There is a State Retirement and Pension System. The State Retirement and Pension System shall provide benefits under this Division II for participants in the several systems. The State Retirement and Pension System has the powers and privileges of a corporation.

The State Retirement and Pension System consists of: the Correctional Officers’ Retirement System, established on July 1, 1974; the Employees’ Pension System, established on January 1, 1980; the Employees’ Retirement System, established on October 1, 1941; the Judges’ Retirement System, which consists of: the contributory plan, established on July 1, 1969; and the noncontributory plan, established on April 7, 1904; the Legislative Pension Plan; the Local Fire and Police System, established on July 1, 1989; the Law Enforcement Officers’ Pension System, established on July 2, 1990; the State Police Retirement System, established on July 1, 1949; the Teachers’ Pension System, established on January 1, 1980; the Teachers’ Retirement System, established on August 1, 1927; and any other system or subsystem that the Board of Trustees administers.

There is a Board of Trustees for the State Retirement and Pension System.

The Board of Trustees consists of the following 15 trustees: the Secretary of Budget and Management, ex officio, who may appoint a deputy secretary as designee; the State Comptroller, ex officio, who may appoint a deputy comptroller as designee; the State Treasurer, ex officio, who may appoint a deputy treasurer as designee; and 12 trustees elected or appointed as follows: one trustee who is an active member of the Correctional Officers’ Retirement System, the Employees’ Pension System, the Employees’ Retirement System, the Judges’ Retirement System, the Legislative Pension Plan, the Local Fire and Police System, or the Law Enforcement Officers’ Pension Plan, who shall be elected as provided in subsection (b) of this section and may not be an employee of the State Retirement Agency; one trustee who is a retiree of the Correctional Officers’ Retirement System, the Employees’ Pension System, the Employees’ Retirement System, the Judges’ Retirement System, the Legislative Pension Plan, the Local Fire and Police System, or the Law Enforcement Officers’ Pension Plan, who shall be elected as provided in subsection (b) of this section and may not be an employee of the State Retirement Agency; one trustee who is an active member of the Teachers’ Pension System or the Teachers’ Retirement System, who shall be elected as provided in subsection (b) of this section and may not be an employee of the State Retirement Agency; one trustee who is a retiree of the Teachers’ Pension System or the Teachers’ Retirement System, who shall be elected as provided in subsection (b) of this section and may not be an employee of the State Retirement Agency; one trustee who is either an active member or retiree of the State Police Retirement System, who shall be elected as provided in subsection (b) of this section and may not be an employee of the State Retirement Agency; one trustee who represents the interests of participating governmental units in the Employees’ Pension System and the Employees’ Retirement System; one trustee who represents the interests of county governments who has at least 10 years of experience in financial management and oversight of county government budgets; and five trustees who: represent the interests of the public; are not members of any of the several systems; are not employees, directors, partners, or officers of any of the external investment managers for the several systems; do not have an ownership interest in any of the external investment managers of the several systems that is greater than 5% of the issued or outstanding stock; are not directors, partners, or officers of any corporation or large organization in which any of the external managers for the several systems own 10% or more of the issued or outstanding stock of the corporation or large organization; and have at least 10 years of substantial experience overseeing similar pension systems, large foundations, or other similar large organizations with fiduciary responsibilities relating to different classes of participants. The trustees who are members or retirees of the Correctional Officers’ Retirement System, the Employees’ Pension System, the Employees’ Retirement System, the Judges’ Retirement System, the Legislative Pension Plan, the Local Fire and Police System, or the Law Enforcement Officers’ Pension Plan shall be elected by the active members and the retirees of those State systems. The trustees who are members or retirees of the Teachers’ Pension System or the Teachers’ Retirement System shall be elected by the active members and the retirees of those State systems. The trustee who is a member or retiree of the State Police Retirement System shall be elected by the active members and the retirees of that State system. The elections shall be conducted under regulations that the Board of Trustees adopts. The trustee who represents the interests of participating subdivisions in the Employees’ Pension System and the Employees’ Retirement System shall be appointed by the Governor. The trustees who represent the public shall be appointed by the Governor with the advice and consent of the Senate. The trustee who represents the interests of county governments shall be appointed by the Governor and may be from a list submitted to the Governor by the Maryland Association of Counties. Within 10 days after the appointment or election of an individual as a trustee, the individual shall take and subscribe to an oath of office that, so far as it devolves on the individual, as trustee the individual: will diligently and honestly administer the affairs of the Board of Trustees; and will not knowingly violate or willingly allow a violation of the law applicable to the several systems. The officer before whom the individual takes the oath shall: certify the oath; and submit the oath immediately to the office of the Secretary of State for filing in that office. The term of an appointed or elected trustee is 4 years. Trustees who represent the public serve staggered 4–year terms. A trustee who is a member but not a retiree of the Correctional Officers’ Retirement System, the Employees’ Pension System, the Employees’ Retirement System, the Judges’ Retirement System, the Legislative Pension Plan, the Local Fire and Police System, the Law Enforcement Officers’ Pension Plan, the Teachers’ Pension System, or the Teachers’ Retirement System at the time of election of the trustee may complete the term of office even if, during the term, the trustee: becomes a retiree of the State system of which the trustee was a member at the time of election; and has completed more than 3 years of the trustee’s term of office. A vacancy in the office of a trustee shall be filled for the unexpired term in the same manner as the office was previously filled. At the end of a term, a trustee continues to serve until a successor is appointed or elected. A trustee who is appointed after a term has begun serves only for the rest of the term and until a successor is selected and qualifies. Except as provided in paragraph (2) of this subsection, each trustee shall attend at least 80% of the monthly Board of Trustees meetings held during a 1–year period beginning January 1. A trustee may be granted an excused absence by the chairman of the Board or another officer of the Board due to: illness; family emergencies; jury duty; or attendance at investment or fiduciary training. An excused absence under this paragraph may not be considered an absence for the purposes of paragraph (1) of this subsection. Any elected or Governor–appointed trustee that fails to attend at least 80% of the meetings, not including excused absences under paragraph (2) of this subsection, shall be removed from the Board of Trustees by the Governor. The Governor shall fill the vacancy for the office of the trustee for the unexpired term in the same manner as the office was previously filled. An elected trustee representing employees of any of the several systems shall be given reasonable time during work to attend monthly meetings of the Board of Trustees or committee meetings of the Board of Trustees. Notwithstanding subsection (d) of this section, the Governor may remove a Governor–appointed trustee for incompetence or misconduct.

The Board of Trustees shall: elect a chairman annually from its membership; and by a majority vote of all of the trustees, elect a secretary who may be one of its members.

Each trustee is entitled to one vote on the Board of Trustees. A majority of the trustees then serving on the Board of Trustees is a quorum for: the transaction of any business; the exercise of any power; or the performance of any duty authorized or imposed by law. The Board of Trustees shall set the times and places of its meetings. A trustee: may not receive compensation from the several systems for service as a trustee; but is entitled to reimbursement for expenses under the Standard State Travel Regulations, as provided in the State budget.

The Attorney General is the legal adviser of the Board of Trustees.

