Charter school pensions in limbo

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PHOENIX -- Thousands of Arizona teachers could lose their pensions if an IRS proposal is adopted.

It is a serious concern that might mean thousands of charter-school teachers would have to leave their schools or lose their accrued pension despite their best laid plans for retirement.

"I am shocked, I am aghast, I am absolutely stunned," said Pat Trotter, who teaches kindergarten at Valley Academy Charter School in North Phoenix.

She's been there 16 years and for 16 years she has contributed to the Arizona state retirement system. The same as every other public school teacher in Arizona.

“We are deserving of that pension," Trotter said.

But the IRS isn't so sure. Since 1994, when Arizona enacted a law allowing charter-school teachers the option to participate in the state retirement system, 12,000 current and former charter teachers have chosen to do so, according to the Arizona Charter Schools Association.

Across the country, it is estimated that more than 95,000 charter-school teachers participate in their state retirement plans. Now, those employees are at risk of losing that pension as the IRS considers a proposed regulation change.
It has to do with the way governmental employees are defined. The proposal specifically applies to the definition of "governmental plan." And for any state to be a government-sponsored pension plan, they have to follow the definition in place.
The definition being proposed contains criteria that must be met to be considered an agency of the state, much of which charter schools cannot satisfy, according to the National Alliance for Public Charter Schools.
"We don't see ourselves as someone you can disenfranchise from what's available to district teachers," Trotter said. "There is no reason to segment us away with no warning and no explanation."
And now school administrators aren't sure what to do.
"They donate 10 percent of their income and our school as employers match that 10 percent and we've been doing that for many years," said Heidi Mitchell, CEO of Valley Academy Charter School.

It's a key benefit used in recruiting teachers.
"What I do worry about is recruitment. We are not required to hire certified teachers, but we usually do and the certified teachers are the ones in the ASRS system," Mitchell said.
The IRS will have a hearing in June on the issue. In the meantime, the Arizona Charter Schools Association isn't sure what to tell its employees relying on that pension.
"The worst case scenario is they could lose the accrued benefits," said association President Eileen Sigmund.
The regulation change would force those teachers who are currently contributing to their state retirement plans to quit their charter-school jobs or lose the money that has been contributed to their accounts by the state. Teachers can keep what they've put in to the account, but anything the state has put in would be gone.
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The deadline for public comment is Monday. To make your voice heard, visit