MEC planning

What MEC planning is

A cash-value life insurance policy that is paid into too quickly can become a modified endowment contract, or MEC, which changes how withdrawals and loans from it are taxed. The test compares the premiums paid in a policy’s early years with a seven-pay limit.

MEC planning tracks your premiums against the seven-pay limit you supply — usually from your insurer or advisor — so you can see where each policy stands.

Run an estimate

Select Run MEC Estimate and enter the policy name and type, issue date, death benefit, planned and actual premiums, the Supplied seven-pay limit, and the testing year, then select Run MEC estimate. Earlier runs are kept under Recent MEC runs.

Track a policy over time

To follow a policy year after year, select Add Policy and Create policy. A policy keeps its premiums, events, and distributions in one place, and Run analysis checks it against its limit.

What it doesn’t do

MEC planning works only from the limit you supply. It doesn’t calculate seven-pay limits, perform actuarial testing, determine tax liability, or give legal or insurance advice — confirm any decision with your insurer and a qualified professional. MEC planning is switched on per account during the closed beta.