On March 21, 2013, Governor Dayton signed a tax bill that impacts Minnesota residents as well as those who reside out-of-state, but own real estate and other assets in Minnesota.

Estate Tax Exemption:
The Estate Tax Exemption for Minnesota residents will increase over the next five (5) years, from $1 million for a death in 2013, up to $2 million for Minnesota residents who pass away in 2018 and after.  The chart below shows the scheduled increases in the Minnesota Estate Tax Exemption.

If you are not a Minnesota resident, but own real estate or other assets in Minnesota, the exempt value from Minnesota estate tax will also be increasing.

Repeal of Minnesota Gift Tax:
In July, 2013, a new Minnesota Gift Tax went into effect.  The Minnesota gift tax has been repealed – retroactively effective as of July, 2013. For Minnesota residents who made gifts after July 1, 2013, a Minnesota Gift Tax Return does not need to be prepared or filed, and no gift tax is due for gifts in Minnesota.  The Federal gift tax law remains unchanged.  If you made a gift in 2013 after July 1 of more than $1 million, no Minnesota gift tax is due on April 15, 2014, to the State of Minnesota.

Continuation of Other 2013 Minnesota Estate Tax Law Changes:
Changes were made in 2013 to subject non-Minnesota residents to estate tax for partnerships and other entity assets located in Minnesota. Other than slight modifications, those laws remain in place.

Who do the Tax Law Changes Impact?
The tax law changes may affect certain clients with existing estate planning documents.  Among others, a married couple with a combined net worth in the $1,000,000 to $4,000,000 range may benefit from updating their estate planning documents in light of the new tax laws.

If you have any questions on the impact these laws have upon your estate plan, please contact the attorneys in our Tax, Trusts & Estates practice area.

Today, the U.S. Department of the Treasury and the Internal Revenue Service published Final Rules to implement the information reporting provisions for insurers and certain employers under the Affordable Care Act (“ACA”), which will take effect in 2015.

The Final Rules apply to Sections 6055 and 6056 of the Internal Revenue Code (“IRC”), which describe employer reporting for the purpose of monitoring whether an employer is compliant with the ACA’s Employer Mandate. The Employer Mandate generally requires employers with 50 or more full-time employees to offer their full-time employees coverage that meets minimum value and affordability standards under the ACA or pay a penalty, though compliance has been pushed back one year for certain employers. Employers with 50 to 99 full-time employees will not be subject to penalties under the Employer Mandate for failing to provide health insurance coverage to employees in 2015. Moreover, employers with 100 or more full-time employees need only offer coverage to 70% of their full-time employees in 2015 to be compliant with the regulations. Despite these delays, the information reporting provisions take effect in 2015, and employers should begin to familiarize themselves with the requirements.

IRC 6055 describes reporting requirements for self-insuring employers, insurers and certain other providers of minimum essential coverage, while IRC 6056 describes reporting requirements for applicable large employers. Under the Final Rules, reporting for both IRC 6055 and 6056 will be made on the same form with the stated goal of eliminating duplicative filings by employers. Large employers that self-insure (employers that pay their employees’ medical costs directly, instead of joining a traditional plan) will fill out both sections of the form. Large employers that do not self-insure will only fill out the top half of the form, for reporting under IRC 6056.

According to the Final Rules, for IRC 6055, an employer must generally report information about the employer, the employees insured, and information on the minimum essential coverage provided. IRC 6056 requires applicable large employers to report information about themselves, such as the number of full-time employees for each month during the calendar year, to certify whether they offered coverage to their full-time employees, and to provide certain information about the plan offered, such as the monthly premium for the plan.

The Final Rules also simplified the reporting obligations of employers who make qualifying offers of coverage to their employers.  According to the Treasury press release, a qualifying offer of coverage is “an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than about $1,100 in 2015” combined with an offer of coverage to the employee’s family, which would not need to meet the cost threshold. The Final Rules allow employers to report different information based on whether or not a given employee was offered coverage for all 12 months of a year or for fewer than 12 months in a year. For employees receiving a qualified offer for all 12 months, “employers will need to report only the names, addresses and taxpayer identification numbers” of such employees. For employees receiving a qualifying offer in fewer than 12 months in the year, employers will be able to report such employees “for each of those months by simply entering a code.”

