COBRA

PaydayJR

The "company" is being sold. All current employees will be terminated by the "old Co." and immediately hired by the "new co." with no loss of current Medical coverage. Is "old co." required to distribute COBRA Notifications with the Termination Packages?

Jackson

COBRA is activated by qualifying events that would result in the loss of benefit coverage. You indicate that in this situation there will be no loss of coverage. Therefore, I don't think COBRA notices are required. But since unexpected events can occur in a business change of the nature you describe, I'd play it safe and discuss with an attorney.

Scott Ruth

You will need to obtain specific advice on your situation, but this sounds like an asset sale. Under the new regulations, an asset sale in which "old co.'s" employees terminate employment and stop receiving coverage from old co. is a qualifying event (termination of employment) and old co. must offer COBRA coverage (even if comparable coverage is offered under a plan sponsored by new co.). However, if old co. (and its controlled group) ceases to offer any health coverage because of the sale, and new co. continues the purchased business operations of old co without substantial change or interruption, there has been no qualifying event. In this latter case, new co. is a "successor employer" and must provide coverage under its plan for pre-existing COBRA beneficiaries under old co.'s plan.

Note also that these rules are "default" rules under COBRA, and old co. and new co. may have agreed differently in their sale agreement.

SandiF

I have dealt with this situation in the past. A number of our employees were terminated and hired immediately by another company who we had contracted to do our billing. The new company hired our billing employees. The insurance coverage changed. And yes,I gave COBRA notices to all of our employees hired by the new company. I would say that although your employees will have the same insurance coverage, they were terminated (a qualifying event) and so should be given the COBRA notice. Scott Ruth suggested another situation that might have occurred, so if that's the case, don't listen to me! If not the case though, with COBRA, I alway go for better safe than sorry.

WOCO Frank

Does the "purchasing" company have an HR Dept? Assuming they do, it is important that you work together with those folks to make sure you are all on the same page with this.