investors are poised to make more deals than ever before. The number of mergers and acquisitions in 2017 were up 12% compared to 2016, according to PcW, and they are expected to rise even more significantly in 2018. There are numerous factors that experts point to in why they expect to see an even higher increase in merger and acquisitions in 2018. A few of those reasons include:
"Considering the annual increases in the number of mergers and acquisitions, and with that trend expecting to continue, it would seem more relevant than ever to be familiar with the various liability and compliance issues that could arise regarding COBRA..."
COBRA Regulations & Business Reorganization
The COBRA regulations categorized business reorganizations into two classes, asset sales and stock sales. A stock sale is defined as transfer of stock in a corporation that causes the corporation to become a different employer or a member of a different employer. An asset sale is defined as a transfer of substantial assets, such as a plant or division of substantially all the assets of a trade or business. In both transaction types a M&A qualified beneficiary is referred to as any employee, spouse or a dependent child who experiences a qualifying event relating to the sale, or individuals who are already receiving COBRA coverage under the selling group’s health plan at the time of the sale. If there were no COBRA obligations negotiated in the final deal, then as previously mentioned, the regulations will enforce who is liable to offer COBRA, which is as follows:
Ultimately, the COBRA issues and responsibilities associated with a buy-sell transaction can be complex and complicated. Even though the COBRA regulations are designed to ensure that employees can elect COBRA during mergers and acquisitions, the best way to avoid any liability is for there to be pointed and binding COBRA obligations outlined in the final negotiations and contract of the deal.
Have more questions about the basics of Federal COBRA? We have the answers on how COBRA works!