Session of 2025
SENATE BILL No. 34
By Senator Bowser
1-16
AN ACT concerning retirement and pensions; relating to the Kansas public
employees retirement system; authorizing the board of trustees to invest
up to 10% of the moneys of the Kansas public employees retirement
fund in bitcoin exchange-traded products; providing requirements,
limitations and definitions regarding such investments; amending
K.S.A. 2024 Supp. 74-4921 and repealing the existing section.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 2024 Supp. 74-4921 is hereby amended to read as
follows: 74-4921. (1) There is hereby created in the state treasury the
Kansas public employees retirement fund. All employee and employer
contributions shall be deposited in the state treasury to be credited to the
Kansas public employees retirement fund. The fund is a trust fund and
shall be used solely for the exclusive purpose of providing benefits to
members and member beneficiaries and defraying reasonable expenses of
administering the fund. Investment income of the fund shall be added or
credited to the fund as provided by law. All benefits payable under the
system, refund of contributions and overpayments, purchases or
investments under the law and expenses in connection with the system
unless otherwise provided by law shall be paid from the fund. The director
of accounts and reports is authorized to draw warrants on the state
treasurer and against such fund upon the filing in the director's office of
proper vouchers executed by the chairperson or the executive director of
the board. As an alternative, payments from the fund may be made by
credits to the accounts of recipients of payments in banks, savings and loan
associations and credit unions. A payment shall be so made only upon the
written authorization and direction of the recipient of payment and upon
receipt of such authorization such payments shall be made in accordance
therewith. Orders for payment of such claims may be contained on:
(a) A letter, memorandum, telegram, computer printout or similar
writing; or
(b) any form of communication, other than voice, which is registered
upon magnetic tape, disc or any other medium designed to capture and
contain in durable form conventional signals used for the electronic
communication of messages.
(2) The board shall have the responsibility for the management of the
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fund and shall discharge the board's duties with respect to the fund solely
in the interests of the members and beneficiaries of the system for the
exclusive purpose of providing benefits to members and such member's
beneficiaries and defraying reasonable expenses of administering the fund
and shall invest and reinvest moneys in the fund and acquire, retain,
manage, including the exercise of any voting rights and disposal of
investments of the fund within the limitations and according to the powers,
duties and purposes as prescribed by this section.
(3) Moneys in the fund shall be invested and reinvested to achieve the
investment objective which is preservation of the fund to provide benefits
to members and member beneficiaries, as provided by law and accordingly
providing that the moneys are as productive as possible, subject to the
standards set forth in this act. No moneys in the fund shall be invested or
reinvested if any investment objective is for economic development or
social purposes or objectives.
(4) In investing and reinvesting moneys in the fund and in acquiring,
retaining, managing and disposing of investments of the fund, the board
shall exercise the judgment, care, skill, prudence and diligence under the
circumstances then prevailing, which persons of prudence, discretion and
intelligence acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims by
diversifying the investments of the fund so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not to do so,
and not in regard to speculation but in regard to the permanent disposition
of similar funds, considering the probable income as well as the probable
safety of their capital.
(5) Notwithstanding subsection (4):
(a) Total investments in common stock may be made in the amount of
up to 60% of the total book value of the fund;
(b) the board may invest or reinvest moneys of the fund in alternative
investments if the following conditions are satisfied:
(i) The total of the annual net commitment to alternative investments
does not exceed 5% of the total market value of investment assets of the
fund as measured from the end of the preceding calendar year;
(ii) if in addition to the system, there are at least two other qualified
institutional buyers, as defined by section (a)(1)(i) of rule 144A, securities
act of 1933;
(iii) the system's share in any individual alternative investment is
limited to an investment representing not more than 20% of any such
individual alternative investment;
(iv) the system has received a favorable and appropriate
recommendation from a qualified, independent expert in investment
management or analysis in that particular type of alternative investment;
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(v) the alternative investment is consistent with the system's
investment policies and objectives as provided in subsection (6);
(vi) the individual alternative investment does not exceed more than
2.5% of the total alternative investments made under this subsection. If the
alternative investment is made pursuant to participation by the system in a
multi-investor pool, the 2.5% limitation contained in this subsection is
applied to the underlying individual assets of such pool and not to
investment in the pool itself. The total of such alternative investments
made pursuant to participation by the system in any one individual multi-
investor pool shall not exceed more than 20% of the total of alternative