The responsibility for the management, general administration, and proper operation of the several systems is vested in the Board of Trustees. The Board of Trustees is not responsible for: reviewing the benefit structures for any of the several systems, except for the purpose of making technical corrections; or considering benefit enhancements for any of the several systems. Each trustee on the Board of Trustees is required to complete at least 8 hours of educational training, including training on investments, fiduciary conduct, board governance, retirement administration and operations, and other relevant topics that the Chairman of the Board of Trustees may deem appropriate, during a 1–year period beginning January 1. The training shall be approved by the Chairman of the Board of Trustees to satisfy the 8–hour requirement under subparagraph (i) of this paragraph. In addition to the Investment Committee established under § 21–114 of this subtitle and the Compensation and Staffing Committee established under § 21–122 of this subtitle, the Board of Trustees may establish other committees. Subject to §§ 21–122 and 21–123 of this subtitle, the Board of Trustees shall have full power to invest the assets of the several systems.

The Board of Trustees shall submit the budget for the several systems annually to the Governor for inclusion in the State budget.

The Board of Trustees shall adopt regulations providing for: the administration of the several systems; the management of the assets of the several systems; the transaction of its business; the imposition of an administrative fee on any participating employer that fails to provide the information required by the State Retirement Agency to properly enroll eligible employees in the several systems; notwithstanding the provisions of § 9–602 of the Criminal Law Article, the management of monitoring and recording, for training and quality control purposes: incoming telephone conversations to employees of the Member Services division of the State Retirement Agency, to telephones within the offices of the State Retirement Agency; and outgoing telephone conversations initiated by the Member Services division’s virtual hold callback feature of the automated call distribution system; and rules regarding the retention of recordings made in accordance with paragraph (5) of this subsection, including a prohibition on the retention of recordings for longer than 10 years. Subject to the approval of the Board of Public Works, the Board of Trustees may adopt regulations for the administration of funds of a pension or retirement system established under §§ 7-206 and 7-603 of the Transportation Article. The Maryland Transit Administration shall pay all financing costs of a pension or retirement system established under §§ 7-206 and 7-603 of the Transportation Article, including the pro rata share of the administrative costs that the Board of Trustees incurs.

As the Board of Trustees considers necessary to properly administer and enforce this Division II or regulations adopted under this Division II, the Board of Trustees may: require any officer or unit of the State or of a political subdivision of the State to furnish the Board of Trustees without charge with a certified copy of any record or paper in the official custody of the officer or unit; and issue a summons, subpoena, or other process, for the attendance of witnesses and the production of documents before the Board of Trustees. The Board of Trustees, or any trustee on the Board of Trustees, may administer an oath to a witness who appears before the Board of Trustees. In addition to any hearing that Title 10 of the State Government Article requires, the Board of Trustees may hold hearings as necessary to perform its duties. The hearings are governed by regulations of the Board of Trustees. The Board of Trustees is not bound by technical rules of evidence. If the Board of Trustees approves an application for disability retirement on behalf of a State police officer under § 2-415(b) of the Public Safety Article, the Board of Trustees shall hold a hearing unless the officer waives the hearing in writing.

Each year the Board of Trustees shall: publish a consolidated report that includes: the fiscal transactions of the several systems for the preceding fiscal year; the amount of the accumulated cash, securities, and other assets of each State system; and the last balance sheet that shows the financial condition of each State system by means of an actuarial valuation of the assets and liabilities of the State system; and provide each member and retiree with a statement on the State Retirement Agency’s website that: summarizes the information in the report under item (1) of this subsection; and explains any material modifications to the applicable State system during the period covered by the annual report. The Board of Trustees shall make the following information available to each member and retiree through a secure access participant portal: the member’s vested benefits or the benefits the member will be entitled to on vesting; the date when the member was or will be vested; and the present value of any annuity.

Except as provided in § 29–409 of this article, if, because of an error, a retiree or beneficiary receives a benefit that differs from the benefit the retiree or beneficiary is entitled to receive, the Board of Trustees shall: correct the error; and to the extent practicable, adjust the payment to the retiree or beneficiary to provide the actuarial equivalent to which the retiree or beneficiary is correctly entitled. Notwithstanding § 21-502 of this title, the Board of Trustees may recover the amount of any improper payment. After due notice, if a person who receives an improper payment fails to repay the money owed, the Board of Trustees may: begin an action to recover the amount of the improper payment and the costs of bringing the action; or adjust any future monthly payments of that person's allowance to recover the amount owed. Subject to the approval of the Board of Trustees, the Executive Director of the State Retirement Agency shall: determine any monthly adjustment under paragraph (2)(ii) of this subsection; and notify the person of the total amount to be recovered, the monthly adjustment, and the period of recovery.

There is an Investment Committee of the Board of Trustees.

The Board of Trustees shall: specify by resolution the number of members of the Investment Committee; and except as provided in subsection (b)(2) of this section, appoint annually the members of the Investment Committee from the members of the Board of Trustees. The Board of Trustees shall ensure that the membership of the Investment Committee includes: a representative of each of: the Employees’ Pension System or the Employees’ Retirement System; the Teachers’ Pension System or the Teachers’ Retirement System; and the State Police Retirement System; and three representatives from the public appointed by the Board of Trustees with the approval of the Board of Public Works for staggered 3-year terms who: are not members, retirees, or beneficiaries under any of the several systems; have had experience in the management and control of large investments; and have at least 10 years of substantial experience as any one or a combination of the following: a portfolio manager acting in a fiduciary capacity; an employee or principal of a trust institution, investment organization, or endowment fund acting either in a management-related capacity or an investment-related capacity; a chartered financial analyst in good standing; or a professional engaged in a public or private financial or investment field that is comparable to the fields listed in this item. The Board of Trustees may: set additional qualifications for public members; and adopt regulations on ethical standards and conflicts of interest for public members. By resolution, the Board of Trustees shall designate the chairman of the Investment Committee.