In accordance with the Minnesota Campaign Finance and Public Disclosure Act, all lobbyist principals must file an Annual Report with the Minnesota Campaign Finance and Public Disclosure Board (“Board”) on or before March 17, 2014. A lobbyist principal is any individual or group that either hires a lobbyist or spends $50,000 or more in any calendar year to influence governmental action in the State of Minnesota.

The lobbyist principal report must disclose the total amount of money spent by the principal on lobbying efforts in Minnesota from January 1 through December 31, 2013. To calculate the amount to be disclosed, the lobbyist principal must consider the following expenses:

1.All payments to lobbyists;
2.All spending for advertising, mailing, research, analysis, compilation and dissemination of information and public relations campaigns related to legislative action, administrative action or the official action of any metropolitan governmental unit; and
3.All salaries and administrative expenses attributable to lobbying activities.

The total amount spent on lobbying may be rounded to the nearest $20,000. According to the Lobbyist Handbook that is published by the Board, an organization that spends $3,000 on lobbying may round this number to $0. Similarly, if the principal’s total lobbying expenditures total $36,000, the organization may report the total as $40,000. Rounding, however, is not required and the Board will accept principal reports that include the actual amount spent on lobbying without rounding.

The Annual Report of Principal Lobbyist may be filed with the Board by electronic mail at [email protected] or by facsimile at (651) 539-1196 or (800) 357-4114. Reports may also be filed electronically at www.cfboard.state.mn.us/lobby/reportPrin.htm. A username and password to use the online reporting system is sent to each lobbyist principal in February of each year. If you have misplaced your username or password, you may obtain a new one from Board staff by calling (651) 539-1187. All reports are available for viewing by the public.

Should you have any questions regarding the filing of this report, or any other campaign finance or lobbying law issues, please fee free to contact any of the attorneys on our Political Law team.

Stay tuned to our blog, Inside the Minnesota Capitol, for updates on Minnesota politics, regulatory agencies and state government news.

On December 30, 2013, the Internal Revenue Service (the “IRS”) issued Revenue Procedure 2014-12 (“Guidance”), which establishes a “safe harbor” for federal historic tax credit (“HTC”) investments made within a single tier or through a master tenant structure. The Guidance was issued largely in the response to the recent decision in Historic Boardwalk Hall, LLC v. Commissioner, 694 F.3d 425 (3d Cir. 2012), cert. denied, US No. 12-90, May 28, 2013 (“HBH“), in which the Third Circuit Court of Appeals held that an investor was not a partner in the partnership that owned a project, because it did not have a meaningful upside potential nor a meaningful downside risk in the economics of the property.

The Guidance will undoubtedly serve as a very large first step in restarting an HTC industry that has been stagnant for months, but due to some of the ambiguous requirements in the Guidance, additional measures in the coming months will likely need to be undertaken before Investors return to investing at levels experienced prior to the HBH decision. Such additional measures may include additional clarification, interpretation, and/or elaboration on certain provisions by government officials and/or the adoption of new standard investment terms by developers, Investors, and their respective tax advisors to conform to the requirements of the Guidance. Attorneys from Winthrop & Weinstine will be closely monitoring and actively participating in such ongoing conversations as the HTC industry prepares to implement the safe harbor requirements in the financing structures of historic projects going forward.

For Winthrop & Weinstine, P.A.’s summary of the Guidance, as supplemented by guidance from IRS officials Joseph Worst and Craig Gerson at the January 14, 2014, conference held by IPED, Inc. (the “IPED Conference”), and our analysis of the material terms and conditions of the same, please click here.

If you have any questions about any topics in this Alert, or any other concerns that arise as a result of the Guidance, please do not hesitate to contact any of the attorneys from Winthrop & Weinstine’s Federal Tax Credit Practice Group.

