Mass Mutual vs Penn mutual

[Allen Trent]

When you put a substantial amount of PUA in a policy you may create a material change.
That would subject the policy to a 7 pay test.
If you take a large withdrawal you will also create a material change and the policy will look at the lowest db in relation to premium...this may create a mec.
A recapture ceiling is a money money out regulation to detect money laundering.
If you trigger this your distribution is taxable

To be clear, isnt your illustration attached becoming a MEC because of the planned premiums going in, not because of partial PUAR surrenders? If the policy was set to avoid MEC & the carrier also doesn't allow excessive premiums that cause MEC without MEC notice signature by Client, wouldn't this be avoided?

I have some large WL that are non MEC that had lump sum PUAR go into them & annual max PUAR just below 7 pay/MEC Premium threshold. Have seen hundreds like it without becoming MEC. Have not seen a partial surrender of PUAR have it cause MEC yet.

Have seen tons of ULs have those issues, but that is normally from a gave reduction or a level face withdrawal causing face reduction or combination of change to smoker class & all of the above.

 

[Lloyds of Lubbock]

Lets be very clear the policy is clearly a mec because of the withdrawal.
Had I not taken the withdrawal the policy would not MEC .
The PUA caused a material change the withdrawal caused the policy to become a MEC.
Here I have included a picture showing where the material change takes place.
The distribution caused the policy to fail a 7 pay test.
I have only triggered a recapture ceiling by accident and had no idea what it was, so I had to call actuarial.
I used Guardian software for this. Penn is very similar. They both have fields to check off to prevent this.
Mass more plug and play.

 

[Lloyds of Lubbock]

no mec

 

[Lloyds of Lubbock]

Avoid material change to prevent MEC.
I have only triggered a recapture ceiling by accident and had no clue as to what is was.

 

[Allen Trent]

Lets be very clear the policy is clearly a mec because of the withdrawal.
Had I not taken the withdrawal the policy would not MEC .
The PUA caused a material change the withdrawal caused the policy to become a MEC.
Here I have included a picture showing where the material change takes place.
The distribution caused the policy to fail a 7 pay test.
I have only triggered a recapture ceiling by accident and had no idea what it was, so I had to call actuarial.
I used Guardian software for this. Penn is very similar. They both have fields to check off to prevent this.
Mass more plug and play.

Sorry, couldn't see that on my phone. I see that now.

Thanks for sharing, need to check this out a bit more. But I likely never saw it as I have never sold or encouraged early distributions, if any.

 

[Lloyds of Lubbock]

Alan, good question(If the policy was set to avoid MEC & the carrier also doesn't allow excessive premiums that cause MEC without MEC notice signature by Client, wouldn't this be avoided?)
If the policy was set to avoid MEC your system would fund the policy at the 7 pay premium.
It would not factor in the withdrawal. Actually if I took a loan it would not MEC.
I cant speak for all Home Offices but where I worked, if you took a withdrawal that caused a MEC a letter would go out to the client (and agent) and give him (or her) 90 days to send the check back.
So in a real world you overfund a policy and you ask your agent how much you can withdraw?
He looks at the cash value of additions gives you the number, you fill out a form and take your distribution and you get notified of a MEC.
Distributions causing a MEC is not something that comes up much and I would bet a majority of agents do not know this could happen.
On a policy statement there may be a field that tells you the minimum db you have to maintain not to cause a mec.
You can model your inforce illustration so that your distribution does not cause your face amount to go below that number. This is why agent service is important
Whomever is reading this my apologies for being so long winded.

 

[scagnt83]

For those following along, Penn calls this report the "Guideline/7pay Report" under the "output design" in the illustration system.

The "material change" column you see on the Guardian illustration posted, is called the "year of 7pay period" column on Penn's illustrations.

 

[scagnt83]

Whomever is reading this my apologies for being so long winded.

Dont be sorry. This is one of the most informative threads for advanced WL knowledge on the forum. Keep sharing your knowledge.

 

[Lloyds of Lubbock]

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!

 

[Lloyds of Lubbock]

Penn and Guardian use the same software vendor.
If you use Mass it is kind of plug and play.
If you use NY Life you have my sympathies in advance.