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In the 1970s, life insurance carriers leveraged the tax-free growth of cash value policies, allowing policy owners to withdraw interest and principal as tax-free loans, effectively creating tax shelters. To address this, Congress enacted the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), establishing the modified endowment contract (MEC) classification. To avoid MEC status, flexible premium policies must pass the 7-pay test, limiting premiums over a seven-year period. Policies exceeding these limits become MECs, permanently losing tax advantages. New policies include their own premium limits that also expire after seven years. Unused cap space can accumulate, maintaining some benefit for policyholders.