Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
A policyowner increases the death benefit on an existing policy, which may cause the policy to become a MEC. The reason is that a material change:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under IRC Section 7702A, a material change in a life insurance policy, such as an increase in the death benefit, triggers a new application of the 7-pay test. The policy is retested as if it were newly issued, and if the cumulative premiums paid exceed the new 7-pay limit, the policy becomes a MEC. This is why policyowners must consider the MEC consequences before increasing coverage.
Why the other options are wrong
- B) A material change subjects the policy to retesting; it does not create an exemption from testing.
- C) A MEC is still a life insurance policy; it is not reclassified as an annuity.
- D) RMD rules apply to qualified retirement accounts, not to MEC testing.
Memory hook
Boost the death benefit and the 7-pay clock restarts: a material change re-runs the MEC test.