Federal officials have issued guidance that may be of interest to financial advisors in the executive benefits market.
The Internal Revenue Service has answered a question concerning an employer that has splits its modified endowment contract business in Revenue Ruling 37-38.
The ruling concerns an employer that owns multiple MECs issued by one insurance company, then exchanges some of the MECs for MECs issued by a second insurance company. Someone has asked whether the employer should aggregate all of the MECs together, to comply with Section 72(e)(12) of the Internal Revenue Code, or aggregate each insurer’s MECs separately.
Melissa Luxner, an IRS financial institutions and products specialist, writes in the ruling that the taxpayer does not have to aggregate the MECs from the second company with the MECs from the first company.