Financial Literacy Month
Term of the Day
MODIFIED ENDOWMENT CONTRACT (MEC)
According to federal tax law limits, MEC is the term given to a life insurance policy that’s exceeded its funding. In other words, the IRS doesn’t consider a MEC to be a life insurance contract anymore. A policy is regarded as a MEC if it meets three criteria: (1) the policy is entered into on or after June 20, 1988; (2) it meets the statutory definition of a life insurance policy; and (3) the policy fails to meet the “7-pay test” from the TAMRA Act of 1988.