The Affordable Care Act requires all U.S. citizens and legal residents to have or to obtain qualifying health insurance coverage, effective January 1, 2014, or pay a tax penalty unless they meet certain criteria and receive an exemption from this requirement.  One way for Minnesota residents to fulfill this requirement is through the MNSure marketplace, where individuals can obtain health insurance.

The Affordable Care Act requires that employers who are subject to the Fair Labor Standards Act must provide their employees with a written notice containing information regarding health insurance marketplaces, such as MNSure, as well as options and costs, by October 1, 2013, though the Department of Labor has confirmed that there will be no fine or penalty if an employer fails to provide the notice.

Both MNSure and the United States Department of Labor offer model notices for employers to use.

To determine whether you must provide the required notice, to determine which notice you should use or for other legal guidance regarding the Affordable Care Act, please feel free to contact us.

Winthrop & Weinstine’s Health Law Group has its finger on the pulse of today’s constantly changing health care industry, whether it be regulatory or compliance issues, representation before state and federal agencies or the legislature, employment counseling or litigation. We monitor the daily changes in health law regulations and new developments in the industry. We focus on helping our clients overcome their health care-related challenges and meet their business goals.

On August 1, 2013, S.F. 840, expanding employees’ sick leave benefits, took effect.

Minnesota law previously provided that an employee receiving sick leave benefits could use that time to care for a sick child, but it did not extend to other relatives. Under the new law, an employee may use sick leave benefits provided by the employer for absences due to illness or injury not only for the employee’s child, but also for the employee’s adult child, spouse, sibling, parent, grandparent, or stepparent, on the same terms upon which the employee is able to use sick leave benefits for the employee’s own illness or injury. The full text of the revised statute may be found here.

The new law does allow an employer to limit an employee’s use of sick leave benefits for absences due to illness or injury of the employee’s adult child, spouse, sibling, parent, grandparent, or stepparent, though this limit can be no less than 160 hours in any 12-month period, and does not apply to absences due to illness or injury of an employee’s child.

Employers should review their sick leave benefits policies and make necessary revisions to ensure compliance with the revised law. Employers may alternatively consider replacing sick leave policies with more general paid time off (“PTO”) policies, which could be drafted in such a way as to encompass sick leave. Employers should evaluate the potential economic and administrative impact this law change would have on existing policies and procedures, and consider whether it makes sense to adopt a broader PTO policy.

If you have any questions regarding the new sick leave law or any other employment topic, please contact any Employment Law attorney at Winthrop & Weinstine.

On June 26, 2013, the Supreme Court of the United States overturned Section 3 of the Defense of Marriage Act (“DOMA”) in United States v. Windsor. Prior to the Supreme Court’s decision, Section 3 of DOMA, a federal law, had defined marriage as the union between one man and one woman. Therefore, under DOMA, a same-sex couple who had been married in a state legally recognizing same-sex marriage would still be considered single under federal law, creating numerous challenges for same-sex spouses and their employers. Section 3 of DOMA has been overturned by the Supreme Court for a violation of Fifth Amendment personal liberty protections; the Court also recognized that marriage is a matter traditionally regulated by the states. Indeed, Section 2 of DOMA, which permits individual states to deny recognition of same-sex marriages formed in other states, still remains in force. Following the Court’s decision, same-sex marriages that are formed in states allowing same-sex marriage, like Minnesota, will now be recognized by the federal government, but there will still be complications when same-sex spouses live or work in states that do not recognize such unions.

According to the General Accounting Office, DOMA’s marriage definition impacted over 1,100 federal laws, so the Supreme Court’s decision will have a substantial impact. Here, we will look at a few of the key ways the decision will impact businesses and individuals in the areas of estate planning, tax, employment practices and employee benefits.

Effect of the DOMA Decision on the Minnesota Marriage Equality Act
On August 1, 2013, the Minnesota Marriage Equality Act goes into effect, allowing same-sex couples to marry within the state. Couples who elect to marry under the new Minnesota law will now have their marriages recognized by the federal government as well, permitting them access to health and retirement benefits, employment benefits, and the marital tax exemption that had previously been denied to same-sex couples.

