MEC Avoidance

A Modified Endowment Contract (MEC) is created when a life insurance policy fails to meet the 7-pay test. The policy still qualifies as Life Insurance but without the tax advantages of a Non-MEC contract. The major drawback to a MEC is the 10% federal penalty for early withdrawal prior to age 59 ½ and distributions are taxed as coming for earnings first.

• None – Run the case as entered and if policy becomes a MEC at any point, Show Alerts indicating the year in which MEC status is achieved.
• Yes – Adjust Face Amount - Run the case as entered and if it becomes a MEC at any point, the system will adjust the face amount (face increase) to avoid MEC status.
• Yes – Adjust Premiums - Run the illustration as entered and if it becomes a MEC at any point, the system will adjust the premiums payments to avoid MEC status.