(b) Notwithstanding section 9003.1(a) of this Subtitle, a deferred compensation committee may contract with a firm of certified public accountants selected as a result of a competitive proposal undertaken by the local employer that expressly included in the scope of services an audit of the deferred compensation plan sponsored by the local government to be conducted in compliance with section 9005.1 of this Subtitle. The competitive request for proposals must be in general compliance with section 9003.2 of this Subtitle, except for the requirement of notice in the State Register. The deferred compensation committee must adhere to the criteria contained in section 9003.3 of this Subtitle in the selection of such auditor made pursuant to this paragraph (b). A firm of certified public accountants selected by a deferred compensation committee pursuant to this paragraph (b) shall be subject to the provisions of section 9003.5 of this Subtitle. The firm of certified public accountants may be the same firm that is under contract with the local employer for other auditing services of the local employer.

Section 2. A new paragraph (c) is added to Section 9003.1 of Title 9 of the NYCRR to read as follows:

Section 3. Section 9003.2 of Title 9 of the NYCRR is amended to read as follows:

9003.2 Competitive proposals. All contracts and agreements in respect of a plan shall be awarded only after receiving competitive proposals; provided, however, that no competitive proposal or bidding shall be necessary for the board or a deferred compensation committee to serve as the trustee of a plan under its authority or with respect to financial organizations selected pursuant to Section 9003.1(c). The board or deferred compensation committee, as applicable, shall cause to be published an announcement requesting competitive proposals. Such announcement shall be published in the State Register and in the official newspaper or newspapers, if any, or otherwise in an appropriate newspaper designated for such purposes, at least 90 days prior to the date on which the contract or agreement will be awarded, and shall request proposals within a specified time period from the date of publication.

Section 4. Paragraph (a) of Section 9003.5 of Title 9 of the NYCRR is amended to read as follows:

9003.5 Miscellaneous requirements. (a) All contracts and agreements entered into with a trustee, an independent consultant, a financial organization, a firm of certified public accountants or an administrative service agency shall be in writing, shall be awarded on the basis of a competitive bid conducted or a search conducted in accordance with Section 9003.1(c) in respect of the specific contract or agreement in accordance with this Part 9003, shall not exceed five years in duration, and shall impose no penalties or surrender charges for the transfer of assets or responsibilities on expiration of the contract or agreement. Where the board or a deferred compensation committee enters into a contract or agreement with a trustee, a financial organization or organizations, and an administrative service agency and such trustee, financial organization or organizations and administrative service agency is selected by the board or deferred compensation committee independently from each other service, such contracts or agreements shall not exceed ten years in duration. Notwithstanding the previous sentence, no trustee who is the only trustee of a plan shall be forced to resign the position of trustee solely by operation of this section 9003.5(a) prior to the time such person's successor as trustee has been duly qualified and appointed.

1. Statutory authority: Section 5 of the State Finance Law authorizes the New York State Deferred Compensation Board to adopt rules and regulations regarding the standards and requirements of all deferred compensation plans established in the state, including selection of financial organizations for investment purposes.

2. Legislative objectives: Section 5 permits the State and local governments to establish deferred compensation plans in accordance with section 457 of the Internal Revenue Code as a voluntary supplemental retirement plan. The proposed amendments would expand the procedures used by the deferred compensation board or committee to identify and select financial organizations for the purposes of investing a portion of the assets of a plan and the term of those contracts. The objective of the proposed rule amendment is to improve the efficiency of this contracting process.

3. Needs and benefits: The selection and contracting with an administrative service agency, custodian/trustee, and financial organizations is an essential part of the plan sponsor's responsibility in administering a deferred compensation plan. These amendments would permit the board or a local deferred compensation committee to (1) select a financial organization for the purposes of investing a portion of the assets of a plan following a search process to identify the most qualified and appropriate firms for the plan, and (2) enter into a contract for an administrative service agency, trustee or investment firms for up to ten years, rather than five, when such services are selected independently from each other. This will improve the efficiency of the selection process of investment firms without compromising integrity because the proposed rule contains guidelines and restrictions related to the process. A ten-year contract for administrative service agency, trustee or investment services would provide for greater stability of the plan and potentially lower costs.

4. Costs: The implementation of this proposed rule should not add any costs to the administration of a deferred compensation plan. The expense to conduct a search process should be no greater than conducting a request for proposal process. Oftentimes there are start up costs involved for administrative service agency, trustee or investment service providers that are included in the costs. A contract longer than five years for these services could lower the overall costs because there would be a longer period to recover those costs.

5. Local government mandates: These proposed rules do not impose any local government mandates.

6. Paperwork: These proposed rules do not impose any additional paperwork.

7. Duplication: These proposed rules do not duplicate any other state or federal regulations.

8. Alternatives: There are no significant alternatives.

9. Federal standards: There are no federal minimum standards related to the proposed rule.

10. Compliance schedule: The proposed rule amendments do not impose a compliance schedule because they are permissive and prospective.

1. Effect of rule: The proposed rule will have no effect on small businesses. Local governments that sponsor deferred compensation plans and contract for investment services independently from other plan services providers will have an alternative method to select the investment provider. Local governments that select administrative service agency, trustee, and investment service providers independently from each other will have the option to have a longer term contract with those providers that the current rules permit.

2. Compliance requirements: Local governments that sponsor a deferred compensation plan and contract for investment services independently from other plan services providers will have to follow the guidelines in the proposed rule to utilize a search process rather than the Request for Proposals (“RFP”) process. However, these guidelines are no more stringent than conducting an RFP.

3. Professional services: In order to select an investment provider through a search process, a local government would have to contract with an investment consultant through an RFP process who would conduct the search. Local employers who would be eligible for this proposed rule generally already employ an investment consultant so there would be no additional professional services required.

4. Compliance costs: There are no additional costs required to comply with the proposed rule.

5. Economic and technological feasibility: Not applicable.

6. Minimizing adverse impact: The proposed rule does not impose an adverse economic impact on local governments because it is permissive.

7. Small business and local government participation: A public hearing will be held in order to provide small businesses and local governments to participate in the rule making process.

1. Types and estimated numbers of rural areas: These proposed rules will not apply to rural areas.

2. Reporting, recordkeeping and other compliance requirements; and professional services: These proposed rules will not apply to rural areas.

3. Costs: There are no costs of these proposed rules on rural areas.

4. Minimizing adverse impact: These proposed rules will not apply to rural areas.

5. Rural area participation: These proposed rules will not apply to rural areas.

Nature of Impact: This proposed rule will have no impact on jobs or employment opportunities. The Board or a local deferred compensation committee must follow fiduciary standards when selecting an investment provider and make a selection based upon the best interests of the plan and plan participants. The same fiduciary standards of selection must be followed to select an investment provider whether a search process or a Request for Proposals process is followed.

Categories and number affected: None.

Regions of adverse impact: None.

Minimizing adverse impacts: Not applicable.

Self-employment opportunities: Not applicable.