Marriages formed in Minnesota may not receive the same recognition from other states that do not legally recognize same-sex marriages. Married same-sex couples may not, for example, be eligible for divorce if they move to a state that does not recognize their marriage, and employers in other states may not be required to grant spousal health benefits if the relevant plan is subject to state law. Conversely, under Minnesota’s law, marriages from other jurisdictions where same-sex marriage is legally recognized will be recognized in Minnesota, effective August 1, 2013.

Tax and Estate Planning
Joint filing of income taxes can create substantial savings for married couples, yet under DOMA, couples in state-recognized same-sex marriages were eligible for joint filing within their state while still required to file as single with the IRS. Even more confusingly, some state returns borrow from the filer’s federal returns, so couples were required to file a mock joint federal return with the state to accompany their state tax return, while also filing individual federal returns. Now, all couples married and employed in Minnesota will be able to file jointly for both state and federal returns. Should a same-sex couple be married in Minnesota and then subsequently need to file in another state that does not recognize same-sex marriage, that state may require the spouses to file as individuals even if they file jointly with the IRS.

Married couples are also eligible for the unlimited marital estate tax exemption, which allows a person to leave his or her entire estate to a spouse without paying tax on the transfer. Without the marital exemption, any amount above $5.25 million is subject to federal estate tax. Same-sex couples may now avoid tax on spousal estate transfers, regardless of their size.

Employment Practices and Employee Benefits
Employers are now permitted by federal law to grant same-sex spouses the same benefits that are available to all other spouses with the accompanying favorable tax treatment. The biggest impact will be on retirement and welfare benefits subject to the Employee Retirement Income Security Act (“ERISA”), and employers will also be required to expand eligibility for leave under the Family and Medical Leave Act (“FMLA”).

Medical, Dental, Life and Disability Benefit Plans
Welfare benefit plans (which include medical, dental, life and disability coverage), Section 125 “cafeteria” plans and fringe benefit programs sponsored by Minnesota employers will likely be required to provide the same level of coverage to same-sex spouses (i.e., those who live in a state where their marriage is recognized as lawful and valid) that is available under the plan to spouses in heterosexual marriages. The particular terms of these plans should be reviewed and revised as appropriate. For plans with benefits provided through insurance, this result should be automatic, since Minnesota is permitted to regulate the terms of insurance and likely will require insurance issued in Minnesota to cover same-sex spouses. We anticipate that Minnesota will be issuing guidance on when these changes must be made.

For employers based in other states, these coverage requirements currently will depend upon whether or not those states recognize same-sex marriage.

Retirement Plans
Most employer-provided retirement benefit plans, including ESOPs, 401(k) plans and pension plans, are governed by ERISA, which broadly preempts conflicting state laws. Now that DOMA’s federal definition of a “spouse” has been changed, any “lawfully married” same-sex spouses (i.e., those who live in a state where their marriage is recognized as lawful and valid) should automatically be treated as the “spouse” for all retirement plan purposes, including beneficiary designations, the assignment of benefits under a “qualified domestic relations order,” and eligibility for any qualified joint and survivor annuities and qualified preretirement survivor annuities available to spouses under pension and certain other retirement plans. Employers should be aware of the impact on their plans and review (and potentially revise) the plan terms, distribution and beneficiary forms.

Tax Implications for Employers
Under DOMA, no federal tax benefits (including pre-tax or tax-free benefits) could be provided to domestic partners and same-sex spouses unless the partner qualified as the employee’s dependent. This has required employers with benefits programs that extend to domestic partners or same-sex spouses to make tax withholdings on benefits and to report taxable income for domestic partners and same-sex spouse benefits. Now, all federal pre-tax and tax-free benefits applicable to spouses will extend to any same-sex spouse who is considered “lawfully married” under the laws of the state in which the couple resides. For Minnesota employers, this means that federal income tax reporting and withholding will not be required for any same-sex employees who are Minnesota residents. However, it appears that federal tax reporting and withholding will continue to be required for any benefits provided to domestic partners or same-sex spouses whose marriage is not recognized in their state of residence.