By resolution, the Board of Trustees shall specify the powers of the Investment Committee. The Investment Committee shall advise the Board of Trustees and make recommendations on: the investment programs; compliance of the investment programs with the policies of the Board of Trustees; and bonding for employees of the State Retirement Agency in the form and amount required by law. Subject to subsections (d) and (e) of this section, the Board of Trustees shall adopt an investment policy manual that details: the functions of the Investment Division of the State Retirement Agency; the goals and objectives of the several investment programs; and the policies that govern the selection and retention of investments. The Investment Committee shall: prepare and maintain the investment policy manual; and submit the investment policy manual, and any subsequent amendments to the manual, to the Board of Trustees for approval. Consistent with minority business purchasing standards applicable to units of State government under the State Finance and Procurement Article and consistent with the fiduciary duties of the Board of Trustees, the Board of Trustees shall direct the Investment Committee to attempt to use to the greatest extent feasible minority business enterprises to provide brokerage and investment management services to the Board. For the fiscal year beginning July 1, 2022, and each fiscal year thereafter, the Board of Trustees shall assess the use of minority business enterprises as required under this subsection. For purposes of this subsection, brokerage and investment management services shall include services relating to all allocated asset classes. To assist it in achieving the goal described under paragraph (1) of this subsection, the Investment Committee shall undertake measures to remove any barriers that limit full participation by minority business enterprises in brokerage and investment management services opportunities afforded under this title. The measures undertaken by the Investment Committee shall include the use of a wide variety of media, including the State Retirement Agency’s website, to provide notice to a broad and varied range of potential providers about the brokerage and investment management services opportunities afforded by the State Retirement Agency. In consultation with the Governor’s Office of Small, Minority, and Women Business Affairs and the Investment Committee, the Board of Trustees shall develop guidelines to assist the Investment Committee in identifying and evaluating qualified minority business enterprises in order to help the State Retirement Agency achieve the objective for greater use of minority business enterprises for brokerage and investment management services. On or before November 1 each year, the Investment Committee shall submit a report to the Board of Trustees, the Governor’s Office of Small, Minority, and Women Business Affairs and, subject to § 2–1257 of the State Government Article, the General Assembly on: the identity of the minority business enterprise brokerage and investment management services firms used by the Investment Committee in the immediately preceding fiscal year; the percentage and dollar value of the assets that are under the control of the Investment Committee that are under the investment control of minority business enterprise brokerage and investment management services firms for each allocated asset class; and the measures the Investment Committee undertook in the immediately preceding fiscal year in accordance with paragraph (2)(ii) of this subsection. Consistent with its fiduciary duties, the Board of Trustees shall include policies in the investment policy manual adopted under subsection (c) of this section regarding the management of risk, including the management of climate risks in accordance with § 21–116.1 of this subtitle, in the investment of system assets, and shall address: investment principles, guidelines, and policies that govern the selection and retention of the investments of the several systems, including proxy voting and engagement guidelines; and a policy that proxy votes and sample due diligence questionnaires for prospective managers be published on the State Retirement Agency’s website. Consistent with its fiduciary duties, on or before January 31, 2019, and every year thereafter, the Board of Trustees shall submit a report on the risk assessment of the several systems, including climate risk, in accordance with § 21–116.1 of this subtitle and § 2–1257 of the State Government Article, to the General Assembly. The assessment shall: identify recent studies or actions by other U.S. state public pension funds, financial institutions, or risk experts, including those related to disclosure, risk assessment, investment principles, or other related issues or activities; based on the information obtained in item 1 of this subparagraph, recommend best practices and consider whether these best practices can be incorporated into the investment policy manual; examine the potential magnitude of the long–term risks and opportunities of multiple scenarios and related regulatory developments across industry sectors, asset classes, and the total portfolio of the several systems; and include any other information the Board of Trustees or Investment Committee deems necessary. The State Retirement Agency shall post a report regarding the risk assessment on its website. To the extent practicable, the State Retirement Agency shall request all information necessary from managers, brokers, or other entities to carry out the policies of the Board of Trustees with respect to an assessment conducted in accordance with this subsection. The Board of Trustees, or any other fiduciary of the several systems as defined in § 21–201(b) of this title, may not be held liable for any actions taken or decisions made in good faith for the purpose of complying with or executing this subsection. Nothing in this subsection shall require the Board of Trustees to take action as described in this section unless the Board of Trustees determines, in good faith, that the action is consistent with the fiduciary responsibilities of the Board of Trustees as described in Subtitle 2 of this title.

In accordance with the fiduciary responsibilities as described in Subtitle 2 of this title, when managing the assets of the several systems, a fiduciary shall consider the potential systemic risks of the impact of climate change on the assets of the several systems, including monitoring net–zero aligned investments and climate solutions to ensure a path to a long–term sustainable portfolio. The climate risk assessment required under § 21–116 of this subtitle shall include: a review of the total investment portfolio of the several systems to determine the level of climate risk across industry sectors and asset classes that prioritize high–impact sectors responsible for greenhouse gas emissions; identifying investment opportunities in: emerging technologies in renewable energy; and transitioning, reducing, and eliminating carbon–emitting technology; establishing a process for regular reassessment of the potential systemic risks of the impact of climate change on the assets of the several systems; and utilization of the best data and practices available in current science, investment strategies, and climate risk analyses. Based on the information obtained in accordance with subsection (b) of this section, the Chief Investment Officer, subject to the policies adopted by the Board of Trustees: shall review and manage the investments of the several systems; and may choose to invest or divest in funds within the several systems. The Chief Investment Officer shall: identify environmentally sustainable investment opportunities to support a low–carbon economy; develop transition assessments relating to investments in high–impact sectors; evaluate whether internal and external investment managers are taking steps to transition to a more sustainable business model aligned with a low–carbon economy; and work with managers, data providers, index providers, or consultants to identify, analyze, define, and prioritize asset–class specific metrics and minimum standards to evaluate transition readiness and resiliency for companies in high–impact sectors. The policies of the Board of Trustees shall address and mitigate climate risk in the investment of system assets through: direct engagement with managers, brokers, or other entities; proxy voting; a periodic review and assessment of the effectiveness of procedures used for direct engagement and proxy voting; and to the extent practicable, the establishment of an advisory panel of experts in the analysis of climate change risk to provide the most current science and data available. Any action taken in accordance with this section shall be included in the risk assessment report required under § 21–116 of this subtitle. The Board of Trustees, or any other fiduciary of the several systems as defined in § 21–201(b) of this title, may not be held liable for any actions taken or decisions made in good faith for the purpose of complying with or executing this section. Nothing in this section shall require the Board of Trustees, or any other fiduciary of the several systems as defined in § 21–201(b) of this title, to take action as described in this section unless the Board of Trustees or other fiduciary determines, in good faith, that the action is consistent with the fiduciary responsibilities of the Board of Trustees as described in Subtitle 2 of this title.

There is a State Retirement Agency. The State Retirement Agency is an agency of the Board of Trustees.

The Board of Trustees shall appoint the Executive Director of the State Retirement Agency. The Executive Director serves at the pleasure of the Board of Trustees. The Executive Director shall: be in charge of the State Retirement Agency; compile annually a comprehensive budget for submission to the Board of Trustees; and have the duties and functions that the Board of Trustees may delegate. The Executive Director shall employ a staff to carry out the administrative duties of the several systems. Except as provided in § 21–315 of this title, the compensation of the Executive Director and staff shall be as provided in the State budget. Except for employees described in paragraph (3) of this subsection, the employees are skilled service or professional service employees subject to the provisions of this article that govern skilled service or professional service employees. An employee is in the executive service, management service, or is a special appointment in the State Personnel Management System if: the employee holds a position that the Executive Director, with the approval of the Board of Trustees, designates as a professional or technical position that involves specialized skill, education, and knowledge; and the employee’s labor is predominantly intellectual rather than manual or physical. The Executive Director and the Chief Investment Officer and staff of the Investment Division of the State Retirement Agency shall comply with the policies that the Board of Trustees prescribes about conflicts of interest and personal investments. A document that must be executed by or for the Board of Trustees shall be signed: by the Executive Director of the State Retirement Agency; or in the absence or disability of the Executive Director, by another employee whom the Executive Director, with the approval of the Chairman of the Board of Trustees, designates in writing. If a countersignature is required, with the approval of the Chairman of the Board of Trustees, the Executive Director shall designate those employees of the State Retirement Agency who may sign.

