So are FDIC banks now safe relying on the CFPB's recent interpretation that profit pool contributions to qualified plans are okay under the MLO compensation rules (http://files.consumerfinance.gov/f/201204_cfpb_LoanOriginatorCompensationBulletin.pdf) or should we wait for the FDIC to confirm they will fall in line with the CFPB?

I think the key to this is mentioned in the bulletin: "Pursuant to Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), rulemaking authority for Regulation Z transferred to the Bureau." The FDIC is examining Reg Z on behalf of the CFPB, so they are going to have to observe CFPB interpretations.

Pay close attention to the bulletin. They referenced 401k being okay but said they would issue further guidance on profit sharing when they release info on the further requirements on compensation that were required by Dodd Frank.

Actually, the Bureau offered its "thumbs up" for contributions from a "profit pool derived from loan originations" to "qualified profit sharing, 401(k), and employee stock ownership plans," which it collectively terms "Qualified Plans." It deferred offering an opinion on "how the Compensation Rules apply to profit-sharing arrangements/plans that are not in the nature of Qualified Plans," saying that it would provide "greater clarity on these arrangements in connection with a [yet to be issued] proposed rule on the loan origination provisions in the Dodd-Frank Act."

Correct, John. My caution was meant more of a "know what type of plan you have before you take any steps or make a major assumption". I was speaking with a bank this week that has something they refer to as profit sharing but it actually is a company match on the 401k.

Does the bank match the contribution if they post an annual loss, or only if they make a profit?

I don't know and at this time don't expect to get involved. My point is this issue still needs careful consideration. I would not go skipping down the hall singing "we are fine" without further review and a full understanding of the bank's programs.

I have worked in two different types of institutions. 401K matches were set at (1) a standard match rate and then based on company performance, that match rate could increase or (2) match rate was totally based on company performance. If the company did not meet goals, then the employer match rate was either at the standard rate or 0%, respectively. All matches were made at year end.

Kathleen - I was out last week and am just now looking at this. I guess I am being overly cautious on this, but your comment about the bank that thought it was profit sharing but was actually a 401K has me confused. If it is a 401K company match that would still be ok because it isn't based on profit, right? And even if it was based on profit it would still be okay due to the new guidance since a 401K is a qualified plan? Thanks for any clarification.

Does anyone know how "Qualified Plans" is defined? Is there a legal definition that the Bureau is relying on? Thanks.

Look to ERISA and IRS rules. Your HR area and plan administrator will know the status. It is a key definition.

Thanks Kathleen

FWIW, I was at a meeting on Wednesday (Mortgage Bankers Assn) and the lawyer confirmed that 401Ks and pensions should not be affected by the MLO Compensation rules.

That is right...unless for some reason the bank messed up their plan and made it unqualified! If that is the case, they have bigger problems than MLO compensation.

Items under consideration:

http://files.consumerfinance.gov/f/201205_cfpb_MLO_SBREFA_Outline_of_Proposals.pdf

Indeed.