Public employees’ retirement: investments: security loans.
The bill stipulates clear regulations regarding collateral requirements, specifying that borrowers must provide at least 102% of the market value of loaned securities in acceptable collateral forms, such as cash or government securities. Furthermore, the Board is mandated to revalue these assets daily, ensuring continual alignment with market conditions. Additionally, the bill caps the market value of loaned securities secured by marketable public equities and international government bonds at 25% of the fund's total assets, thereby instituting a risk management framework meant to protect the integrity of the retirement fund.
Assembly Bill No. 679 primarily amends Section 20203 of the Government Code, which governs contracts related to security loan agreements by the Public Employees Retirement System (PERS). This legislation grants the PERS Board of Administration enhanced authority to enter into security loan agreements independently from provisions that previously required alignment with state agency agreements. This shift facilitates a more streamlined and efficient process for the investment and management of the Public Employees Retirement Fund, designed to bolster the overall financial health of the retirement system.
The sentiment surrounding AB 679 appears largely supportive among legislative members focused on fiscal responsibility and stable pension fund management. Proponents argue that the bill enhances the Board's flexibility in executing secure investment agreements, which could lead to improved financial returns for public employees. However, there are concerns raised about the potential risks associated with the modernization of these loan agreements, which could lead to significant fluctuations in fund asset values, drawing criticism from more cautious stakeholders.
Key points of contention lie in the balance between increased investment opportunities and the safeguarding of retirement assets. While supporters emphasize enhanced investment potential, opponents express unease over the adequacy of collateralization and ongoing oversight. The potential for the Board's leniency in securing investments raises questions regarding the long-term sustainability of the retirement fund and the need for stringent controls within the context of evolving financial markets.