Additional Changes
While tax, estate, and employment areas have widespread impact, there are many other aspects of federal law that affect marriages. Same-sex spouses will now be eligible for hospital visitations, social security benefits, spousal immigration petitions, and home protection from forced sale to pay nursing home bills.

We will continue to monitor any further developments on this issue, and continue to provide updates as we see the result of the Supreme Court’s decision being implemented.

On May 23, 2013, Governor Dayton signed the Omnibus Tax Bill (“Tax Bill”) into law.  The Tax Bill made significant changes to the Minnesota estate and gift tax laws.  The following is a brief summary of a few of the most relevant changes that will have an impact upon some of our clients.

New Minnesota Gift Tax
The Tax Bill imposes a new 10% Minnesota gift tax on lifetime gifts in excess of $1 million (this is significantly less than the $5.25 million Federal gift tax exemption in 2013).  Minnesota residents are subject to the gift tax for gifts of any type of property once they exceed $1 million of gifts.  Non-Minnesota residents are subject to the tax for gifts of real property and tangible personal property located in Minnesota.  The Tax Bill adopts the Federal rules with respect to “annual exclusion” gifts, where you may give up to $14,000 (for 2013) per recipient without triggering the gift tax.  Gifts to an individual’s spouse and gifts to charity are also exempt from the tax.  The Minnesota gift tax applies to gifts made after June 30, 2013.

Changes to the Minnesota Estate Tax
The Tax Bill also makes changes to the Minnesota estate tax.  Taxable gifts made within three years of death are now considered when determining if an estate tax return must be filed, and such gifts may have an impact on an individual’s Minnesota estate tax due upon death.  The scope of the Minnesota estate tax has also been expanded to reach non-Minnesota residents who own real property located in Minnesota, whether held individually or held in pass-through entities such as S-corporations, limited liability companies, partnerships and some trusts.  The Minnesota estate tax changes were made retroactive for deaths occurring on or after January 1, 2013.

Family Farms
There were also technical corrections made to the estate tax law for family farms, to clarify the law that was passed two years ago.  This law exempts some family farms from Minnesota estate tax for a value of up to $5 million per person in specific situations.

How do these tax laws impact me?
Not all individuals will be impacted by the Tax Bill.  If you fall into one of these situations, we encourage you to call us as soon as possible.  If you are interested in making gifts, these need to be completed before July 1, 2013.

• You are a Minnesota resident and intend to make lifetime gifts of $1 million or more in the near future.
• You are a Minnesota resident and your net worth is between $1 million and $5.25 million ($2 million and $10.5 million if you are married), and you are planning to make substantial lifetime or “end-of-life” gifts in order to avoid Minnesota estate tax at your death.
• You are a non-Minnesota resident and own real property or tangible personal property located in Minnesota.
• You are a non-Minnesota resident and you have created a pass-through entity, such as an LLC, partnership or Sub-S corporation, to own real estate or tangible personal property located in Minnesota.
• You are a Minnesota resident who owns a family farm, and you are not intending to gift any of the farm or business at this time, then you should call as soon as possible to discuss updates to your estate plan, but this does not have a deadline of July 1, 2013.  If you are interested in making gifts, then the July 1, 2013 deadline is important.

For more information, or if you have any questions, please feel free to contact your Estate Planning attorney at Winthrop & Weinstine.

On May 14, 2013, Governor Dayton signed into law legislation revising the definition of “marriage” in Minnesota to include same-sex marriage. The law becomes effective August 1, 2013.

This landmark decision for the state has wide-reaching implications for Minnesota, including individuals, businesses and employers. The legal impact of the revision to the definition of marriage in the state will be felt in Premarital and Estate Planning, Real Estate law, as well as the Employment and Benefits areas. Especially in the areas of Employment and Employee Benefits, the new law will substantially affect employers and small businesses. In this Alert, we discuss some of the changes to look out for as a result of the Act, and provide guidance on how to prepare for the changes coming later this summer.

