| Set to TRUE if some determination (such as an insurer's 7-Pay Test) has been made that the policy is a Modified Endowment Contract (MEC), otherwise set to FALSE. This indicator may be used with both the existing and proposed policy.The Technical and Miscellaneous Revenue Act of 1988 (TAMRA) (see TAMRA_AMT) created a new class of life insurance called a MEC. A contract becomes a MEC when it exceeds a 7- Pay Test established by the Federal government. Once a policy becomes a MEC, loans and withdrawals are taxed as income first and premium second. Also a 10% penalty applies to loans and withdrawals taken before age 59 1/2. However, the policy cash value still accumulates tax-free and the death benefit still goes to the beneficiary tax free like a regular life insurance policy. This is a U.S. specific property. |