CFPB Issues Guidance on Application of Compensation Rules under Regulation Z to Qualified Plans
NEWS
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to CMS Due Soon - HIPAA Privacy Notice Reminder
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- The Pension Funding Equity Act of 2004; Internal Revenue Service Notice 2004–34 and Announcement 2004–38
On April 2, 2012, in response to several inquiries, the Consumer Financial Protection Bureau ("CFPB") issued Bulletin 2012-2 (the "Bulletin") to clarify the application of the compensation rules under Regulation Z to qualified plans. The compensation rules under Regulation Z generally provide that no loan originator may receive (and no person may pay to a loan originator), directly or indirectly, compensation that is based on any terms or conditions of a mortgage transaction. It was unclear from the regulation and related guidance whether these rules prohibited financial institution employers from contributing to a qualified plan if such employer contributions are derived from profits generated by mortgage loan originations. The Bulletin clarifies that employers may contribute to qualified plans out of a profit pool derived from loans originated by employees without running afoul of these rules. The Bulletin is limited to qualified plans, and does not address other types of profit sharing arrangements or plans. The CFPB is expected to provide additional guidance relating to these other types of arrangements at a later date.
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