From Muppet Wiki

In the early 1990s, with the death of Jim Henson, rumors began to appear that Sesame Street's Ernie would be killed off to teach children about death. There were various suggestions saying that Ernie would have died by a disease or by a traffic accident (either being hit by a car or being killed in a fatal auto accident). Due to the rising popularity of the Internet, the rumors became more widespread. However, the producers had no plans to kill a Muppet character.

For a while, the rumors became misunderstood into thinking that Bert would be the one that would be killed off, saying that his performer, Frank Oz, died of either AIDS or a car crash.

Rumor Sources

The rumor became more widespread in 1991 when Michael Tabor, a college student in New Hampshire, took the then-small rumors too seriously. At his college graduation, all the graduations were wearing "Save Ernie" beanies and signing a petition to save the character. However, by the time he found out the "Ernie's Death" rumor was false, it already hit the papers.

Official Statements

"Ernie is alive and well, and we have no intention of anything happening to him or anyone else."

- Children's Television Workshop spokeswoman Carolyn Miller

Sources

• Snopes.com Toe Tag Ernie