Pensions at charter schools hot topic with IRS

Charter school supporters are continuing to pressure the Internal Revenue Service to change proposed regulations that could disqualify teachers at charter schools from public pension systems.

The potential changes, released late last year, would revise the definition of “governmental plans,” the current standard for determining who can be legally considered a government employee and therefore eligible for state retirement plans. There’s a growing fear that charter school employees would not meet the new IRS criteria, and ineligibility for pensions, analysts fear, could keep good teachers from taking jobs at charters and slow the alternative schools’ rapid growth across the U.S.

“The charter school sector around the country needs to be able to grow … you see states across the country improving their charter-school laws. This rule could jeopardize that,” said Renita Thukral, senior director of legal affairs at the National Alliance for Public Charter Schools.

Ms. Thukral and other charter backers testified Monday before a panel of IRS officials, who are sifting through more than 2,300 public comments submitted by teachers’ groups and others urging changes to the proposal.

Members of Congress also have weighed in. In February, Rep. John Kline, Minnesota Republican, and Rep. Duncan Hunter, California Republican, sent the IRS a letter saying the proposal “could unfairly jeopardize the retirement security of charter-school teachers.”

The rule is in draft form, and a firm date for its finalization has not been set.

An IRS spokeswoman had no comment Monday, but the agency previously said its new guidelines aren’t meant to disqualify charter teachers from state pension plans.

Its justification for the rule, it says on its website, is an increasing concern about the “growing number of requests for governmental-plan determinations from plan sponsors whose relationships to governmental entities are increasingly remote.”

But the alliance has estimated that, if unchanged, the rule would force 95,000 charter school teachers nationwide - about 93 percent of the total workforce - to leave their schools or risk losing their pensions.

As currently written, the regulation would establish five criteria for determining eligibility in state retirement plans.

They include a requirement that all institutions eligible for governmental plans have “governing officers appointed by state officials or publicly elected,” and that a government body must be responsible for all the debt a participating institution accumulates.

Ms. Thukral said it is possible charters could meet the guideline of having governing officers appointed or elected by the state, but it is unlikely they would meet any of the other requirements.

Charter schools, for example, can go bankrupt and out of business without a government - state or local - guaranteeing its debts. Proponents believe that is one of their key strengths, since they compete in an educational marketplace and close if they are unable to attract enough students or quality instructors.

Among other suggestions, Ms. Thukral told the IRS on Monday that the rule could be amended to include language making clear public charter schools will be considered “agencies or instrumentalities of the state.”

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