Academic journal article Journal of Accountancy

IRS Releases Final COBRA Guidelines

Academic journal article Journal of Accountancy

IRS Releases Final COBRA Guidelines

Article excerpt

The IRS published final regulations under the Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA coverage allows terminated employees to purchase continued health care benefits for themselves and their dependents for a limited period of time.

The new rules update the act and address how COBRA applies to employers and employees in the event of a merger or acquisition.

According to Joan Vines, CPA and an associate partner in Grant Thornton's Washington, D.C., office, the most significant aspect of the new regulations is that they spell out the obligations of both the buying and the purchasing entities in mergers.

The final regulations

* Prevent group health plans from terminating COBRA continuation coverage because of other coverage (for example, Medicare benefits) an employee had prior to electing COBRA.

* Give employees and employee organizations flexibility in determining the number of group health plans they maintain.

* Provide baseline rules for determining COBRA liabilities of buyers and sellers of corporate stock and assets and permit buyers and sellers to reallocate COBRA liabilities by contractual agreement. …

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