Section 67. The treasurer of any city or town, on behalf of the city or town, may contract with an employee to defer a portion of that employee's compensation and may, for the purposes of funding a deferred compensation program for said employee, established in accordance with the U.S. Internal Revenue Code (the ''Code''), invest the deferred portion of the employee's income in a life insurance or annuity contract, mutual fund, or a bank investment trust. If the employee is a director, administrative officer of a department, city or town manager, or executive secretary, or a similar professional or scientific employee, the treasurer of a city or town may, at the election of the employee, for the purpose of funding a deferred compensation program for said employee, invest the deferred portion of the employee's income in either a plan containing the options provided for in the previous sentence or in a contract, trust or program maintained by a nonprofit organization classified as tax-exempt by the United States Internal Revenue Service whose holdings consist of tax-exempt government securities. The treasurer shall, before making any such investment, solicit bids from insurance companies authorized to conduct business within the commonwealth pursuant to chapter one hundred and seventy-five, mutual fund managers, and banks, which bids shall be sealed, and opened at a time and place designated by the treasurer. Any bid submitted by an insurance company, mutual fund, or bank investment trust to fund the deferred compensation program shall, where applicable, clearly indicate the interest rate which shall be paid on the deferred funds, any commissions which will be paid to the salesmen, any load imposed for the purpose of administering the funds, mortality projections, expected payouts, tax implications for participating employees and such other information as the treasurer may require. Any contract entered into between an employee and the city or town pursuant to this section shall include all such information in terms the employee can reasonably be expected to understand.

As used in this section the word ''employee'' shall have the same meaning as ''employee'' in section one of chapter thirty-two and shall also include consultants and independent contractors who are natural persons paid by the city or town.

Notwithstanding any provisions herein to the contrary, the treasurer shall not be required to solicit bids to invest the deferred portion of an employee's income provided: (a) the treasurer elects to invest such funds in the same investment products as provided through the deferred compensation plan for employees of the commonwealth administered by the state treasurer, provided such plan resulted from the solicitation of bids in accordance with bidding requirements comparable to those required under this section; or (b) the treasurer elects to invest such funds in the investment products offered pursuant to a plan developed through a competitive selection process, provided that such plan resulted from the solicitation of bids by a group of any combination of three or more city, town, county or public authority treasurers acting as a ''Common Group'' for purposes of soliciting such proposals in accordance with bidding requirements comparable to those required under this section.

An employee may defer compensation so long as such deferral is the lesser of seven thousand five hundred dollars or thirty-three and one-third per cent of his includible compensation for a taxable year, except that for one or more of the last three taxable years ending before he attains normal retirement age under the plan, the employee may defer the lesser of fifteen thousand dollars or the sum of (1) seven thousand five hundred dollars or thirty-three and one-third per cent of his includible compensation for a such year, plus (2) a sum not more than the total deferrable compensation for prior taxable years that had not in fact been deferred in such years.

Such deferred compensation program shall be in addition to and not a part of the retirement program or pension system as provided under said chapter thirty-two and any other benefit program provided by law for such employee. Any compensation deferred under such a plan shall continue to be included as regular compensation, as defined in section one of said chapter thirty-two, for the purpose of computing the retirement and pension benefits earned by any such employee, but any compensation so deferred shall not be included in the computation of any taxes withheld on behalf of any such employee.