Mass Mutual vs Penn mutual

[scagnt83]

The scary part is we are the "experts"

The problem is that this level of in-depth expertise is on the actuarial level almost.

One thing that always stuck with me, my trainer at NYL always told us to "be very careful of large distributions in the first 5 years". He said "you can get into a whole mess of trouble doing that, WL is not designed for large early distributions".

He never went in depth with that comment, all he said was it was due to the 7702 regs. I always thought it was a MEC issue. But seems like he was probably referring to the recapture ceiling.

 

[Allen Trent]

Clear as mud, right? I currently have this doc open in 3 different tabs trying to follow the recapture wording (since it refers to previous sections of the document).

Looks like multiple scenarios could trigger this since there are different rules for before 5 years and year 6-16.

The 2 year lookback at past distributions is very interesting.

From my understanding, in the first 5 years scenario, essentially, if the pre-distribution CV is greater than the post-distribution Net Single Premium, then the recapture window is triggered.

Interesting. This along with the possibly triggering MEC due to PUAR surrenders even causes me a bit more concern for all those out there that push some of the aggressive BYOB, IBC, LEAP & WL instead of 401k. These items we are ignorant on are definitely some additional issues other unsuspecting agents & clients could encounter.

Somewhat surprised standard disclaimer l

The problem is that this level of in-depth expertise is on the actuarial level almost.

One thing that always stuck with me, my trainer at NYL always told us to "be very careful of large distributions in the first 5 years". He said "you can get into a whole mess of trouble doing that, WL is not designed for large early distributions".

He never went in depth with that comment, all he said was it was due to the 7702 regs. I always thought it was a MEC issue. But seems like he was probably referring to the recapture ceiling.

I bet you are right. I had never even heard recapture ceiling iny 25+ years, all my ChFC, CLU, etc, etc nor in dozens of Actuarial or product design meetings. Granted, I have been a huge proponent of showing distributions on illustrations based on clientele involved over the years being excess savers & non spenders. I merely pointed to the CV as last resort emergency funds or temporary needs & there is a best way to access & wrong way to access if ever needed

 

[Lloyds of Lubbock]

I spoke with one of the actuaries at Guardian.
He laughed, says he gets a call on it every month or so.
It is definitely a money laundering precaution.
It should only be triggered by a distribution, but not be the first time there was a system glitch.
I had no idea what it was, i though the system was wrong.
Everyday is a learning experience

 

[Allen Trent]

it is not just the early distributions.
Here is a distribution in year 15 causing a mec.
When I am doing this it is easy to avoid a MEC as the software will account for a material change.
Real life does not work like this, your client wants money at a moments notice.
The agent needs to know the best way to access this money, a withdrawal , a loan combination of both, maybe take the withdrawal over two years.
That s why I originally said which agent do you feel represents you the best?
Choosing the best piece of paper an illustration is printed on is probably not the best way to make your decision.
That's enough out of me, time to do some work I have bills to pay!

just got back to look at some of these illustrations. on this one, how is a distribution in year 15 showing the policy becoming a MEC 5 years earlier in year 10--or was there some other "material change" in year 10 like lowering face or changing dividend option or something. what in year 10 changed & where is the MEC notification on this document

Sorry for all the questions, trying to digest it

 

[Lloyds of Lubbock]

I showed you different illustrations to provide examples to you.
I showed a premium of 48k for a 10 years and a distribution in year 11 that causes a mec.
I showed the same illustration with a lower premium in year ten that showed no material change, therefore no mec
The I showed 48k for 10 years and a distribution in year 15 causing a mec.
You are reading the illustration incorrectly, it triggers a material change in year 10, a material change is not a mec....the distribution in year 15 causes the mec.
I also included an illustration from Penn for you to see on another system the witdrawal can cause a mec.
FYI... I didnt dummy up the illustrations, they are plain vanilla., base premium, pua , withdrawal

 

[Allen Trent]

I showed you different illustrations to provide examples to you.
I showed a premium of 48k for a 10 years and a distribution in year 11 that causes a mec.
I showed the same illustration with a lower premium in year ten that showed no material change, therefore no mec
The I showed 48k for 10 years and a distribution in year 15 causing a mec.
You are reading the illustration incorrectly, it triggers a material change in year 10, a material change is not a mec....the distribution in year 15 causes the mec.
I also included an illustration from Penn for you to see on another system the witdrawal can cause a mec.
FYI... I didnt dummy up the illustrations, they are plain vanilla., base premium, pua , withdrawal

Ok. So this seems to me to think the issue is they are considering merely the stopping of the annual purchases of PUAR to be a material change. Otherwise,how could stopping PUAR in year 10 cause a distribution in year 15 to be a MEC.