In addition, it is important for Minnesota residents and companies to consider the Defense of Marriage Act (“DOMA”), which continues to limit the definition of marriage to between a man and a woman for federal law purposes. Because of this, there may be instances in which Minnesota’s law would be superseded by federal law and the marriage would not be recognized. The U.S. Supreme Court has heard arguments in two cases, one of which challenges the constitutionality of DOMA, and the Court is expected to decide both of these cases in late June. Depending on the outcome, additional issues may need to be considered.

Premarital Agreements and Estate Planning
For same sex couples who choose to marry in Minnesota after August 1, 2013, we recommend that they consider whether a Premarital Agreement is appropriate prior to marriage.

After marriage, each couple should review and update their estate plan. There will likely be estate and other tax savings as a result of the marriage, which ought to be incorporated into the estate plan.

For any same-sex couple who has already married in a state that legally recognizes same-sex marriage, some updates to estate planning documents may be appropriate after August 1, 2013.

Again, depending on the result of the U.S. Supreme Court’s decision in the DOMA case in June, additional estate planning changes may result for same sex couples.

Real Estate
In Minnesota, marriage triggers certain rights and responsibilities in relation to real estate, even if the property were acquired prior to the marriage. If real property is titled in the name of only one spouse, upon marriage the other spouse may acquire certain rights that vest upon divorce or upon the death of the titled spouse. Because of this, after marriage, real property generally cannot be sold without the signatures of both spouses. Similarly, it will require both spouses to amend the terms of an existing mortgage or property-related document.

Existing co-tenancy or similar agreements between current domestic partners may also be affected and should be revisited if those partners are considering marriage. The upcoming decisions by the U.S. Supreme Court may also impact the taxation of real estate.

Employment Practices and Employee Benefits
Minnesota employers, businesses and individuals will need to consider the impact that the new law will have on their employment practices and employee benefits. Employers should also determine whether they will need to begin offering some or all of their benefits to same-sex spouses as of August 1, 2013. This decision will need to be based both on the specific federal or state law that governs each benefit and the definitions used in each separate plan document.

Employment Practices
The civil marriage law impacts state discrimination protections under the Minnesota Human Rights Act (“MHRA”) and could impact leave policies as well. For example, same-sex spouses will be protected from marital status discrimination under the MHRA. With respect to leave policies, any impact on leaves of absence governed by federal law, such as the Family and Medical Leave Act, will depend on the U.S. Supreme Court’s decision in late June on the constitutionality of DOMA, as set forth above. However, we recommend that employers and businesses immediately evaluate their current leave and non-discrimination policies in light of state laws to ensure the policies are consistent and non-discriminatory.

Retirement Benefits
Most employer-provided retirement benefits, through employee stock ownership plans, 401(k) plans and pension plans, are governed by federal law, including the Employee Retirement Income Security Act (“ERISA”), which generally preempts state laws. Therefore, we do not expect that Minnesota’s same-sex marriage law will apply to most retirement plans. However, if the U.S. Supreme Court decision regarding DOMA addresses the constitutionality question, it is possible that the federal definition of marriage might change as well, and then Minnesota’s new law will likely impact retirement plans.

Some retirement benefits, such as governmental plans and non-electing church plans, are not governed by ERISA. We recommend reviewing these plans to determine how they will be impacted by Minnesota’s new law.

Self-Funded Benefits
Welfare benefits (such as medical, dental, disability and life) usually are provided either from the employer’s general funds (“self-funded”) or through insurance. Most “self-funded” welfare benefits are governed by ERISA, which preempts state law, so that Minnesota’s law will not have an effect upon these plans. Several other employer plans, including Section 125 “cafeteria” plans and medical expense reimbursement plans, are largely designed to provide pre-tax benefits under federal tax law. Since federal law under DOMA currently does not recognize same-sex marriage, the new Minnesota law should not require these plans to recognize same-sex spouses.

