COBRA and bankruptcy

[Guest 91smithie]

My client in bankruptcy has COBRA obligations because of a terminated retiree medical plan sponsored by a now-defunct subsidiary within its controlled group. Another subsidiary within the controlled group is also in bankruptcy and under Section 363(f) of the Bankruptcy Code wishes to sell its assets, "free and clear" of interests. First, I want to understand if I have the right understanding of COBRA. Does the purchaser under COBRA, if the selling entity no longer maintains any plans take the retiree medical plan obligations under the new COBRA regs, meaning, are the retirees that have never worked for the selling entity but who worked for a member of the selling entity's controlled group M&A qualified beneficiaries for purposes of the asset sale? Second, has anyone found anything that says COBRA trumps Section 363 of the Bankruptcy Code so that the assets cannot be sold free and clear of COBRA obligations? Any help would be much appreciated.

[Guest Hadden2001]

The COBRA regulations clearly state that the fact that the assets are purchased in a bankruptcy does not relieve a buyer from being a successor employer. So, it the seller does not maintain a health plan after the sale, the buyer will be responsible for COBRA.