Notwithstanding any other provision of law, on the recommendation of the Executive Director and the Investment Committee, the Board of Trustees shall determine the qualifications and appointment, as well as compensation and leave, for the Chief Investment Officer who shall be the head of the Investment Division. The Compensation and Staffing Committee shall assist the Executive Director and the Investment Committee in recommending qualifications, compensation, and leave for the Chief Investment Officer, including any salary changes for the Chief Investment Officer. In making recommendations, determinations, and appointments under this section, the Board of Trustees, Executive Director, Investment Committee, and Compensation and Staffing Committee shall consider the comparative qualifications, compensation, and leave of employees serving in similar positions and discharging similar duties at comparable public pension funds. The Board of Trustees shall adopt objective criteria for setting the qualifications and compensation of the Chief Investment Officer. The Board shall consider the recommendations of the Compensation and Staffing Committee under § 21–122(g) of this subtitle before adopting objective criteria for setting compensation. The criteria adopted under subparagraph (i) of this paragraph shall include objective benchmarks of investment performance that shall be met or exceeded for the Chief Investment Officer to be eligible for an increase in compensation. The Board may not grant any increases in compensation to the Chief Investment Officer in a fiscal year in which State employees are subject to a furlough. The Chief Investment Officer’s compensation may not be adjusted in accordance with cost–of–living adjustments and merit increases available to State employees. In addition to the Board of Trustees setting the compensation of the Chief Investment Officer under subsection (a) of this section, the Board of Trustees may also award financial incentives to the Chief Investment Officer in accordance with this subsection and subsection (d) of this section. Any financial incentives paid shall be paid over multiple fiscal years in equal installments. The dates on which financial incentives awarded under this section shall be paid shall be set by the Board of Trustees at the time the financial incentives are determined. The dates set under subparagraph (ii) of this paragraph may not be changed after being set. Except as provided in subparagraph (ii) of this paragraph, if the Chief Investment Officer separates from employment, the Board of Trustees may not pay out any remaining financial incentives due to be paid after the date of separation from employment. The Board of Trustees may pay any remaining awarded financial incentives after the date of separation from employment if the Chief Investment Officer retires directly from the Investment Division on or within 30 days after the date of separation from employment. The Board of Trustees may not pay financial incentives in a fiscal year in which State employees are subject to a furlough. Except as provided in subparagraph (iii) of this paragraph, the Board of Trustees shall pay out any financial incentives not paid in accordance with subparagraph (i) of this paragraph only: after the furlough period has ended; and if the Chief Investment Officer is currently employed as the Chief Investment Officer. After a furlough period has ended, the Board of Trustees shall pay out any remaining awarded financial incentives not paid to the Chief Investment Officer in accordance with subparagraph (i) of this paragraph if: the Chief Investment Officer separates from employment with the Investment Division during the furlough period; and after the date of separation from employment, the Chief Investment Officer retires directly from the Investment Division or within 30 days after the date of separation from employment. On the recommendation of the Compensation and Staffing Committee, the Board of Trustees shall establish objective criteria for awarding financial incentives to the Chief Investment Officer. The Board shall consider the recommendations of the Compensation and Staffing Committee under § 21–122(g) of this subtitle before adopting objective criteria for awarding financial incentives. Financial incentives may only be awarded based on the objective criteria adopted in accordance with subparagraph (i) of this paragraph. The criteria under paragraph (1) of this subsection shall include: objective benchmarks of investment performance for the assets of the several systems that shall be met or exceeded; objective criteria used by comparable public pension funds awarding financial incentives to chief investment officers; and limitations on the amount of financial incentives in a fiscal year, not to exceed 33% of the Chief Investment Officer’s compensation exclusive of financial incentives. The Chief Investment Officer may not participate in any deliberations regarding the establishment of criteria under this subsection. The criteria established under this subsection shall be included in the investment policy manual. On or before September 1 of each year, the Board of Trustees shall submit to the Joint Committee on Pensions, in accordance with § 2–1257 of the State Government Article, a copy of the most recent criteria established under this section and any financial incentives that were awarded for the previous fiscal year to the Chief Investment Officer. The Chief Investment Officer appointed under this section is a State employee and shall be entitled to participate in the Employees’ Pension System under Title 23 of this article. On the recommendation of either the Investment Committee or the Executive Director and on receiving an affirmative vote from a majority of the Board of Trustees, the Executive Director shall terminate the appointment of the Chief Investment Officer.

The Executive Director shall employ a Director of Diversity, Equity, and Inclusion of the State Retirement Agency. The Director of Diversity, Equity, and Inclusion shall report directly to the Executive Director. The Director of Diversity, Equity, and Inclusion shall: identify and minimize barriers to open and equitable processes by ensuring the State Retirement Agency provides access and opportunities to underrepresented groups; engage with the Board of Trustees, staff, and external entities to promote and support diversity of participation and leadership; provide assistance as necessary to the Investment Division established under § 21–122 of this subtitle; provide advice and reports to the Board of Trustees on topics including diversity, equity, and inclusion; and have the duties and functions that the Executive Director or the Board of Trustees may delegate. On the recommendation of the Executive Director and on receiving an affirmative vote from a majority of the Board of Trustees, the Executive Director shall terminate the Director of Diversity, Equity, and Inclusion.

The State Retirement Agency shall carry out the administrative duties of the several systems.

On or before December 15 of each year, the Executive Director shall submit a report to the Board of Trustees about the operation and performance of the State Retirement Agency during the fiscal year that ended on the preceding June 30. The report shall include data on all commissions the State Retirement Agency paid on investments during that fiscal year. The Board of Trustees may: prescribe the format of the report; and require any information it considers appropriate.

The State Retirement Agency may at any time examine the records of a participating employer to determine whether the payment of benefits to a participant and the payment of contributions by a participating employer or participant are and will be in accordance with the provisions of Division II of this article. Whenever an audit reveals that the payment of benefits to a participant or the payment of contributions by a participating employer or participant is not in accordance with the provisions of Division II of this article: the State Retirement Agency and participating employer shall correct their records; and the participating employer shall pay any amounts owed to the accumulation fund of the appropriate State system; and the member contributions owed by the participant shall be made by the participant in accordance with § 21–312(e) of this title.

