COBRA in Asset Sale

[Scott]

Company A sells substantially all of its assets to Company B. Company B hires most, but not all, of Company A's employees. Some of the employees not hired by Company B are let go by Company A, while a few are retained by Company A to wind-up Company A's affairs. Company A continues its health plan during the wind-up process.

Under the COBRA regs, as long as Company A continues its health plan, that plan is responsible for COBRA for (a) any qualified beneficiaries who were already on COBRA at the time of the sale, (B) the employees who were not hired by Company B and who were let go by Company A, and © any employees retained by Company A who subsequently are terminated.

As I read the COBRA regs, if Company A terminates its health plan, Company B, as a successor employer, will have COBRA liability for the 3 groups of people described above. The regs address this situation, but the answers are less than clear.

With respect to the group described in (a), I presume that Company B's obligation will continue only until the original COBRA period expires. Correct?

With respect to the group described in (B), Company B's obligation will continue until 18 months after the sale/termination of employment. Correct?

Group © is where I get confused. If Company A terminates its group health plan at some point after the sale, what exactly is Company B's obligation?

I can see a couple of possible scenarios. Company A might terminate the remaining employees one or a few at a time while it still maintains a health plan. In that case, I presume that Company A's plan would provide COBRA until the plan is terminated, at which point Company B's plan would pick up the obligation for the rest of the 18 months.

Another scenario is that Company A could terminate its health plan before it completes the wind-up and terminates these employees. In that event, does Company B have to immediately offer coverage to the remaining employees? If so, for how long? Has there really been a qualifying event?

If Company B's obligation does not kick in until these employees are terminated by Company A, then does Company B have to offer a full 18-month period from that date, or from the date of the sale?

Any help on these issues would be much appreciated.