This section describes SSA’s approach to coverage issues involving charter schools. While charter schools are analyzed under the same rules as other entities, their unique characteristics warrant special consideration. The way a State structures its charter school laws influences whether charter schools in the State qualify as political subdivisions for purposes of obtaining Section 218 coverage. Additionally, differences in organizational structure and day-to-day operations between charter schools within a State may mean that some charter schools qualify as political subdivisions while others do not. Accordingly, it is essential to evaluate each charter school on its own merits for Section 218 purposes.

A charter school is an independent, government-funded public school that operates under a charter issued within a State law framework. Most States have laws authorizing charter schools, but the contents of these laws vary. Although State laws typically define charter schools as public schools, charter schools operate under different laws than traditional public schools and may have characteristics associated with private entities.

In most States that permit charter schools, a person or organization initiates formation of a charter school by asking a sponsor to authorize the school. The sponsor (which may be a State department or board, institution of higher learning, local school district, or other sponsor type permitted by State law) verifies requirements before granting a charter for the applicant or another entity to operate a school for a certain number of years. The charter authorizes the school and describes how it will operate. Going forward, the sponsor monitors the charter operator’s compliance with the charter, State laws, and other requirements. The sponsor may renew or in case of noncompliance with requirements, revoke the school’s charter.

If a charter school’s charter is revoked or expires, the entity is no longer a charter school, but it may continue to exist in a different form.

If a charter school is a political subdivision of the State (see below subsection E), then the State can modify its Section 218 agreement to extend coverage to services of charter school employees (see below subsection D).

If a covered charter school dissolves due to expiration or revocation of its charter, the State should provide a notice of dissolution to remove the charter school from its agreement (see below subsection F).

We define common charter school terms, but terminology may differ from State to State.

Charter: A legal document issued by a sponsor that authorizes a charter operator to run a charter school for a certain number of years, subject to charter terms, State laws, and other requirements.

Charter operator: An entity or body that operates a charter school pursuant to a charter. The charter operator may be the charter school itself or a different entity that is legally separate from the school for certain purposes.

Charter school: An independent, government-funded public school that operates under a charter issued within a State law framework.

Sponsor: An entity or body that issues a charter authorizing a charter operator to run a school. The sponsor also monitors the charter operator’s compliance with the charter, State laws, and other requirements, and may renew or revoke the charter consistent with State law. A State may authorize State departments or boards, institutions of higher learning, local school districts, or other entity types to act as sponsors.

Identify the employer of charter school staff using the same rules that apply to other entities (see SL 60001.660). If a private entity is the relevant employer under these rules, then charter school staff cannot obtain Social Security coverage under the State’s Section 218 agreement. This is true because Section 218 only permits coverage for employees of the State or political subdivisions of the State, and not employees of private entities.

The fact that charter school staff are enrolled in a retirement system associated with the State or political subdivisions does not establish that the workers are employees of the State or a political subdivision (see SL 30001.311D).

Example: Under the laws of State A, charter schools are public schools, but a private entity may obtain a charter to operate a charter school while maintaining its separate, private character. A sponsor grants a charter to Big City Prep, Inc., a private not-for-profit corporation, to operate Big City Prep, a charter school. As charter operator, Big City Prep, Inc. directs and controls school staff in the performance of their duties. If Big City Prep staff are employees of Big City Prep, Inc. under SSA rules, staff cannot obtain coverage under the State’s Section 218 agreement.

To evaluate whether a charter school is a political subdivision of the State, complete the factor-based analysis that applies to all entities see SL 30001.311C. For purposes of this analysis, charter schools are usually similar to traditional public schools in terms of functions, powers, and funding. However, charter schools may differ from traditional public schools in terms of the interests involved, ownership of school assets, and character of control and supervision, among other factors.

Evaluate all characteristics of the charter school, including characteristics of any legally separate entity or body that operates the school on a day-to-day basis.

In general, a sponsor grants a charter and ensures that a school complies with the charter, but it does not exercise day-to-day control over the school in the same way as the charter operator. For this reason, the public or private character of a charter school’s sponsor is not a significant factor in evaluating the charter school’s status unless the sponsor exercises an unusual degree of control over the school.

Because State laws generally provide flexibility for charter schools to differ in terms of structures and powers, an individualized analysis is needed to evaluate whether a particular charter school is a political subdivision.

Example: Under the laws of State B, charter schools are public schools operated by legally distinct public or private organizations. A sponsor, Public University, grants a charter to Language Academy, Inc., a private not-for-profit corporation, to operate Language Academy, a charter school. Language Academy, Inc., controls the day-to-day operations of Language Academy charter school, while Public University’s role is limited to ensuring that the school complies with its charter and other legal requirements. When evaluating whether Language Academy is a political subdivision, consider all traits of the school, including traits of the charter operator. Because Language Academy is controlled by Language Academy, Inc., a private entity, the school is private in nature. The governmental character of the sponsor, Public University, is not a significant factor in the analysis because the sponsor’s role is limited to providing general oversight without direct control.

Dissolution may be a more common issue for charter schools than for other entities because of limited charter terms and the possibility of charter revocation. It is important for the State to monitor covered charter schools to watch for dissolutions or other relevant predecessor–successor transitions.

If the State modifies its Section 218 agreement to extend coverage to services of employees of a charter school, and the school later dissolves, then the State should submit a notice of dissolution to remove the school from its agreement see SL 40001.485.

Analyze predecessor-successor situations involving charter schools under the same rules that apply to other entities see SL 30001.387. If a charter school’s charter is revoked or expires, the charter school ceases to exist as a charter school, but it may continue to exist in a different form. Continuation of Social Security coverage in this situation depends on whether the successor entity has the same identity as its predecessor and whether it continues to qualify as political subdivision of the State despite changes.

Example 1: In State C, sponsors may grant charters to not-for-profit corporations, which then become charter schools with governmental functions and powers for the length of the charter term. A sponsor granted a charter to A-1 Academy, Inc., a not-for-profit corporation, to run A-1 Academy, a charter school. The State modified its Section 218 agreement to extend coverage to services of employees of A-1 Academy as a political subdivision of the State. Later, the sponsor revoked the school’s charter due to poor academic performance. Upon revocation of its charter, A-1 Academy ceased to exist as a charter school. The successor entity, A ‑ 1 Academy, Inc., was an ordinary not-for-profit corporation that no longer had the governmental powers and functions needed to qualify as a political subdivision of the state for Section 218 purposes. Because the covered entity, A-1 Academy, ceased to exist as a political subdivision of the State, the State should provide notice of legal dissolution to delete this entity from its agreement.

Example 2: The State modified its Section 218 agreement to extend coverage to School of Performing Arts, a charter school. Later, the school’s charter was revoked due to noncompliance with State law, and the school ceased to exist. One year after revocation, a sponsor issues a new charter for a school called School of Performing Arts, which will operate in the same location and employ many of the same workers as the old school. If, based on an analysis of facts and State law, School of Performing Arts is a new entity that is distinct from the earlier charter school of the same name, then the new entity does not obtain coverage under the State’s Section 218 agreement. The State should submit a new modification if it wishes to extend coverage to the new School of Performing Arts. Because the old school of the same name ceased to exist, the State should submit a notice of dissolution to delete that entity from its Section 218 agreement.