There is an Investment Division in the State Retirement Agency. Subject to subsection (f) of this section, the Board of Trustees shall determine the qualifications and compensation for positions within the Investment Division. The Board of Trustees: may determine and create the type and number of positions necessary for carrying out the professional investment functions of the Investment Division; and shall adopt objective criteria to be followed when exercising its authority under item (i) of this paragraph and paragraph (2) of this subsection. On or before October 1, 2012, and each October 1 thereafter, the Board of Trustees shall report to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions, in accordance with § 2–1257 of the State Government Article on: the current compensation of the Chief Investment Officer and employees of the Investment Division; any compensation increases the Chief Investment Officer and employees of the Investment Division have received in the fiscal year immediately preceding that October 1; the number of individuals in the Investment Division of the State Retirement Agency who were employed as professional investment staff and terminated employment with the State Retirement Agency in the fiscal year immediately preceding that October 1; the number of years of employment an individual described in item 1 of this item had accrued with the State Retirement Agency at the time the individual terminated employment with the State Retirement Agency; and to the extent possible, the new employer, position, and compensation the individual described in item 1 of this item accepted upon terminating employment with the State Retirement Agency; the criteria used to set the compensation of employees of the Investment Division; the criteria used to determine the type and number of positions necessary to carry out the functions of the Investment Division; the number of employees eligible for financial incentives, and the financial incentives paid in the current fiscal year; and the net impact on system investment returns attributable to the costs of the Investment Division for the preceding fiscal year. As the Board of Trustees specifies, the Investment Division shall invest the assets of the several systems. Quarterly, the Investment Division shall submit to the Board of Trustees a report about the commissions that the State Retirement Agency pays on investments. The report shall detail: the identity of each recipient of a commission that the State Retirement Agency paid during the previous quarter; the dollar amount of commission business that each recipient performs; the average price–per–share each recipient charged or, if the commission was paid on a net basis, the markup or markdown that the recipient uses; and a reasonable history of the allocation of commissions. On behalf of the several systems, the Chief Investment Officer: may hire external investment managers to invest the assets of the several systems; may select and invest in specific investment vehicles, including limited partnerships, private equity fund investments, and private real estate fund investments; and may terminate the appointment of an external investment manager. Prior to terminating the appointment of an external investment manager under subsection (d)(3) of this section, the Chief Investment Officer shall provide written documentation to the Board of Trustees and the Investment Committee explaining the basis for the termination. The Board of Trustees shall adopt objective criteria for setting the qualifications and compensation of positions under subsection (a) of this section. The Board shall consider the recommendations of the Compensation and Staffing Committee under subsection (g) of this section before adopting objective criteria for setting compensation. The criteria adopted under subparagraph (i) of this paragraph shall include: consideration of the comparative qualifications and compensation of employees serving in similar positions and discharging similar duties at comparable public pension funds; limitations on the amount by which the compensation for a position may be increased each fiscal year, not to exceed 10%; and objective benchmarks of investment performance that shall be met or exceeded by an individual to be eligible for an increase in compensation. The Board of Trustees may not grant any increases in compensation in a fiscal year in which State employees are subject to a furlough. For positions that do not involve discretion over investment–related decisions, the Board of Trustees may not set compensation that exceeds compensation for providing comparable services in other State employment. Except for positions under subparagraph (iv) of this paragraph, the compensation of an employee may not be adjusted in accordance with cost–of–living adjustments and merit increases available to State employees. Based on the recommendations of the Compensation and Staffing Committee under subsection (g) of this section, the Board of Trustees shall approve: the type and number of positions in the Investment Division; the qualifications for each position in the Investment Division, as approved under item 1 of this subparagraph; any compensation and financial incentives for the Investment Division staff, including salary increases or decreases recommended for the employees of the Investment Division; and in accordance with § 21–118.1 of this subtitle, any compensation and financial incentives for the Chief Investment Officer, including salary increases or decreases recommended for the Chief Investment Officer. The Board of Trustees shall adopt objective criteria for awarding financial incentives under subsection (a) of this section. The Board shall consider the recommendations of the Compensation and Staffing Committee under subsection (g) of this section before adopting objective criteria for awarding financial incentives. Financial incentives may only be awarded based on the objective criteria adopted in accordance with subparagraph (i) of this paragraph. The criteria adopted under subparagraph (i) of this paragraph shall include: limitations on the amount of financial incentives for a position in a fiscal year, not to exceed 33% of a position’s compensation, exclusive of financial incentives; and objective benchmarks of investment performance that shall be met or exceeded by an individual to be eligible for financial incentives, including benchmarks for the asset class in which investments are under the direction of the individual. Any financial incentives paid shall be paid over multiple fiscal years in equal installments. The dates on which financial incentives awarded under this section shall be paid shall be set by the Board of Trustees at the time the financial incentives are determined. The dates set under subsubparagraph 2 of this subparagraph may not be changed after being set. Except as provided in subparagraph (vi) of this paragraph, if an individual who has been awarded financial incentives separates from employment in the Investment Division, the Board of Trustees may not pay out any remaining financial incentives due to be paid after the date of separation from employment. The Board of Trustees may pay any remaining awarded financial incentives after the date of separation from employment if the individual retires directly from the Investment Division on or 30 days after the date of separation. The Board of Trustees may not award financial incentives for positions that do not involve discretion over investment–related decisions. The Board of Trustees may not pay out financial incentives in a fiscal year in which State employees are subject to a furlough. Except as provided in subsubparagraph 3 of this subparagraph, the Board of Trustees shall pay out any financial incentives not paid to an individual in accordance with subsubparagraph 1 of this subparagraph only: after the furlough period has ended; and if the individual is currently employed in the Investment Division. After a furlough period has ended, the Board of Trustees shall pay out any remaining awarded financial incentives not paid to an individual in accordance with subsubparagraph 1 of this subparagraph if: the individual separates from employment with the Investment Division during the furlough period; and after the date of separation from employment, the individual retires directly from the Investment Division or within 30 days after the date of separation from employment. On or before October 1 each year, the Board of Trustees shall submit to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions, in accordance with § 2–1257 of the State Government Article, a copy of the most recent criteria adopted under this subsection, including any changes to compensation and incentives for the Chief Investment Officer and Investment Division staff. In addition to the report required under subparagraph (i) of this paragraph, the Board of Trustees shall submit, within 30 days of adoption by the Board of Trustees, a copy of any changes adopted to the criteria established under this subsection to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions, in accordance with § 2–1257 of the State Government Article. On or before October 1, January 1, March 1, and July 1 each year, the Board of Trustees shall submit to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions, in accordance with § 2–1257 of the State Government Article, a report on system investment returns for the preceding fiscal quarter, including: investment performance by asset class, including performance relative to asset class benchmarks; and investment performance of assets under the direction of each Investment Division employee. There is a Compensation and Staffing Committee of the Board of Trustees. The following members shall be included on the Committee: the Secretary of Budget and Management or the Secretary’s designee; one or more members of the Board of Trustees under § 21–104(a)(4)(i), (ii), (iii), (iv), or (v) of this subtitle, appointed by the Chairman of the Board of Trustees; one or more members of the Board of Trustees under § 21–104(a)(4)(vi) or (vii) of this subtitle, appointed by the Chairman of the Board of Trustees; and one or more members of the Board of Trustees under § 21–104(a)(4)(viii) of this subtitle, appointed by the Chairman of the Board of Trustees. The following members may be appointed to the Committee by the Chairman of the Board of Trustees: the State Treasurer, or the State Treasurer’s designee; and the Comptroller, or the Comptroller’s designee. The Chairman of the Board of Trustees shall appoint the Chair of the Committee. The Chairman of the Board of Trustees may not serve as the Chair of the Committee. The Committee shall make recommendations to the Board of Trustees regarding: objective criteria under § 21–118.1(b)(2) and (d) of this subtitle for the compensation and financial incentives for the Chief Investment Officer; and objective criteria under subsections (a) and (f) of this section for the compensation and financial incentives for the positions in the Investment Division. The Board of Trustees shall enter into an agreement with a consultant to assist the Committee and the Board regarding objective criteria under this subsection and the Board’s responsibilities for compensation and staffing. Except as provided in subsubparagraph 2 of this subparagraph, the Board of Trustees may not enter into an agreement with a consultant under subparagraph (i) of this paragraph if that consultant is actively providing consulting services for the Board of Trustees or the staff of the Investment Division. The Board of Trustees may enter into an agreement with a consultant selected under subparagraph (i) of this paragraph to provide executive search services for the Board of Trustees or the Executive Director. The Chief Investment Officer may not separately retain the consultant hired under subparagraph (i) of this paragraph for any services. The Executive Director shall serve in an advisory capacity to the Committee regarding compensation and incentive compensation for the Chief Investment Officer and Investment Division staff. The Chief Investment Officer may not participate in any deliberations regarding the criteria for compensation and financial incentives for the Chief Investment Officer or Investment Division staff. The Chief Investment Officer shall serve in an advisory capacity regarding the type of, number of, and qualifications for positions in the Investment Division. There is a governance program within the Investment Division of the State Retirement Agency established in accordance with the policies of the Board of Trustees. Subject to subsection (a) of this section, the Chief Investment Officer shall employ an individual to assist in the implementation of the governance program. On the recommendation of the Chief Investment Officer and on receiving an affirmative vote from a majority of the Board of Trustees, the Executive Director shall terminate an individual employed in accordance with subparagraph (i) of this paragraph. The responsibilities of the individual employed under paragraph (2)(i) of this subsection shall be consistent with the fiduciary responsibilities and shall include: developing appropriate standards, policies, and processes for the implementation and management of the governance program; monitoring, evaluating, and quantifying the risks and effects of material environmental, social, and governance factors on the investment of the assets of the several systems; working across asset classes to integrate consideration of material environmental, social, and governance factors into investment due diligence and recommendations; providing recommendations to the Chief Investment Officer based on research and analysis of material environmental, social, and governance factors, including diversity, equity, and inclusion; assisting the Investment Division in identifying and recommending investment opportunities to the Chief Investment Officer; evaluating whether internal and external investment managers represent a diverse set of backgrounds; working with investment managers, data providers, index providers, or consultants to identify, analyze, define, and prioritize specific metrics to align with an inclusive environment; supporting the Board of Trustees with the implementation of the State’s minority business enterprise policies by the Investment Division, in accordance with Title 14, Subtitle 3 of the State Finance and Procurement Article and § 21–116(d) of this subtitle; and providing advice and reports to the Board of Trustees on governance topics.

