows INPRS to cease divestment if certain conditions are met. Costs of
divestment include the costs associated with the sale, redemption, divestment, or withdrawal of an investment
and the costs associated with the acquisition and maintenance of a replacement investment. The potential also
exists that the funds may earn a lower rate of return by divesting from restricted holdings under the proposal.
The bill allows INPRS to contract with a research firm to determine which businesses would be restricted
investments under the proposal.
Interim Study Committee on Pension Management Oversight (PMOC): The bill allows the INPRS board in
consultation with PMOC to cease divestment if certain conditions are met. If the committee were to hold
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additional meetings to address this topic, there would be additional expenditures for legislator per diem and
travel reimbursement for the committee members. Any additional expenditures must be within the
committee’s budget, which is established by the Legislative Council.
Additional Information - INPRS currently pays a third party provider approximately $71,000 annually to
provide lists for the Sudan, terror states, and Anti-BDS divestment requirements in current law. INPRS
estimates that the opportunity cost of not holding Chinese securities in its global equity portfolio over the
past five years would have been approximately $44 M. INPRS's estimate was based on a request for
information from the Pension Management Oversight Committee. The actual investments that INPRS would
be required to divest from under the bill may differ from the estimate provided by INPRS. The expected rate
of return on investment for the pension funds is 6.75%. If the funds do not achieve the expected rate of return
over time and administrative costs increase, the actuarially defined contribution rate and the employer
contribution rate for the actuarially-funded retirement funds may increase.
This proposal applies to the following public pension and retirement funds: 1. Public Employees’ Retirement
Fund (PERF); 2. Public Employees Defined Contribution Plan; 3. Indiana State Teachers’ Retirement Fund
(TRF); 4. Teachers’ Defined Contribution Plan; 5. Indiana Judges’ Retirement Fund; 6. Prosecuting
Attorneys Retirement Fund; 7. State Excise Police, Gaming Agent, Gaming Control Officer, and
Conservation Enforcement Officers’ Retirement Fund; 8. 1977 Police Officers’ and Firefighters’ Pension
and Disability Fund; 9. Legislator’s Retirement System; 10. Pension Relief Fund; 11. Special Death Benefit
Fund.
Explanation of State Revenues:
Explanation of Local Expenditures:
Explanation of Local Revenues:
State Agencies Affected: Indiana Public Retirement System.
Local Agencies Affected:
Information Sources: Scott Davis, Chief Investment Officer, INPRS, ScDavis@inprs.in.gov;
INPRS’s Investment Exposure to China, Interim Study Committee on Pension Management Oversight,
October 14, 2020, https://iga.in.gov/documents/86c3fc9a;
https://iga.in.gov/legislative/2020/committees/i_pension_management_oversight_interim_study_committ
ee_on#information.
Fiscal Analyst: Camille Tesch, 317-232-5293.
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