Conversions of Startup Loans Into Surplus Notes by Consumer Operated and Oriented Plans Were Allowable but Not Always Effective 

CMS established loan agreements with Consumer Operated and Oriented Plans (CO-OPs) to provide startup and solvency loan funding. CMS issued a memo to the CO-OPs in July 2015 allowing the CO-OPs to convert startup loans into surplus notes. A surplus note is a bondlike instrument issued to provide needed capital. Under the terms of a surplus note, CO-OPs are not required to make any repayment on the surplus note that could lead to financial distress or default.