Non-COBRA small employer acquired by employer subject to COBRA

[Guest Kathleen Meagher]

Employer A with eleven employees is acquired by an employer B with 500 employees. A's health plan will terminate at the time of the acquisition. Two former employees of A currently have state "COBRA" coverage. Are these former employees of A entitled to COBRA under B's plan? What about employees of A that are not hired by B after the acquisition?

I think B's plan must cover both groups--any other opinions?

Kathleen Meagher

[Sandra Pearce]

I have just gone through a similar situation. The final COBRA regulations specifically address stock and asset sales. Rules are different depending upon the type of sale. Our acquisition was a stock purchase. I do not believe the acquiring company would have any COBRA obligation for those employee who terminated previously (unrelated to the purchase) and were not eligible for federally mandated COBRA coverage. However, in a stock purchase I believe that any employee who loses coverage because of the purchase or after the purchase would be eligible for COBRA coverage from the purchasing employer plan (this assumes that the selling company was not a part of a multiple employer group and their is still coverage available on the selling side of the equation).