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In the 1970s, life insurance companies leveraged the tax-free growth of cash value policies, allowing policyholders to withdraw tax-free loans. To counter this, Congress enacted the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), introducing the modified endowment contract (MEC) classification. MECs must adhere to the 7-pay test, which limits the total premiums paid into the policy within the first seven years. If the premiums exceed this limit, the policy becomes a MEC, losing its tax advantages permanently. New policies have specific premium limits that also expire after seven years, while unused cap space may accumulate, affecting future premium payments.