L&HMImedium
Within a Michigan-issued variable annuity, the mortality & expense risk (M&E) charge is most accurately characterized as:
AA federal excise tax on annuity income
BA surrender charge assessed only at contract termination, triggered solely when the contract owner elects to fully liquidate the accumulated sub-account value prior to the end of the stated surrender period
CA premium tax remitted to DIFS
An asset-based fee deducted from sub-account value that compensates the insurer for mortality guarantees and operating expenses
Why this is the answer
M&E is deducted daily from the net asset value of the variable annuity sub-accounts, similar to a mutual-fund expense ratio. It compensates the insurer for assuming mortality risk (the death-benefit guarantee) and for general operating expenses, and is distinct from front-end loads, surrender charges or premium taxes.
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