investments made by the system pursuant to this subsection. Nothing in
this subsection requires the board to liquidate or sell the system's holdings
in any alternative investments made pursuant to participation by the
system in any one individual multi-investor pool held by the system on the
effective date of this act, unless such liquidation or sale would be in the
best interest of the members and beneficiaries of the system and be
prudent under the standards contained in this section. The 20% limitation
contained in this subsection shall not have been violated if the total of such
investment in any one individual multi-investor pool exceeds 20% of the
total alternative investments of the fund as a result of market forces acting
to increase the value of such a multi-investor pool relative to the rest of the
system's alternative investments; however, the board shall not invest or
reinvest any moneys of the fund in any such individual multi-investor pool
until the value of such individual multi-investor pool is less than 20% of
the total alternative investments of the fund;
(vii) the board has received and considered the investment manager's
due diligence findings submitted to the board as required by subsection
(6);
(viii) prior to the time the alternative investment is made, the system
has in place procedures and systems to ensure that the investment is
properly monitored and investment performance is accurately measured;
and
(ix) the total of alternative investments does not exceed 25% of the
total investment assets of the fund. The 25% limitation contained in this
subsection shall not have been violated if the total of such alternative
investments exceeds 25% of the total investment assets of the fund, based
on the fund total market value, as a result of market forces acting to
increase the value of such alternative investments relative to the rest of the
system's investments. However, the board shall not invest or reinvest any
moneys of the fund in alternative investments until the total value of such
alternative investments is less than 25% of the total investment assets of
the fund based on the market value. If the total value of the alternative
investments exceeds 25% of the total investment assets of the fund, the
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board shall not be required to liquidate or sell the system's holdings in any
alternative investment held by the system, unless such liquidation or sale
would be in the best interest of the members and beneficiaries of the
system and is prudent under the standards contained in this section;
(c) for purposes of this section, "alternative investment" includes a
broad group of investments that are not one of the traditional asset types of
public equities, fixed income, cash or real estate. Alternative investments
are generally made through limited partnership or similar structures, are
not regularly traded on nationally recognized exchanges and thus are
relatively illiquid, and exhibit lower correlations with more liquid asset
types such as stocks and bonds. Alternative investments generally include,
but are not limited to, private equity, private credit, hedge funds,
infrastructure, commodities and other investments that have the
characteristics described in this paragraph; and
(d) except as otherwise provided, the board may invest or reinvest
moneys of the fund in real estate investments if the following conditions
are satisfied:
(i) The system has received a favorable and appropriate
recommendation from a qualified, independent expert in investment
management or analysis in that particular type of real estate investment;
(ii) the real estate investment is consistent with the system's
investment policies and objectives as provided in subsection (6); and
(iii) the system has received and considered the investment manager's
due diligence findings; and
(e) the board may invest and reinvest moneys of the fund in bitcoin
exchange-traded products issued by an investment company registered in
Kansas. The total of bitcoin investments shall not exceed 10% of the total
investment assets of the fund. The 10% limitation contained in this
subsection shall not have been violated if the total of such bitcoin
investments exceeds 10% of the total investment assets of the fund, based
on the fund total market value, as a result of market forces acting to
increase the value of such bitcoin investments relative to the rest of the
system's investments. However, the board shall not invest or reinvest any
moneys of the fund in bitcoin investments until the total value of such
bitcoin investments is less than 10% of the total investment assets of the
fund based on the market value. If the total value of the bitcoin
investments exceeds 10% of the total investment assets of the fund, the
board shall not be required to liquidate or sell the system's holdings in any
bitcoin investment held by the system, unless such liquidation or sale
would be in the best interest of the members and beneficiaries of the
system and is prudent under the standards contained in this section;
(f) for purposes of this section:
(i) "Bitcoin" means the decentralized digital currency launched in
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2009 that is based on Satoshi Nakamoto's white paper entitled "bitcoin: a
peer-to-peer electronic cash system" and includes the digital asset that is
the basis of the bitcoin exchange-traded product regulated by the United
States securities and exchange commission; and
(ii) "exchange-traded product" means a financial instrument that is
approved by the United States securities and exchange commission, the
commodities future trading commission or the office of the securities
commissioner of Kansas, is traded on a United States regulated exchange
and derives its value from an underlying pool of assets, including, but not
limited to, stocks, bonds, commodities or indexes.
