SB 380 — An Act providing for divestiture by the State Treasurer, the State Employees' Retirement System, the Public School Employees' Retirement System and the Pennsylvania Municipal Retirement System of investments in assets relating to China.

PRINTER'S NO.   327

                    THE GENERAL ASSEMBLY OF PENNSYLVANIA



                        SENATE BILL
                        No. 380
                                               Session of
                                                 2025

     INTRODUCED BY MASTRIANO, ROTHMAN, PENNYCUICK, PHILLIPS-HILL,
        HUTCHINSON, STEFANO AND DUSH, MARCH 6, 2025

     REFERRED TO FINANCE, MARCH 6, 2025


                                     AN ACT
 1   Providing for divestiture by the State Treasurer, the State
 2      Employees' Retirement System, the Public School Employees'
 3      Retirement System and the Pennsylvania Municipal Retirement
 4      System of investments in assets relating to China.
 5      The General Assembly of the Commonwealth of Pennsylvania
 6   hereby enacts as follows:
 7   Section 1.    Short title.
 8      This act shall be known and may be cited as the China
 9   Divestiture Act.
10   Section 2.    Definitions.
11      The following words and phrases when used in this act shall
12   have the meanings given to them in this section unless the
13   context clearly indicates otherwise:
14      "Alternative investments."    An investment in a private equity
15   fund, private debt fund, venture fund, real estate fund, hedge
16   fund or absolute return fund.
17      "Board."    Any of the following:
18          (1)    The Pennsylvania Municipal Retirement Board.
19          (2)    The Public School Employees' Retirement Board.
 1          (3)    The State Employees' Retirement Board.
 2      "China."     The People's Republic of China.
 3      "Company."     A sole proprietorship, organization, association,
 4   corporation, partnership, joint venture, limited partnership,
 5   limited liability partnership, limited liability company or
 6   other entity or business association that exists for the purpose
 7   of making a profit.
 8      "Direct holdings."    All securities of a company or the
 9   government of China that are held directly by the public fund.
10      "Foreign company."    An entity which is not organized under
11   the laws of the United States.
12      "Government of China."     The government of China and its
13   political subdivisions and the instrumentalities and companies
14   owned or controlled by the government of China or its political
15   subdivisions.
16      "Indemnitee."    Each current or former board member, duly
17   appointed designee of a board member, officer, employee,
18   including, without limitation, the attorneys in the Office of
19   Chief Counsel that serve a public fund, agent, research firm or
20   investment manager of a public fund who was or is a party to, or
21   is threatened to be made a party to or is otherwise involved in,
22   any proceeding by reason of the fact that the person is or was a
23   board member, designee of a board member, officer, employee,
24   agent, research firm or investment manager of a public fund.
25      "Indirect holdings."    All securities held in an account or
26   fund such as a mutual fund managed by one or more persons not
27   employed by a public fund, in which the public fund owns shares
28   or interests together with other investors.
29      "Public fund."     Any of the following:
30          (1)    The State Employees' Retirement Fund established

20250SB0380PN0327                    - 2 -
 1      under 71 Pa.C.S. Pt. XXV (relating to retirement for State
 2      employees and officers).
 3            (2)   The Public School Employees' Retirement Fund
 4      established under 24 Pa.C.S. Pt. IV (relating to retirement
 5      for school employees).
 6            (3)   The Pennsylvania Municipal Retirement Fund.
 7            (4)   Any Commonwealth fund of which the State Treasurer
 8      is the custodian.
 9      "Sanctioned Chinese company."           A foreign company sanctioned
10   under the authority of Presidential Executive Order 14032 (June
11   3, 2021), published at 86 Fed. Reg. 107, 30145 (June 7, 2021).
12      "Scrutinized company."        A foreign company domiciled in or
13   organized under the laws of China. The term includes a
14   sanctioned Chinese company.
15   Section 3.     Identification.
16      Within 30 days of the effective date of this section and no
17   less frequently as deemed necessary by the State Treasurer or a
18   board thereafter, a public fund shall make its best effort to
19   identify all direct holdings, indirect holdings and alternative
20   investments of scrutinized companies and the government of
21   China.
22   Section 4.     Divestment.
23      (a)   Initial divestment of direct holdings.--A public fund
24   shall sell, redeem, divest or withdraw from its direct holdings
25   all securities of the government of China.
26      (b)   Additional divestment.--Beginning on the effective date
27   of this section, a public fund shall sell, redeem, divest or
28   withdraw from the following:
29            (1)   A scrutinized company in which the public fund has
30      direct holdings.