Except for those assets that the law requires another entity or person to control, the State Retirement Agency, under the supervision of the Board of Trustees, shall manage all assets of the several systems. The Board of Trustees: is deemed the owner of all the assets of the several systems; but may delegate some or all incidents of ownership to the State Retirement Agency to administer the investment portfolios of the several systems. The Board of Trustees may invest assets of the several systems subject to the conditions that it imposes. The Board of Trustees shall include the conditions that it adopts under paragraph (1) of this subsection in the investment policy manual required by § 21–116(c) of this subtitle. This subsection applies only to the execution of: ground rent redemption deeds; releases or reassignments of mortgages; and satisfactions or reassignments of notes conveying, releasing, or reassigning any interest owned by the State for the use of a fund of the several systems. An instrument must be executed by any two of: the State Treasurer; the Executive Director of the State Retirement Agency; the Chief Investment Officer of the State Retirement Agency; or another employee of the State Retirement Agency as the Executive Director designates with the approval of the Board of Trustees. The Board of Trustees may commingle assets of the several systems, including the Postretirement Health Benefits Trust Fund, if the Board of Trustees keeps separate sets of records for each State system or group of State systems listed in paragraph (2) of this subsection that show: the percentage of participation of each State system or group of State systems, including the Postretirement Health Benefits Trust Fund; the percentage of income, gains, and losses applicable to each State system or group of State systems, including the Postretirement Health Benefits Trust Fund; and the total contributions and disbursements applicable to each State system or group of State systems, including the Postretirement Health Benefits Trust Fund. The Board of Trustees shall keep records required by paragraph (1) of this subsection for each of the following: the group that consists of the Correctional Officers’ Retirement System, the Employees’ Pension System, the Employees’ Retirement System, and the Legislative Pension Plan; the Judges’ Retirement System; the Law Enforcement Officers’ Pension System; the State Police Retirement System; the group that consists of the Teachers’ Pension System and the Teachers’ Retirement System; and the Postretirement Health Benefits Trust Fund. On behalf of the several systems, the Board of Trustees shall make arrangements for the safe custody, domestic or global, of investments with one or more duly qualified custodian banks or trust companies. Notwithstanding any other law in force on or after July 1, 1988, unless the law makes specific reference to this subsection, and subject to paragraph (2) of this subsection, the Board of Trustees may keep all analyses, forecasts, negotiations, papers, records, recommendations, and reports closed to public inspection until: the release of the information would not adversely affect the negotiation for or market price of a security; and completion of: a proposed purchase or program of purchases leading to a cumulative position in a security; the making, sale, or prepayment of a loan; any proposed sale or program of sales leading to the elimination of a position in a security; or the sale or purchase of real estate. The sale or purchase of real estate shall be subject to the approval of a majority of the Comptroller, Treasurer, and Secretary of Budget and Management, in their capacity as members of the Board of Trustees. Any direct owned real estate purchased as an investment by the State Retirement and Pension System shall be managed by an external investment manager selected by the Chief Investment Officer. Title 4, Subtitle 3, Part III and § 10–305 of the State Finance and Procurement Article do not apply to the sale, acquisition, lease, transfer, exchange, or other disposition of any real or personal property acquired by the Board of Trustees in any transaction authorized under this title.

In this subtitle the following words have the meanings indicated. “Actively managed separate accounts” means the accounts of the several systems that are actively managed at the direction of the Board of Trustees and held in separate accounts. “Actively managed separate accounts” does not mean indexed funds, private equity funds, real estate funds, or other commingled or passively managed funds. “Company” means any corporation, utility, partnership, joint venture, franchisor, franchisee, trust, entity investment vehicle, financial institution, or a wholly owned subsidiary of any of these entities. “Divestment action” means selling, redeeming, transferring, exchanging, otherwise disposing of, and refraining from further investment in certain investments. “Doing business in Iran” means the company has, with actual knowledge, on or after August 5, 1996, made an investment of $20,000,000 or more, or any combination of investments of at least $10,000,000 each, which in the aggregate equals or exceeds $20,000,000 in any 12–month period, and which directly or significantly contributes to the enhancement of Iran’s ability to develop the petroleum or natural gas resources of Iran. “Doing business in Sudan” means engaging in commerce in Sudan by maintaining or leasing equipment, facilities, personnel, or other apparatus of business or commerce in oil–related activities, mineral extraction activities, power production activities, or production of military equipment of Sudan. “Eligible accounts” means actively managed separate accounts containing funds of the several systems. “Government of Iran” means the government of Iran, its instrumentalities, and companies owned or controlled by the government of Iran. “Investment” means the commitment of funds or other assets to a company, including: the ownership or control of a share or interest in the company; or the ownership or control of a bond or other debt instrument of a company. “Iran” means the Islamic Republic of Iran. “Sudan” means the government in Khartoum, Sudan, that is led by the National Congress Party (formerly known as the National Islamic Front) or any successor government formed on or after October 13, 2006, including the Coalition National Unity Government agreed on in the Comprehensive Peace Agreement for Sudan. “Sudan” does not mean the regional government of southern Sudan. The Board of Trustees shall review the investment holdings in eligible accounts for the purpose of determining the extent to which funds in eligible accounts are invested in companies doing business in Iran or Sudan. Except as otherwise provided in this section, and consistent with the fiduciary duties of the Board of Trustees under Subtitle 2 of this title and all other applicable law, the Board of Trustees shall, within 30 days of its review under subsection (b) of this section, provide written notice and opportunity to comment to a company in which eligible accounts are invested and that has been identified as doing business in Iran or Sudan. Any notice provided by the Board of Trustees under paragraph (1) of this subsection shall state that the company shall be subject to divestment action by the Board of Trustees unless the company provides written comments within 90 days to the Board of Trustees: demonstrating that the company is not doing business in Iran or Sudan; or stating that, within 60 days of providing written comments to the Board of Trustees under this paragraph, the company will produce a plan to end doing business in Iran or Sudan within 1 year. If the company demonstrates to the satisfaction of the Board of Trustees that it is not doing business in Iran or Sudan, the Board of Trustees may not take any divestment action against the company. If within 60 days of providing written comments to the Board of Trustees under paragraph (2) of this subsection, the company produces a plan to cease doing business in Iran or Sudan within 1 year, the Board of Trustees may not take any divestment action against the company. If the Board of Trustees does not take any divestment action under subparagraph (i) of this paragraph, the Board of Trustees shall monitor the progress of the company’s plan to cease doing business in Iran or Sudan over the 12 months immediately following receipt of the plan. If the company ceases doing business in Iran or Sudan within 1 year, the Board of Trustees may not take any divestment action against the company. If the company does not cease doing business in Iran or Sudan within 1 year, the Board of Trustees shall take divestment action against the company as provided in subsection (d) of this section. Except as provided in subsections (c) and (e) of this section, the Board of Trustees: shall take divestment action in eligible accounts with regard to current investments: in any company doing business in Iran or Sudan; or in any security or instrument issued by Iran or Sudan; and may not make any new investments from net new funds in an eligible account in any company that is doing business in Iran or Sudan as determined in accordance with the procedures set forth in subsection (c) of this section. Notwithstanding the provisions of this section, the Board of Trustees may exclude from the provisions of subsections (c) and (d) of this section, a company: that the United States government affirmatively declares to be excluded from its federal sanctions regime relating to Iran or Sudan; and whose divestment cannot be executed for fair market value or greater. If the Board of Trustees takes divestment action under subsection (d) of this section, with respect to investments in a company, the Board of Trustees shall provide the company with written notice of its decision and reasons for the decision. On or before October 1 of each year, and every 6 months thereafter, the Board of Trustees shall submit a report in accordance with § 2–1257 of the State Government Article to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions that provides: a summary of correspondence with companies engaged by the Board of Trustees under this section; all divestment actions taken by the Board of Trustees in accordance with this section; a list of companies doing business in Iran or Sudan which the Board of Trustees has determined to be ineligible for investments of net new funds under subsection (d)(2) of this section; and other developments relevant to investment in companies doing business in Iran or Sudan. The Board of Trustees, or any other fiduciary of the several systems, may not be held liable for any actions taken or decisions made in good faith for the purpose of complying with or executing the requirements of any divestment provisions under this subtitle. The Board of Trustees shall act in good faith to carry out divestment action as required by this section in compliance with all applicable State and federal law, including relevant judicial decisions and the federal Sudan Accountability and Divestment Act of 2007. Nothing in this section shall require the Board of Trustees to take action as described in this section unless the Board of Trustees determines, in good faith, that the action is consistent with the fiduciary responsibilities of the Board of Trustees as described in Subtitle 2 of this title.

