The plans will be put to the SPFL and Scottish FA before clubs are asked to vote on them, report the BBC.
The proposals would see Celtic and Rangers enter reserve sides in a 16-team fourth tier with two sides from both the Lowland and Highland League also joining.
The 20 clubs in Leagues One and Two will be granted £100,000 over five years, while the current movement between the SPFL and the winners of the Lowland League and Highland League play-off will remain.
The Colts teams will have an age limit of 21 and won’t be able to win promotion from the third tier.
In addition, strategic partnerships have also been discussed with loans of under-21 players between clubs increasing from two to five.
The working group have presented their proposal to the Professional Game Board within the Scottish FA.