Other employer programs, such as stock options or appreciation rights, stock purchase plans, and employment-provided fringe benefits, generally are not governed by ERISA. For these programs, any regular or survivor benefits need to be extended to same-sex spouses. If you have these plans, we recommend that they be reviewed.

Benefits Provided Through Insurance
Although ERISA and other federal laws generally preempt state laws, states are permitted to regulate insurance. Therefore, it is likely that Minnesota’s insurance laws will require that any insurance-provided benefits for spouses be extended to same-sex spouses. This would include health, dental, disability and life insurance. We anticipate that Minnesota will be issuing guidance concerning whether this change must occur when Minnesota’s same-sex marriage law goes into effect on August 1, 2013, or at a later date, such as the start of the next policy year. Please check back with us as August 1 approaches so that we can keep you informed.

Domestic Partner Coverage
Some employers currently extend benefits, especially health benefits, to same-sex domestic partners. For most, the purpose has been to provide benefits to same-sex partners who could not have a marriage recognized under state or federal law. Now that Minnesota recognizes same-sex marriage, employers will need to decide whether they will continue to provide domestic partner coverage, or whether same-sex partners will need to marry in order to qualify for these benefits.

Tax Impact of Providing Same-Sex Spouse Benefits
Currently, neither Minnesota nor federal law permits pre-tax or tax-free benefits for same-sex partners unless the partner qualifies as a “dependent” for federal tax purposes. Although Minnesota’s same-sex marriage law will not change the federal income tax treatment of these benefits, it seems likely that these benefits will no longer be subject to Minnesota income tax once the law goes into effect.

Definitions of Spouse Used in Plans
Regardless of whether or not an employer’s benefit plans will be required to provide coverage for same-sex spouses, employers should review the definitions of “spouse” used in their plans to determine whether the definitions will continue to reflect the employers’ intent once Minnesota begins to recognize same-sex marriage. For example, a plan definition of “spouse” that refers to Minnesota Statute Section 517.01 will automatically expand to cover same-sex marriage once the new Minnesota law goes into effect.

If you have any questions about any topics in this Alert, or any other concerns that arise as a result of the new law, please do not hesitate to contact us. We will be closely monitoring the implications of the law, in addition to the U.S. Supreme Court decisions.

Whistleblower Protections Expanded New Securities and Exchange Commission (SEC) Rules Effective August 12, 2011

SEC whistleblower rules added under the Dodd-Frank Act now in effect will have a significant impact on private and public companies. Companies should become familiar with the new rules and train their management and employees to prevent any unintentional violations of the rules.   Background On May 25, 2011, the SEC adopted whistleblower rules – contained in Regulation 21F – to implement Section 21F of the Securities Exchange Act of 1934 (Exchange Act).  Regulation 21F, which became effective on August 12, 2011, applies to both private and public companies and establishes a process for whistleblower reporting that could award whistleblowers up to 30 percent of the government’s recovery if the total recovery exceeds $1 million.

New whistleblower provisions under the Dodd-Frank Act:  What you need to know
Section 21F and Regulation 21F generally provide that the SEC is required to pay whistleblowers awards equal to 10 to 30 percent of the aggregate monetary recoveries obtained by the SEC, the U.S. Department of Justice and certain other authorities in a judicial or administrative action. This could happen where one or more whistleblowers voluntarily provide original information regarding a violation or possible violation of the federal securities laws and the information leads to one or more enforcement actions that result in monetary sanctions exceeding $1 million. Section 21F and Regulation 21F also expand anti-retaliation employment protections and remedies for whistleblowers.

