The Issue
Allowing Arizona charter school employees to participate in the state retirement system was a decision made by the Arizona legislature in 1994. Now, the Internal Revenue Service wants to prohibit Arizona from allowing our 12,000 current and former charter school employees in the state retirement system.
The IRS, a bureau of the Department of Treasury, proposed regulation that would force charter employees enrolled in state retirement system to either leave their charter schools or lose their accrued pension wealth. We cannot allow these regulations, listed as “Determination of Government Plan Status,” to be adopted in their current form.
The regulations proposed by the IRS are part of the rule making process, which are not subject to a vote by Congress and are not legislation. Instead, they’re required to use their expertise and experience to come up with the best policies. The public can comment on the proposed rules, which is where we are now. The Treasury extended the deadline for public comments on the proposed rule from February 6 to June 18, 2012. They held a hearing on the rule on July 9, 2012.
Updates
July 11, 2012 — The IRS held a public hearing on Monday, July 9 to discuss the potential regulation change that could affect 95,000 public charter school employees nationwide. The National Alliance for Public Charter Schools and two other state charter associations testified in support of charter employees. Although the proposed regulation doesn’t specifically mention charter schools, it describes entities a lot like charter schools and excludes them from state retirement systems. We want the IRS to incorporate our suggestions to into the next round of their drafts, ensuring charter employees are still allowed to participate in state sponsored retirement systems. After the next draft is released, there will be another public hearing. The IRS is only in the preliminary stages of this process, and it could take years before the proposed regulations become official.
March 8, 2012 — Issues regarding the Internal Revenue Service’s proposed regulation affecting charter employees participating in state retirement systems continue to unfold. Thank you for engaging your congressional delegation on this issue – you and your charter school communities are being heard! Due to your grassroots action in sending messages to Congress and Administration officials, we have several significant victories, including:
- On Thursday, March 1, 17 members of the U.S. House of Representatives sent a bipartisan letter to IRS Commissioner Doug Shulman, embracing our concerns and urging the IRS to adopt our position.
- Education Sector issued a report titled, “A Legal Guide to State Pension Reform.” Although the report is not specific to charter schools, it details how laws protecting state pension benefits vary dramatically from state to state. Please review this report to understand how Arizona’s laws may or may not protect charter employees’ retirement wealth, should modifications to existing plans happen (either because of the IRS draft Proposed Regulations or because of political pressure to reform state pension plans).
- Through your efforts, over 1,200 people have sent nearly 6,600 emails. Across the nation over 43,000 emails were sent.
- The Internal Revenue Service extend the public comment period until June 18, 2012 and said in a statement that public charter schools were not intended to be impacted by the draft proposal.
The Treasury Department and Internal Revenue Service have confirmed that our messages have had a direct effect on the extension of the public comment deadline. The tens of thousands of emails sent via the Association and other charter organizations allowed our concerns to be heard and produced a positive reaction for the charter community. At this point, the threat appears minimal to charter employees; however, this issue is far from resolved or decided, and we must remain diligent, informed and involved.