In this section the following words have the meanings indicated. “Private equity” means an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. “Venture capital” means an investment of capital to a business at any stage of its development before the business makes a public offering of stock. For purposes of this section, an investment in the State shall include an investment in an entity or vehicle that: is domiciled in the State; operates in the State; or is reasonably expected to invest in entities that are in the State. It is the intent of the General Assembly that State contributions in excess of statutory requirements be invested in the State with a goal to increase the risk capital available in the State, if the investments are consistent with, and do not compromise or conflict with, the fiduciary duties of the Board of Trustees to the participants of the several systems. The Board of Trustees may enter into an agreement with the Maryland Technology Development Corporation or another entity to make and manage investments on behalf of the Board of Trustees in private equity and venture capital in the State with the amount of money appropriated to the system, the State Retirement Agency, or the accumulation funds of the several systems that: for fiscal year 2017, is in addition to: the amounts appropriated for the State and local employer contributions and the supplemental contribution required under §§ 21–308, 21–309, 21–309.1, and 21–310 of this title; the amount appropriated under § 7–311(j)(1)(i)1 of the State Finance and Procurement Article; and any other amounts required by any other provisions of law to be appropriated to the system, the State Retirement Agency, or the accumulation funds of the several systems; and for fiscal years 2019 through 2022, is appropriated under § 21–308(a)(4) of this title. If the Board of Trustees does not enter into an agreement with the Maryland Technology Development Corporation or another entity in accordance with paragraph (1) of this subsection, the Board of Trustees shall develop a process that authorizes the Maryland Technology Development Corporation or another entity to provide recommendations regarding investments in private equity and venture capital in the State with respect to the amount described under paragraph (1) of this subsection. The investments or recommendations made in accordance with this section shall include a goal of investments or recommendations for the investment of 50% of the funds in commercialization of technology sponsored or created by a university in the State. An entity providing services to the Board of Trustees in accordance with paragraph (1) or (2) of this subsection shall be subject to the standards of care under § 21–203 of this title and the prohibited transactions under § 21–205 of this title, with respect to the services provided. All profits of and return of principal from investments made under this section shall accrue to the accumulation funds of the several systems. On or before December 31 each year, the Board of Trustees shall submit a report to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions, in accordance with § 2–1257 of the State Government Article, and subject to § 4–335 of the General Provisions Article, that includes a detailed description of: the investments, if any, made under this section; the recommendations, if any, made under this section; the actions, if any, taken by the Board of Trustees on the recommendations made under this section; the investment performance of any investments made under this section; to the extent possible, an accounting of the fees and expenses incurred under this section; and to the extent possible, the ratio of funds invested in projects under this section to the total percentage of venture capital funds raised in the State by all sources. On or before December 1 each year, the Maryland Technology Development Corporation or another entity with which the Board of Trustees entered into an agreement under subsection (d)(1) or (2) of this section shall submit a report to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions, in accordance with § 2–1257 of the State Government Article, that, to the extent possible, provides: the economic benefit generated from investments made under this section, including: the creation of new businesses; the expansion of existing businesses; the creation of new jobs; the termination of any jobs; and any increases in payroll; and the number of businesses receiving funds from investments under this section that subsequently relocate to other states or countries. The Board of Trustees, or any other fiduciary of the several systems as defined in § 21–201(b) of this title, may not be held liable for any actions taken or decisions made in good faith for the purpose of complying with or executing the requirements of this section. The Board of Trustees shall act in good faith to carry out the requirements of this section in compliance with all applicable State and federal law, including relevant judicial decisions. Nothing in this section shall require the Board of Trustees to take action as described in this section unless the Board of Trustees determines, in good faith, that the action is consistent with the fiduciary responsibilities of the Board of Trustees as described in Subtitle 2 of this title.

