IRS to permit state and local governmental plans to cover charter school employees

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The IRS has announced (Notice 2015-7) that it plans to propose regulations allowing state and local retirement systems to cover employees of a charter school within a governmental plan under Section 414(d). The notice describes the guidance being considered, which would allow charter school employees to participate in a state or local retirement system if certain requirements were met. The requirements being considered include the following:

  • The school is a nonsectarian, independent public school that serves a governmental purpose by providing tuition-free elementary or secondary education, or both.
  • The school is established and operated in accordance with a specific state statute authorizing charter or independent public schools.
  • Participation in the state or local retirement system by the school’s employees is expressly required or permitted under applicable law.

The IRS said the final rules under Section 414(d) will apply prospectively and will include a delayed effective date. The final regulations are also expected to provide that a plan will qualify as a governmental plan under Section 414(d) if it covers employees of a public charter school and meets the requirements of the guidance in Notice 2015-7 for periods starting on and after the effective date of the final regulations, even if the plan covered those employees for periods before the final regulations’ effective date, when the public charter school didn’t meet the requirements.

Eddie Adkins
+1 202 521 1565

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