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Asset Purchase Agreement Cobra

Suppose, for example, that Selling Co. has essentially sold all of its assets to Buying Inc., but after the sale, it continues to offer health insurance for a small number of employees. Under these conditions, Buying Inc. would not be a successor employer and would have no obligations of COBRA following the sale. However, if Selling Co. has been sufficiently liquidated at a later stage and terminates its health plan, COBRA`s commitments could be made by Buying Inc. On that date, Buying Inc. would be a successor employer if it continued its activities related to the acquired assets and would therefore have to provide COBRA continuity coverage to all M&A eligible beneficiaries. A-7: Yes. Nothing in this section precludes a sales group and a group of purchasers from assigning, in a contract of sale, to either party the responsibility for securing the coverage required in accordance with paragraphs 54.4980B-1 to 54.4980B-10. Where, and to the extent that the party that has delegated such liability in accordance with the contractual terms, proceeds with such non-performance, the party that is required, under Q&A-8 of this Section, to continue to provide eligible M&A beneficiaries with coverage for the continuation of COBRA.

Employers should be aware of the limitations of contractual reallocation of COBRA liability. When a seller no longer offers a group health plan in a sale of assets related to the sale and before the expiry of the maximum cobra period and the buyer becomes a successor employer, COBRA liability is returned to the buyer, despite the contrary provisions of the contract. Similarly, in the case of a sale of shares, cobra liability will be transferred to the buyer, despite the contrary provisions of the contract, if the seller does not have a group health plan after the sale. The buyer in the event of a sale of assets is a “successor employer” when (1) the seller ceases to provide a group health plan to an employee; 2. the hiring is made in the context of the sale; and (3) the buyer continues the business related to the acquired assets without interruption or substantial modification. In these situations, it is the buyer`s plan (provided the buyer sponsors a health plan) that must offer COBRA coverage to each M&A beneficiary. The definition of the successor employer is quite simple and the IRS provides little clarity and simply adds that the decision to make a plan is related to a sale must be based on all facts and circumstances. A-8: a) In the event of a corporate restructuring (whether the sale of shares or the sale of assets), as long as the selling group has a group health plan after the sale, a group health plan maintaining the selling group is required to make COBRA continuity cover available to M&A qualified beneficiaries for that sale. .

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