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In the 1970s, many life insurance companies exploited the tax-free growth of cash value policies by offering products with significant cash value accumulation, allowing policy owners to withdraw funds as tax-free loans, effectively creating tax shelters. To mitigate this, Congress enacted the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), which established the Modified Endowment Contract (MEC) classification. MEC status applies to flexible premium policies that fail the 7 pay test, which limits premium payments over seven years. If premium limits are exceeded, the policy becomes a MEC, and the classification is irrevocable, resulting in the loss of previous tax advantages. New policies now include specific premium limits that also expire after seven years. Unused cap space can accumulate within these limits.