Cobra

[Guest Cribbet]

I have a COBRA length of continuation coverage question. A company filed Chapter 11 bankruptcy in 1998 and remains in Chapter 11. That company continues to sponsor a health plan. My client will purchase the assets of the bankrupt company and hire some, but not all, of the bankrupt company's employees. The remaining employees will be terminated and the selling company will cease sponsoring any health plans. Under the special COBRA rules for Chapter 11 bankruptcy, could any former employee of the bankrupt company be entitled to a maximum continuation period extending until his death? Thanks.

[mroberts]

I'm not familiar with any special rules for COBRA under Chapter 11 bankruptcy, however, the maximum period of continuation that any employee or dependent could be entitled to under COBRA is 36 months. Additionally, if Company A is going out of business and will no longer sponsor any health plan, employees wouldn't be eligible to continue their health plan since there is no longer a plan to continue. Is somebody else aware of any special rules for COBRA and Chapter 11?

[Kirk Maldonado]

It's been a long time since I looked at the rules, but my recollection is that the COBRA bankruptcy rules only apply to retiree health coverage.

If somebody knows differently, please correct me.

[jeanine]

Even if the selling company is no longer maintaining a benefit plan, the purchasing company will have possible COBRA obligations at the sale. Check the IRS 2000 COBRA rules. I believe Kirk is right about the bankruptcy rules giving certain protections to retirees, but in this case I think the merger and acquisitions rule under COBRA would apply since this is Chapter 11 and not Chapter 7.