What I am so confused on is that making PUAR purchases in my mind isn't obligated & is optional within the carrier rules, minimums & maximums. How can the stopping of those be a material change?. I could see it being a material change if someone only did the minimum $100 for 5 years & then made a PUAR payment equal to base premium as that would be "increasing the face"

Thanks for the education.

The key so far in this for me is that the clients being sold this concept need to realize it is not near as flexible & they need to 100% commit to the funding decided at issue or they may be harmed if they take a distribution within 7 years after lowering or stopping PUAR.

If all this is true, sure looks like IUL/VUL/UL have the upper hand in accumulation focused cases because of this & also now with the expanded 7702 room.

 

[Lloyds of Lubbock]

I am not sure you are looking at this correctly...and my explaining might not be as clear as I would like to think.
What I am so confused on is that making PUAR purchases in my mind isn't obligated & is optional within the carrier rules, minimums & maximums. 100% correct but a 7 pay test is mandated if a material change is created whether your payment was optional or not. How can the stopping of those be a material change?. I am not sure where you got this from, as in one illustration I reduced the premium in year 10 not to create a material change could see it being a material change if someone only did the minimum $100 for 5 years & then made a PUAR payment equal to base premium as that would be "increasing the face". Yes this is something that could happen, I think you may need more pua but yes your premise is correct.

 

[REI_Velocity]

I am looking at opening a policy to partially use for the IBC method as well as the death benefit. I have come across something I am not able to fine clear answers on and few insurance guys are contradicting each other.

Mass mutual salesman keep touting a 4% guaranteed plus dividends and the Penn appears to be 2% guaranteed plus dividends. That 2% over the life of a contract could really add up, but Im not getting very straight answers. Anyone here mind helping a consumer out that is new to this?

I’m a huge believer in “Infinite Banking” (I’m not affiliated) and have several policies myself. I’m also an investor and business owner, part of which is an insurance startup with the niche on the policies I create (I create the same for a client that I create for myself). Yes, I became an agent reluctantly several years after using my policies as a client. That’s a different story, but for the sake of your post, here are some thoughts.

The ROR (rate of return) of your policy can only be seen by calculating the ACTUAL return in dollars received. Let’s assume for the sake of argument that illustrations will be correct into the future (e.g., non-guaranteed section). Simply see what your increase was above any premiums you paid and divide that into your previous years cash value. Numbers don’t lie, but agents sure do (perhaps in ignorance).

Lastly, dividend rates and guaranteed rates are NOT actual returns of the policy. For example, a dividend is decided by multiple factors, 1) the declared rate used as a factor, 2) current company obligations vs what was planned for and paid, 3) future company obligations. Plus you have direct/non-direct recognition variables. By the time this flows into the policy, you can see the actual % of dividend based on the previous years cash value (similar to the formula above). When all of this is taken into consideration, most companies fall into the 4-5-ish% range for total annual returns (guaranteed + dividends), but this is still smoke and mirrors for an investor like me. Let me explain:

If a MassMutual guy says he made 5.25% and a PennMutual guy says he made 5%, which is better? Well, for one you cannot compare a return of one company with the return of another. They are both built on their proprietary chassis’s - which is often very obscure, not to mention the way an agent makes the policy (5 agents using the same Ins company can make 5 different policies). To hammer this point, would you rather make a 15% return on $5 or a 5% return on $100 this year? I’ll take the 5% option! Agents often leave out the $5 vs the $100 part. Rates only mean something in context, and in order to compare two scenarios the context must be level. When I compare companies and policies, I use a 3 calculation approach I created, but really it’s gauging efficiency. If I put in 10k a year, what is it doing for me? I can care less if an agent says my return is 7% while I have the first 3 yrs of zero cash value. Yet, if I have 8K of avail cash value in year one then I’m onto something but that is only when considering my the entire policy in the game plan I’m sold on, otherwise I’m still -20%. The numbers don’t lie, and I want to see the actual numbers of increase, not lazy % return claims.

When I teach and show my policies, it’s an entire way of thinking. It’s not a 1 yr plan but a 100+ yr plan. The biggest question to ask when someone says this or that is better is… “as compared to what?” Always make comparisons apples to apples. I love using this with the “cash only” Dave Ramsey types who were taught to hate “Whole Life Insurance.” Even the cash only people make payments to themselves, they just call it filling their savings account back up after depleting it for the 30k car they just paid in cash. What we do blows that away, especially when over a lifetime, but you have to know the fundamentals of what we’re doing and why. And for the record, Ramsey is right for about 70% of whole life policies I see being made. It’s just that “whole life insurance” is essentially an empty bucket agents have to fill, just as one wouldn’t say “Roth IRAs suck”… it all depends on what it is and what it’s filled with. It could suck, but I once bought a rental in my SD Roth IRA for triple digit returns. Not bad, but that’s where education comes in. That’s another rant for later. Ha.

 

[REI_Velocity]

@DHK I enjoyed your initial response here!