COBRA required here?

[SLuskin]

There is a group in which one of the partners leaves the company along with over half the employees. All these employees have elected cobra from their former company. The prior company wants to change their name as well as their tax id number essentially closing the prior company business.

When the new company sets up their new benefits under the new name and tax id number, are they under any obligation to offer the prior cobra participants benefits under their new company?

[Guest Sieve]

Probably, Yes. See Treas. Reg. Section 54.4980B-9, especially Q&A-8.

[leevena]

I am 99.9% sure that COBRA is not required in this situation. When a business is closed, there is no group health plan in effect, let alone something for the cobra people to continue.

If I am wrong, please make the eggs for my face scrambled with a little ketchup!

[Chaz]

If companies can get rid of their COBRA obligation merely by changing "their name as well as their tax id number" there wouldn't be much left to the COBRA statute!

[leevena]

If companies can get rid of their COBRA obligation merely by changing "their name as well as their tax id number" there wouldn't be much left to the COBRA statute!

I don't disagree with your comment, but if I read the question correctly they will be legally closing the company. I don't not believe it is just changing name and tax ID. But I could be wrong, so keep the ketchup handy.

[Guest Sieve]

What do you mean by "legally closing the company".

If an entity ends its business but begins another business with the same assets & the same employees, then it's form over substance, and I don't see how you can escape COBRA obligations if the new entity offers health care to employees. That, to me, is what the OP indicates is going to happen when they say "essentially" closing the business--meaning, the business continues, but it's under a new entity name and EIN. The employees won't probably skip a beat in this "transaction", & will only know something has happened when they see a new sign out front.

If they close the business & sell assets to an unrelated entity, then the cited regs clearly apply to the purchaser of the assets.

[lvena]

What do you mean by "legally closing the company".

If an entity ends its business but begins another business with the same assets & the same employees, then it's form over substance, and I don't see how you can escape COBRA obligations if the new entity offers health care to employees. That, to me, is what the OP indicates is going to happen when they say "essentially" closing the business--meaning, the business continues, but it's under a new entity name and EIN. The employees won't probably skip a beat in this "transaction", & will only know something has happened when they see a new sign out front.

If they close the business & sell assets to an unrelated entity, then the cited regs clearly apply to the purchaser of the assets.

Probably a poor choice of words. I was using the word "legally" to differentiat from the scenario you just outlined. I interpreted this situation differently because one of the "partners" quit and took employees elsewhere. When a partner leaves the partnership is usually dissolved, which requires that start of new business.

[GBurns]

Was it really a partnership ?

It continued after the "partner" left. I think this needs clarification.

[MARYMM]

What do you mean by "legally closing the company".

If an entity ends its business but begins another business with the same assets & the same employees, then it's form over substance, and I don't see how you can escape COBRA obligations if the new entity offers health care to employees. That, to me, is what the OP indicates is going to happen when they say "essentially" closing the business--meaning, the business continues, but it's under a new entity name and EIN. The employees won't probably skip a beat in this "transaction", & will only know something has happened when they see a new sign out front.

If they close the business & sell assets to an unrelated entity, then the cited regs clearly apply to the purchaser of the assets.

Probably a poor choice of words. I was using the word "legally" to differentiat from the scenario you just outlined. I interpreted this situation differently because one of the "partners" quit and took employees elsewhere. When a partner leaves the partnership is usually dissolved, which requires that start of new business.

The partnership is not necessarily dissolved. I think it depends on the partnership agreement. The large law firm I worked for (in administrative capacity) had defections, I mean departures, frequently and there was never a dissolution. The departing partner was paid out according to the terms of the agreement and life went on as usual for the remaining partners. Amendments were made to the agreement when new partners joined.