COBRA under Medical Plan - Employer Contribution for Portion of COBRA period - 105(h) Discrimination Issue

[Guest rocnrols2]

Company X is a large employer maintaining self-insured medical coverage for its employees under a cafeteria plan. One portion of the plan provides that if an employee is terminated under the Company X severance plan, then if the employee elects COBRA, the employer would pay the share of premiums it wo uld have paid had the employee remained active for the first 6 months after terminating employment. Company X has acquired Company Y, a subsidiary of Company Z, and expects the closing to occur as of 5/1/2005. Because Company X expects to terminate the majority of Company Y employeees shortly after the closing, it would like to condition the 6-month emloyer subsidy of COBRA premiums upon the execution of a release by the affected Company Y employees during the remainder of 2005. The issue is does this condition need to or adversely affect testing under Code Section 105(h)? How would it be tested under 105(h)? Would putting the Company Y employees into a separate plan prevent an adverse test result?