20250SB0380PN0327                       - 3 -
 1            (2)   A scrutinized company in which the public fund has
 2      indirect holdings and alternative investments.
 3            (3)   Securities of the government of China in which the
 4      public fund has indirect holdings and alternative
 5      investments.
 6      (c)   Prohibition.--A public fund may not acquire direct
 7   holdings, indirect holdings or alternative investments of
 8   scrutinized companies or the government of China.
 9      (d)   Deadline.--
10            (1)   All investments referenced in subsections (a) and
11      (b) must be divested not later than the following:
12                  (i)    At least 50% of the investment shall be removed
13            from a public fund's assets within three years after the
14            effective date of this subparagraph.
15                  (ii)    At least 75% of the investment shall be removed
16            from a public fund's assets within five years of the
17            effective date of this subparagraph.
18                  (iii)   One hundred percent of the investment shall be
19            removed from a public fund's assets within 10 years of
20            the effective date of this subparagraph.
21            (2)   An administrator of a public fund shall use the
22      administrator's best efforts to liquidate the assets listed
23      in subsection (b)(2) and (3) over unspecified periods of time
24      in a manner that does not result in significant adverse
25      economic harm to the public fund since these assets are
26      invested in partnerships and other investment vehicles that
27      make these assets illiquid and typically represent long-term
28      public fund investment holdings.
29   Section 5.     Reporting.
30      (a)   Duty of public fund.--A public fund shall, within three

20250SB0380PN0327                       - 4 -
 1   months of the effective date of this subsection and not less
 2   than once per year thereafter, provide a report with the content
 3   under subsection (b) to the Governor, the President pro tempore
 4   of the Senate, the Speaker of the House of Representatives and
 5   each member of the boards of the Pennsylvania Municipal
 6   Retirement System, the State Employees' Retirement System and
 7   the Public School Employees' Retirement System. The report shall
 8   include the items required under subsection (b). The public
 9   funds may file a joint report under this subsection. The report
10   shall be made available to the public.
11      (b)   Contents.--The report under subsection (a) shall include
12   all of the following:
13            (1)   A list of all scrutinized companies in which the
14      public fund has direct holdings, indirect holdings and
15      alternative investments.
16            (2)   All investments sold, redeemed, divested or
17      withdrawn in compliance with section 4(a), the costs and
18      expenses of the transfers and a determination of net gain or
19      loss on account of the transactions incurred in compliance
20      with the provisions of this act, which shall be determined in
21      accordance with section 9.
22            (3)   All investments sold, redeemed, divested or
23      withdrawn in compliance with section 4(b).
24            (4)   All prohibited investments under section 4(c).
25   Section 6.     Expiration.
26      A public fund shall have no obligations under this act with
27   respect to foreign companies which are domiciled in or organized
28   under the laws of China or the government of China upon the
29   occurrence of any of the following:
30            (1)   The company is no longer a foreign company which is

20250SB0380PN0327                    - 5 -
 1      domiciled in or organized under the laws of China.
 2            (2)   The President or Congress of the United States,
 3      through executive order or legislation, declares that
 4      mandatory divestment of the type provided for in this act
 5      interferes with the conduct of United States foreign policy.
 6   Section 7.     Conflict with other laws.
 7      (a)   Compliance.--Except as otherwise provided under
 8   subsection (b), a public fund may perform any action necessary
 9   to comply with this act, including, but not limited to, any
10   fiduciary or prudent investing responsibilities as prescribed in
11   20 Pa.C.S. § 7302 (relating to authorized investments; in
12   general), 24 Pa.C.S. § 8521 (relating to management of fund and
13   accounts), 71 Pa.C.S. § 5931 (relating to management of fund and
14   accounts) and section 110 of the act of February 1, 1974
15   (P.L.34, No.15), known as the Pennsylvania Municipal Retirement
16   Law, and any obligations of a public fund with respect to choice
17   of asset managers, investment funds or investments for the
18   public fund's securities portfolios.
19      (b)   Applicable standard.--Divestment under section 4(b)
20   shall be made in accordance with any applicable fiduciary or
21   prudent investing responsibilities as prescribed under 20
22   Pa.C.S. § 7302, 24 Pa.C.S. § 8521 and 71 Pa.C.S. § 5931, section
23   110 of the Pennsylvania Municipal Retirement Law and any
24   obligations of a public fund with respect to choice of asset
25   managers, investment funds or investments for the public fund's
26   securities portfolios.
27   Section 8.     Indemnification.
28      (a)   Actions subject to indemnification.--Each indemnitee
29   shall be indemnified and held harmless by the Commonwealth for
30   all good faith actions taken by the indemnitee and for all good

20250SB0380PN0327                      - 6 -
 1   faith failures to take action, regardless of the date of any
 2   action or failure to take action, in connection with attempts to
 3   comply with any investment limitations imposed by statute
 4   against all expense, liability and loss, including, without
 5   limitation, attorney fees, judgments, fines, taxes, penalties
 6   and amounts paid or to be paid in settlements reasonably
 7   incurred or suffered by the indemnitee in connection with any
 8   proceeding.
 9      (b)   Advance payment.--The right to indemnification provided
10   under this section shall include the right to have the expenses
11   reasonably incurred by the indemnitee in defending any
12   proceeding paid by the Commonwealth in advance of the final
13   disposition of the proceeding upon the receipt by the
14   Commonwealth of a written undertaking by the indemnitee to
15   refund the amounts so advanced if it is ultimately determined
16   that the indemnitee is not entitled to indemnification under
17   this section.
18      (c)   Persons entitled.--Indemnification under this section
19   shall continue as to an indemnitee who has ceased to be a board
20   member, designee of a board member, officer or employee of a
21   public fund and shall inure to the benefit of the person's legal
22   representatives, heirs, executors and administrators.
23      (d)   Reimbursement to public funds.--To the extent that the
24   Commonwealth does not make any indemnification payments,
25   including any advancement of legal fees and expenses, within 30
26   days of demand therefor, a public fund shall make such payment
27   and the Commonwealth shall reimburse the public fund.
28      (e)   Construction.--The repeal, expiration or amendment of
29   any provision of this section shall not limit the rights of any
30   indemnitee to indemnification, including advancement of

