The Newton City Finance Committee voted 7-0 on March 10 to authorize a five-year contract (with an optional five-year renewal) for administration of the city’s deferred compensation plan and to continue the request-for-proposals (RFP) process to select a new plan administrator.

Ron Mendez, the city treasurer, told the committee the plan is analogous to a public-sector 401(k) and operates under Internal Revenue Code Section 457(b). Mendez said the city is the plan fiduciary by statute and that the plan is funded entirely by employee contributions and fees — not by taxpayer dollars.

Mendez said the city’s RFP process is intended to find a plan administrator and investment manager offering the best fee structure and investment options for participants. He said proposals were expected in March and a new contract in place by June, with an effective date of July 1 if approved. Mendez described a range of options the evaluators will consider, including keeping a standalone city plan or merging into the Commonwealth of Massachusetts’ SMART Plan. "That may be a good deal," he said, "but the first step in the process is to see what deal we can get on our own."

Mendez told the committee the deferred compensation fund holds substantial assets and that roughly 480 employees — about 40% of the full-time workforce — currently participate. He also said part-time and seasonal employees are required to contribute 7.5% of pay to an account that helps preserve the city’s exemption from Social Security taxes for municipal employees.

The evaluation group will include volunteer employee representatives from across bargaining units, retirees and some nonunion employees. Mendez said the contract will include escape clauses to terminate the administrator if performance or fees are unsatisfactory and that the city intends to retain a consultant to assist with ongoing fiduciary oversight.

Councilors asked about the current part-time plan administrator (Voya) and the timetable for any switch; Mendez said the RFP could result in a new administrator, continued use of Voya, or a decision to merge into the state SMART Plan, with an anticipated transition in late fiscal 2026 after education to employees.

The committee approved the authorization by voice vote; the chair announced the tally as 7 to 0.