[lmi] 1035 exchange amounts limited by 7702A?

[Greg Chicares]

Wendy--you questioned lines 2999-3001 here:
  http://web.cvs.savannah.gnu.org/viewvc/lmi/7702.html?annotate=1.1&root=lmi
[which is
  http://www.nongnu.org/lmi/7702.html#fn61
until I change it]:

[normally]
| the net 1035 amount doesn’t exceed the necessary-premium limit
...
| But if it nevertheless does, the contract still doesn’t become
| a MEC: OBRA House Report, page 1439.

and I agree that it should be amended to describe what lmi
actually does, viz.:

    // If the net 1035 amount is more than the NSP, then the contract
    // becomes a MEC as of the issue date. But the exchanged contract
...
    if(a_Bft * MlyInterpNSP[PolicyMonth] < a_Net1035Amount)
        {
        IsMec = true;
        }

Suppose a 1035 exchange moves a million dollars into a new
contract issued with a one-dollar specified amount. One could
construct a rationale for calling that a non-MEC, and we can add
an option to support such an alternative if desired, but I would
hesitate to endorse that as representing the mainstream consensus.

The legislative history cited reads:

  Finally, it is intended that a contract which is materially
  changed is not to be considered a modified endowment contract
  if the calculation of the 7-pay premium after the material
  change results in a negative amount provided that no additional
  premiums are paid during the first 7 years after the material
  change.

and that certainly applies when CSV has over time come to exceed
NSP because of excess interest. However, it's plausible to read
it as not waiving necessary-premium testing of 1035 amounts, and
I don't want to argue with that reading.