Charter schools fear pension exclusion

COLUMBIA -- Charter school advocates worry a proposed federal rule could force South Carolina and other states to dump charter school employees from state retirement systems.

The proposed IRS and Treasury Department rule could affect about 900 teachers who participate in South Carolina's pension. Charter school officials fear they could lose most of their teachers and administrators to traditional schools if they're faced with losing their pension benefits, said Mary Carmichael, executive director of the state's Public Charter School Alliance.

Many charter school employees began their career in traditional public schools.

"If they've been in the state retirement system for 20 years, they'll go back to keep their retirement," she said.

The fear stems from a proposed IRS definition change, issued last November, on what can be considered a government plan.

"It is important to note that the proposed regulations are in draft form, and that there is nothing in the draft proposed regulations excluding public charter schools from being treated as governmental entities," the IRS said in a statement Friday.

The agency did not respond to a follow-up question on whether charter school advocates were misinterpreting the proposal.

While not specifically addressed in the language, charter schools appear to not meet the new definitions, creating a legal risk for states that don't toss charter school employees from state plans if the rule takes effect as written, Renita Thukral, senior director for legal affairs at the National Alliance for Public Charter Schools, wrote in a letter to the IRS last week.

The group wants the wording revised to specify that charter schools are public entities.

Charter schools are public schools. But they are overseen by a board of parents, teachers and community members, rather than a district board, and are subject to fewer government regulations than traditional public schools.

South Carolina has 47 charter schools. About two-thirds choose to participate in the state retirement system; others just can't afford to pay the employer's share of the benefit, Carmichael said.

"These employees would be faced with either leaving their students or lose their retirement savings in our state's system," South Carolina's Republican schools Superintendent Mick Zais wrote in a letter to Treasury Secretary Tim Geithner, dated Feb. 6.

That date was the initial deadline for submitting public comments, but the IRS this week extended that deadline through June. A public hearing in Washington is planned for July 9.

Zais noted the feared effect of the rule as written runs counter to the Obama administration, which promotes charter schools.