General recommendations
Companies should have policies and procedures that encourage employees and others to first report their concerns about possible securities law violations to the company. Because of the potential for large awards for whistleblowers, which encourage employees to bypass a company’s internal reporting system, companies should redouble their efforts to encourage employees to report violations and possible violations internally. In this regard, companies may wish to consider the following:

• Adopt a comprehensive whistleblower policy which clearly states that there will be no retaliation for reporting.
• Provide several ways to report a violation, including by email, a toll-free hotline and a confidential/anonymous disclosure system.
• Offer periodic training on the company’s whistleblower policy and assure employees that their complaints will be handled appropriately and seriously.
• Review employee confidentiality agreements, employee handbooks, and other employee materials that may limit employees’ dissemination of information outside the company to assure that nothing might be construed as prohibiting protected whistleblowing.
• Obtain confirmation from employees in exit interviews or separation agreements that the employee is not aware of any possible violations.
• Take immediate action upon receipt of a whistleblower complaint. The SEC has emphasized that the promptness with which a company self reports misconduct is an important factor in considering whether to grant leniency for cooperating in the SEC’s investigations and enforcement efforts.
• Review and potentially expand the scope of the company’s directors and officers insurance policy to ensure adequate coverage in the event of an SEC investigation, as the new whistleblower rules are likely to result in additional SEC investigations. It is important to review your policies and ensure it is protecting what you wish.

Additional information regarding
Section 21F and Regulation 21F
Neither Section 21F nor Regulation 21F requires the whistleblower to first report the violation or possible violation to the company. This makes it particularly important for companies to increase their efforts to create internal policies and procedures to encourage employees to report any suspected violations internally through implementation of an effective whistleblower policy. If an employee reports to the SEC first, the company may be placed in the unfortunate position of learning about the possible violation from the SEC.

• Although internal reporting is not required, the SEC has attempted to counterbalance the potential disincentives for internal reporting by providing some reward for whistleblowers to go through internal channels first. A whistleblower’s cooperation in the company’s internal compliance program can be used by the SEC as a factor to increase the award. In addition, a whistleblower’s unreasonable delay in reporting or interference with the company’s internal compliance program can reduce the size of the award.
• Whistleblowers who first report internally may delay reporting to the SEC for up to 120 days and still receive an award. Whistleblowers may also receive awards even if the company reports the information to the SEC that ultimately results in a successful award action.
• The definition of a whistleblower includes not only employees of the issuer or its consolidated subsidiaries. The definition is broad enough to include an employee of a competitor, an angry ex-spouse, or even an unaffiliated academic.
• Violations of the securities laws include violations of the Foreign Corrupt Practices Act (FCPA). The anti-bribery provisions of the FCPA apply to both private and public companies. Thus, the new whistleblower provisions raise the specter of enhanced enforcement of FCPA provisions against both public and private companies.
• In addition to the whistleblower bounty provisions, Section 21F and Rule 21F create additional anti-retaliation provisions which both supplement and expand upon those protections already provided under Sarbanes-Oxley Act of 2002 (SOX). Many employees are now covered by both SOX and Section 21F/Regulation 21F.
• The statute of limitations for retaliation claims under Section 21F is six years or more, which is much longer than the ninety days originally provided for in the anti-retaliation provisions of SOX.
• The anti-retaliation protections provide not only for reinstatement and attorneys’ fees but also double back pay plus interest. Under SOX, the anti-retaliation remedies consist of one times back pay plus interest and attorneys’ fees. Coupled with the longer statute of limitations, this raises the possibility of significantly larger awards to whistleblowers for retaliation claims.
• The anti-retaliation provisions apply even if the whistleblower does not qualify for an award and even if the information provided does not relate to an actual violation of law. The only requirement is that the whistleblower has a reasonable belief that there was a violation of securities laws.

The SEC estimates that it will receive 30,000 tips, complaints and referrals annually through its new whistleblower system and that there will be approximately 150 SEC actions resulting in monetary sanctions of greater than $1 million. As a result, the plaintiff’s bar now is actively recruiting potential whistleblowers, so employers need to be prepared.

Additional Information
If you have any questions on adopting a new whistleblower policy or in implementing changes to an existing policy in light of the changes described in this alert, please contact shareholders Michele D. Vaillancourt or Laura A. Pfeiffer.

Michele D. Vaillancourt
(612) 604-6681
[email protected]

Laura A. Pfeiffer
(612) 604-6685
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NOTICE:
This client alert is a periodic publication of Winthrop & Weinstine, P.A., and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your legal counsel concerning your situation and any specific legal questions you may have. This may be considered Advertising Material.