Credit unions may now make contributions to qualified plans for loan originators out of a pool of profits derived from loans originated by employees, according to a new NCUA regulatory alert.
According to the regulator, the Consumer Financial Protection Bureau released informal guidance earlier this month that softened a position formerly held by the Federal Reserve Board, clarifying how it interprets loan originator compensation rules that apply to qualified plans under Truth in Lending.
According to the CFPB, the rules permit employers to contribute to qualified plans out of a profit pool derived from loan originations.
By next Jan. 21, the CFPB anticipates releasing more pointed guidance as to how the compensation rules apply to profit sharing arrangements not considered qualified plans.
The NCUA advised credit unions with discretionary non-qualified pension plans tied to profit targets to amend the plan to exclude income from closed-end mortgage loan originations, pending additional guidance from the CFPB.
“If your credit union has a pension plan that establishes the employer’s contribution amount based on a loan originator’s income, that plan is particularly at risk,” the NCUA said in the bulletin sent Monday.