In this section the following words have the meanings indicated. “Actively managed separate accounts” means the accounts of the several systems that are actively managed at the direction of the Board of Trustees and held in separate accounts. “Actively managed separate accounts” does not mean indexed funds, private equity funds, real estate funds, or other commingled or passively managed funds. “Company” means any corporation, utility, partnership, joint venture, franchisor, franchisee, trust, entity investment vehicle, financial institution, or a wholly owned subsidiary of any of these entities. “Divestment action” means selling, redeeming, transferring, exchanging, otherwise disposing of, and refraining from further investment in certain investments. “Eligible accounts” means actively managed separate accounts containing funds of the several systems. “Investment” means the commitment of funds or other assets to a company including: the ownership or control of a share or interest in the company; or the ownership or control of a bond or other debt instrument of a company. “Russia” means the government of Russia or the government of the Russian Federation. “Russia” includes all agencies, institutions, instrumentalities, and political subdivisions of Russia. “Russia–restricted investment” means an investment in a company: identified by the Federal Office of Foreign Assets Control as a Russian entity with which transactions are prohibited by federal law; owned, in whole or in part, by Russia; controlled by a company that is owned, in whole or in part, by Russia; incorporated in Russia; or whose principal place of business is located within Russia, to the extent this determination can be made. The Board of Trustees shall review the investment holdings in eligible accounts for the purpose of determining the extent to which funds in eligible accounts are invested in Russia–restricted investments. Except as provided in subsection (d) of this section, the Board of Trustees: shall take divestment action in eligible accounts with regard to current investments: in any Russia–restricted investment; or in any security or instrument issued by Russia; and may not make any new investments from net new funds in an eligible account in any Russia–restricted investment. Notwithstanding the provisions of this section, the Board of Trustees may exclude from the provisions of subsection (c) of this section a company: that the United States government affirmatively declares to be excluded from its federal sanctions regime relating to Russia; and whose divestment cannot be executed for fair market value or greater. On or before April 1 and October 1 each year, the Board of Trustees shall submit a report, in accordance with § 2–1257 of the State Government Article, to the Senate Budget and Taxation Committee, the House Appropriations Committee, and the Joint Committee on Pensions that provides: all divestment actions taken by the Board of Trustees in accordance with this section; a list of investments that the Board of Trustees has determined to be ineligible for investments of net new funds under subsection (c)(2) of this section; and other developments relevant to Russia–restricted investments. The Board of Trustees or any other fiduciary of the several systems may not be held liable for any actions taken or decisions made in good faith for the purpose of complying with or executing the requirements of any divestment provisions under this section. The Board of Trustees shall act in good faith to carry out divestment action as required by this section in compliance with all applicable State and federal law, including relevant judicial decisions. Nothing in this section shall require the Board of Trustees to take action as described in this section unless the Board of Trustees determines in good faith that the action is consistent with the fiduciary responsibilities of the Board of Trustees as described in Subtitle 2 of this title.

The State Treasurer is the custodian of: the accumulation, annuity savings, and expense funds of the several systems; and the assets of the Board of Trustees. The State Retirement Agency shall make all payments from the accumulation, annuity savings, and expense funds of the several systems in accordance with regulations that the Board of Trustees adopts with the approval of the State Treasurer. The State Treasurer may make arrangements with one or more duly qualified banks or trust companies in this State, organized under the laws of this State or of the United States, for: banking services; and any other function that the State Treasurer considers necessary to safeguard physically the assets that the Board of Trustees manages. The State Treasurer: may deposit any of the securities that the Board of Trustees purchases in vaults or in other safe depositories outside the office of the State Treasurer, whether or not in this State; and shall deliver to the Board of Trustees a safekeeping receipt that: describes the securities that the State Treasurer deposits; and is payable on demand and without conditions to the Board of Trustees, to any designated fund of the several systems that the Board of Trustees controls, or to the State Treasurer. The Board of Trustees shall keep on file any safekeeping receipt that the State Treasurer delivers. Subject to paragraph (2) of this subsection, to make disbursements, the State Treasurer may keep cash on deposit in one or more duly qualified banks or trust companies in this State that are organized under the laws of this State or of the United States. The State Treasurer may not: keep more than 10% of the total amount in the funds of the several systems on deposit as cash; or keep cash that exceeds 25% of the paid–up capital and surplus of the bank or trust company in that bank or trust company.

The Board of Trustees shall designate an actuary who shall: give technical advice to the Board of Trustees on the operation of the funds of the several systems; and perform other related duties that the Board of Trustees requires. On the basis of actuarial assumptions that the Board of Trustees adopts, each year the actuary shall make a valuation of the assets and liabilities of the funds of the several systems and shall recommend the rates of employer contributions to be certified by the Board of Trustees. Each year, on the recommendation of the actuary, the Board of Trustees shall certify to the Secretary of Budget and Management and to the Governor the rates of employer contributions. Each year, on the recommendation of the actuary, the Board of Trustees shall certify to all other participating employers the rates of employer contributions. The normal contribution rate recommended by the actuary and certified by the Board of Trustees for all employers under subparagraph (i) of this paragraph for each fiscal year shall include an amount necessary for the administrative and operational expenses of the Board of Trustees and the State Retirement Agency, excluding the administrative and operational expenses of the Investment Division. For purposes of actuarial valuation, the Board of Trustees may adopt a generally accepted actuarial method for determining the value of the assets held by the several systems. For general ledger accounting and financial reporting, the Board of Trustees shall use generally accepted accounting principles. At least once in each 5–year period, the actuary shall make: actuarial investigations into the compensation, mortality, and service experience of the participants of each of the several systems; and a valuation of the assets and liabilities of the funds of each of the several systems. The Board of Trustees shall: review the results of the investigations and valuations of the actuary; and adopt the actuarial assumptions for each of the several systems as the Board of Trustees considers necessary.

The Board of Trustees shall establish one or more medical boards. Each medical board consists of three members and not more than three alternates. Each medical board member and alternate shall be a physician who is not eligible to be a member of a State system. The Board of Trustees shall appoint the medical board members and any alternates. Notwithstanding paragraph (2) of this subsection, the Board of Trustees may appoint a physician who is a participating employee in the Optional Retirement Program under Title 30 of this article to a medical board if the physician is not eligible to receive a disability benefit under Title 29, Subtitle 1 of this article. In the absence of a medical board member, an alternate may serve on a medical board. Two members of a medical board are a quorum for the conduct of business. A medical board shall: arrange for and approve all medical examinations required under this Division II; investigate all essential certificates and statements by or on behalf of a member concerning the application of the member for disability retirement; and submit written reports to the Board of Trustees, with conclusions and recommendations, on all matters that the Board of Trustees refers to the medical board. The Board of Trustees may employ other physicians to report on special cases. A member of a medical board appointed under subsection (b)(3)(ii) of this section may not participate in a case concerning the application of a member for disability retirement if the applicant is an employee of the same institution that is the employing institution, as defined in § 30–101 of this article, of the member of the medical board.

In this section, “retiree organization” means an organization in which State retirees participate and that has as one of its primary purposes, representing or providing services to State retirees. This section applies to any retiree organization that has the legal authority to provide services to retirees of the several systems. A retiree organization may submit only two requests each year to the Board of Trustees to assist the retiree organization in performing direct mailings to retirees of the several systems who are members of the retiree organization or eligible to become members of the retiree organization. The direct mailings may not be for the purpose of supporting or opposing any political party, ballot measure, or candidate in any election, including any State general or primary election or any election within the retiree organization. The Board of Trustees shall provide the retiree data for addressing envelopes only to the mail processing center under a secure data share agreement with the mail processing center under which neither the retiree organization nor any other entity has direct access to any names or addresses. If the Board of Trustees provides any retiree data to a mail processing center under subparagraph (i) of this paragraph, the Board of Trustees is not required to notify a retiree whose data is released of the provisions of § 21–504 of this title. A retiree organization shall provide the Board of Trustees with copies of all materials that will be included in the direct mailing. The Board of Trustees shall review the materials provided under subparagraph (i) of this paragraph before providing any retiree data to a mail processing center. The direct mailing shall provide retirees of the several systems who are members of the retiree organization or eligible to become members of the retiree organization with information that explains the services offered by the retiree organization. A retiree organization is solely responsible for the procurement of a mail processing center under this section. The retiree organization shall provide all printed materials to be mailed and envelopes to a mail processing center. The retiree organization is responsible for paying all costs for generating mailing labels, inserting materials into envelopes, sealing, labeling, and delivering materials to be mailed to a bulk mail center or post office. The retiree organization is responsible for all postage costs involved for the direct mailings. The Board of Trustees is not liable for the content of any direct mailing sent under this section.