(6) (a) Subject to the objective set forth in subsection (3) and the
standards set forth in subsections (4) and (5) the board shall formulate
policies and objectives for the investment and reinvestment of moneys in
the fund and the acquisition, retention, management and disposition of
investments of the fund. Such policies and objectives shall include:
(i) Specific asset allocation standards and objectives;
(ii) establishment of criteria for evaluating the risk versus the
potential return on a particular investment;
(iii) a requirement that all investment managers submit such
manager's due diligence findings on each investment to the board or
investment advisory committee for approval or rejection prior to making
any alternative investment;
(iv) a requirement that all investment managers shall immediately
report all instances of default on investments to the board and provide the
board with recommendations and options, including, but not limited to,
curing the default or withdrawal from the investment; and
(v) establishment of criteria that would be used as a guideline for
determining when no additional add-on investments or reinvestments
would be made and when the investment would be liquidated.
(b) The board shall review such policies and objectives, make
changes considered necessary or desirable and readopt such policies and
objectives on an annual basis.
(7) The board may enter into contracts with one or more persons
whom the board determines to be qualified, whereby the persons undertake
to perform the functions specified in subsection (2) to the extent provided
in the contract. Performance of functions under contract so entered into
shall be paid pursuant to rates fixed by the board subject to provisions of
appropriation acts and shall be based on specific contractual fee
arrangements. The system shall not pay or reimburse any expenses of
persons contracted with pursuant to this subsection, except that after
approval of the board, the system may pay approved investment related
expenses subject to provisions of appropriation acts. The board shall
require that a person contracted with to obtain commercial insurance
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which provides for errors and omissions coverage for such person in an
amount to be specified by the board, provided that such coverage shall be
at least the greater of $500,000 or 1% of the funds entrusted to such person
up to a maximum of $10,000,000. The board shall require a person
contracted with to give a fidelity bond in a penal sum as may be fixed by
law or, if not so fixed, as may be fixed by the board, with corporate surety
authorized to do business in this state. Such persons contracted with the
board pursuant to this subsection and any persons contracted with such
persons to perform the functions specified in subsection (2) shall be
deemed to be agents of the board and the system in the performance of
contractual obligations.
(8) (a) In the acquisition or disposition of securities, the board may
rely on the written legal opinion of a reputable bond attorney or attorneys,
the written opinion of the attorney of the investment counselor or
managers, or the written opinion of the attorney general certifying the
legality of the securities.
(b) The board shall employ or retain qualified investment counsel or
counselors or may negotiate with a trust company to assist and advise in
the judicious investment of funds as herein provided in accordance with
the provisions of this section.
(9) (a) Except as provided in subsection (7) and this subsection, the
custody of money and securities of the fund shall remain in the custody of
the state treasurer, except that the board may arrange for the custody of
such money and securities as it considers advisable with one or more
member banks or trust companies of the federal reserve system or with one
or more banks in the state of Kansas, or both, to be held in safekeeping by
the banks or trust companies for the collection of the principal and interest
or other income or of the proceeds of sale. The services provided by the
banks or trust companies shall be paid pursuant to rates fixed by the board
subject to provisions of appropriation acts.
(b) The state treasurer and the board shall collect the principal and
interest or other income of investments or the proceeds of sale of securities
in the custody of the state treasurer and pay same when so collected into
the fund.
(c) The principal and interest or other income or the proceeds of sale
of securities as provided in this subsection shall be reported to the state
treasurer and the board and credited to the fund.
(10) The board shall with the advice of the director of accounts and
reports establish the requirements and procedure for reporting any and all
activity relating to investment functions provided for in this act in order to
prepare a record monthly of the investment income and changes made
during the preceding month. The record will reflect a detailed summary of
investment, reinvestment, purchase, sale and exchange transactions and
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such other information as the board may consider advisable to reflect a
true accounting of the investment activity of the fund.
(11) The board shall provide for an examination of the investment
program annually. The examination shall include an evaluation of current
investment policies and practices and of specific investments of the fund in
relation to the objective set forth in subsection (3), the standard set forth in
subsection (4) and other criteria as may be appropriate, and
recommendations relating to the fund investment policies and practices
and to specific investments of the fund as are considered necessary or
desirable. The board shall include in its annual report to the governor as
provided in K.S.A. 74-4907, and amendments thereto, a report or a
summary thereof covering the investments of the fund.
(12) Any internal assessment or examination of alternative
investments of the system performed by any person or entity employed or
retained by the board which evaluates or monitors the performance of
alternative investments shall be reported to the legislative post auditor so
that such report may be reviewed in accordance with the annual financial-
compliance audits conducted pursuant to K.S.A. 74-49,136, and
amendments thereto.
Sec. 2. K.S.A. 2024 Supp. 74-4921 is hereby repealed.
Sec. 3. This act shall take effect and be in force from and after its
publication in the statute book.
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