20250SB0380PN0327                  - 7 -
 1   expenses, with respect to any action or failure to act occurring
 2   prior to the effective date of a repeal or amendment.
 3   Section 9.   Fund reimbursement.
 4      The Commonwealth shall reimburse each public fund for the
 5   public fund's net losses, costs and expenses incurred as a
 6   result of compliance with the provisions of this act. The
 7   reimbursements shall occur in the following manner:
 8          (1)   The public fund shall submit to the Secretary of the
 9      Budget an itemization of the amount necessary to be
10      appropriated by the General Assembly to reimburse the public
11      fund for net losses, costs and expenses incurred as a result
12      of compliance with the provisions of section 4(a) in the
13      previous fiscal year. This paragraph shall only apply to net
14      losses, costs and expenses incurred after the effective date
15      of this paragraph and relating to a first year after sale,
16      redemption, divestiture or withdrawal under section 4(a). To
17      the extent the public fund experiences net gains as a result
18      of compliance with the provisions of section 4(a) in a fiscal
19      year, the net gains shall be used to offset any reported
20      costs or expenses incurred by the public fund.
21          (2)   In consultation with each public fund, the Secretary
22      of the Budget shall annually establish a uniform method for
23      the determination of gains and losses under paragraph (1).
24      The method shall be used by each public fund in making a
25      claim for reimbursement under this section. The budget
26      submission shall be on a form and in a manner determined by
27      the Secretary of the Budget, including net losses, along with
28      an itemized accounting of all costs and expenses claimed by
29      the public fund. Budget submission shall occur no later than
30      November 1 following the fiscal year in which the net losses,

20250SB0380PN0327                  - 8 -
 1      costs and expenses were incurred.
 2            (3)   Upon appropriation by the General Assembly to
 3      provide for the obligations of the Commonwealth, the amount
 4      shall be paid by the State Treasurer through the Department
 5      of Revenue into the public fund within 90 days of receipt of
 6      the requisition presented by the public fund.
 7   Section 10.    Nonapplicability.
 8      (a)   State Employees' Defined Contribution Plan and
 9   Commonwealth's Deferred Compensation Plan.--The provisions and
10   restrictions of this act shall not apply to the State Employees'
11   Defined Contribution Plan established under 71 Pa.C.S. Pt. XXV
12   (relating to retirement for State employees and officers), known
13   as the State Employees' Retirement Code, the Commonwealth's
14   Deferred Compensation Plan established under section VIII.2 of
15   the act of March 30, 1811 (P.L.145, No.99), referred to as the
16   Settlement of Public Accounts Act, or to the individual
17   investment accounts or the funds and investments therein of the
18   participants of the plans, but the State Employees' Retirement
19   Board is authorized to offer to the participants of the plans
20   investment vehicles that would be permitted under this act.
21      (b)   School Employees' Defined Contribution Plan.--The
22   provisions and restrictions of this act shall not apply to the
23   School Employees' Defined Contribution Plan established under 24
24   Pa.C.S. Ch. 84 (relating to School Employees' Defined
25   Contribution Plan) or to the individual investment accounts or
26   the funds and investments therein of the participants of the
27   plan, but the Public School Employees' Retirement Board is
28   authorized to offer to the participants of the plan investment
29   vehicles that would be permitted under this act.
30      (c)   Tuition Account Guaranteed Savings Program, Tuition

20250SB0380PN0327                    - 9 -
 1   Account Investment Program and Pennsylvania ABLE Savings
 2   Program.--The provisions and restrictions of this act shall not
 3   apply to the Tuition Account Guaranteed Savings Program or the
 4   Tuition Account Investment Program established under the act of
 5   April 3, 1992 (P.L.28, No.11), known as the Tuition Account
 6   Programs and College Savings Bond Act or the Pennsylvania ABLE
 7   Savings Program established under the act of April 18, 2016
 8   (P.L.128, No.17), known as the Pennsylvania ABLE Act.
 9   Section 11.   Severability.
10      If any provision of this act or its application to any person
11   or circumstances is held invalid, the invalidity shall not
12   affect other provisions or applications of this act that can be
13   given effect without the invalid provision or application.
14   Section 12.   Effective date.
15      This act shall take effect immediately.




20250SB0380PN0327                    - 10 -