CESP - RESP provider user guide Transfers and payments

Disclaimer: RESP promoters

The information contained on this page is technical in nature and is intended for Registered Education Savings Plan (RESP) and Canada Education Savings Program promoters. For general information, visit the RESP section.

Chapter 3-1: RESP transfers and the Education savings incentives

When funds are transferred between Registered Education Savings Plans (RESPs) held within different financial institutions, the transferring and receiving RESP promoters must share information and work together to successfully complete the following Employment and Social Development Canada (ESDC) RESP Transfer Forms:

  • HRSDC SDE 0088 (Form A)
  • HRSDC SDE 0089 (Form B)
  • HRSDC SDE 0090 (Form C)

Promoters must also submit accurate transfer transactions to the Canada Education Savings Program (CESP) system of ESDC. In addition, when undertaking the transfer, certain conditions are required to ensure that the beneficiary continues to be eligible for the following incentives:

  • Canada Education Savings Grant (CESG)
  • Canada Learning Bond (CLB)
  • Saskatchewan Advantage Grant for Education Savings (SAGES)
  • British Columbia Training and Education Savings Grant (BCTESG)

See Appendix C for a list of acronyms and terms used in this guide.

1. What is an RESP transfer and who is involved?

The term RESP transfer refers to the transactions that take place when all or parts of the funds in the plan are transferred from one RESP to another.

While the subscriber provides the information needed to facilitate the transfer and provides authorization by signing the required form, the RESP transfer process involves the cooperation of:

  • the transferring RESP promoter, who transfers funds from the transferring plan to the receiving plan;
  • the receiving RESP promoter, who ensures funds are deposited into the corresponding accounts in the receiving plan; and
  • the CESP.

Each play a critical role in facilitating the RESP transfer process and confirming that it meets the conditions required to ensure that the beneficiary continues to be eligible for the CESG, CLB and/or provincial incentives for which they qualify.

Synonyms for transferring and receiving

In this guide, "transferring RESP" means the plan from which funds are withdrawn in a transfer between RESPs, whereas "receiving RESP" means the plan in which these funds are deposited.

Other RESP documents may refer to transferring and receiving RESPs using different terms.

The following terms could replace "transferring":

  • sending
  • relinquishing
  • originating
  • transferor

The following term could replace "receiving":

  • transferee

1.1. Responsibilities of the RESP promoters

Participating RESP promoters must comply with the terms and conditions of the agreements signed with ESDC.

Under those agreements, RESP promoters must agree to track and report to the Minister of ESDC, all RESP financial activities in compliance with the CESP system Interface Transaction Standards (ITS). This includes transfer transactions that are reported in the RT 400 transaction. See Chapter 1-3: The CESP system and Interface Transaction Standards (ITS).

With respect to RESP transfers, RESP promoter responsibilities include:

  • understanding the conditions for an 'eligible' transfer with respect to the CESG, CLB and provincial incentives and communicating this information to the subscriber;
  • completing the applicable RESP transfer forms (HRSDC SDE 0088, 0089 and 0090) each time a transfer occurs, using information provided by the subscriber;
  • sharing information with other RESP promoters in order to successfully complete the transfer forms as well as the transfer transaction. This represents a critical part of the transfer process. Accurately completing the RESP transfer forms requires each RESP promoter to provide information, as authorized by the subscriber. Accurate and timely transfer transactions also ensure beneficiaries continue to be eligible for and receive the incentives for which they qualify;
  • submitting transfer transactions to the CESP system in a timely manner and in compliance with ITS requirements;
  • continuing to administer the RESP as required under the Income Tax Act (ITA); and
  • administering and accounting for the CESG, CLB, and/or provincial incentives that have been received.
1.1.1. Responsibility for administering the incentives

Once the CESG, CLB and/or provincial incentives are paid into an RESP, the RESP promoter becomes responsible for administering these funds.

When incentives are transferred, the transferring and receiving RESP promoters must advise the CESP of the transferred amount(s) of CESG, CLB and/or provincial incentives administered by ESDC. This is accomplished by completing the RESP transfer forms and submitting the respective transactions to the CESP system according to ITS requirements. The responsibility for administering the incentives is transferred to the receiving RESP promoter.

If the CESP is not properly informed of the transfer transaction, the transferring RESP promoter remains responsible for administering the CESG, CLB and/or provincial incentives that have been paid into the RESP in respect of a beneficiary.

1.2. Responsibilities of the CESP

The main responsibility of the CESP, relative to transfers, is to track the CESG, CLB and/or provincial incentives administered by ESDC by receiving and processing transfer transactions submitted to the CESP system by RESP promoters.

Via the CESP system, the CESP will:

  • accept and process transfer transactions;
  • validate the RESP promoters' records pertaining to the CESG, CLB and/or provincial incentives administered by ESDC, ensuring that information is maintained and has been accurately entered into the CESP system; and
  • undertake compliance reviews to ensure:
    • promoters complete the transfer forms and share information with other promoters;
    • information is being submitted to and accepted by the CESP system; and
    • promoters accurately maintain their books and records to properly reflect all transfer transactions.
Compliance reviews and the RESP transfer form

CESP undertakes compliance reviews of the RESP promoters' records and submission of information to the CESP system. This includes ensuring that the RESP transfer forms have been properly completed, signed and maintained in a record keeping system.

2. RESP accounts - What they accomplish

RESP promoters must create and maintain separate RESP accounts to administer the CESG, CLB, and/or provincial incentives. These accounts identify the value of each monetary component of the RESP.

An RESP may be comprised of the following accounts:

  • assisted contributions made to the RESP by the subscriber
  • unassisted contributions made to the RESP by the subscriber
  • CESG
  • CLB - maintained separately for each beneficiary
  • provincial incentives – accounts maintained separately for each designated provincial program
  • earnings

Account balances entered onto the RESP transfer forms must reflect the book value of RESP accounts.

When a financial transaction is processed in respect of a beneficiary, the funds are either deposited into or withdrawn from the appropriate RESP account depending on the purpose of the financial transaction. For example, contributions are deposited into the appropriate contribution account and the CESG (Basic & Additional) is deposited into the CESG account.

RESP accounts and the RESP transfer forms

The transferring RESP promoter must enter the appropriate (book value) balances for each of the RESP accounts onto RESP transfer forms.

See Appendix D: Forms index - Education savings incentives, RESP transfer forms (HRSDC SDE 0088, 0089 and 0090).

RESP promoters must calculate the proportion of CESG and provincial incentives transferred between RESPs (The CLB is handled separately in the case of transfers.)* An example of how to perform this calculation is included in 4.1 Partial transfers, later in this chapter.

3. Implications when transferring funds to another RESP

The RESP promoter must be aware of the various possible implications of making an RESP transfer and is responsible for communicating this information to the subscriber(s). These could include the following:

  • Transfers are subject to ITA requirements and may have tax implications.
  • Transfers must meet certain conditions to ensure the beneficiary's continued eligibility for the Education savings incentives.
  • Transfers may impact contribution history and the effective date of the plan.

Important Note!

RESP transfers are not permitted once an accumulated income payment (AIP) has been made from the transferring RESP. See Chapter 3-3: Options for assets remaining in the RESP.

3.1. Contribution history and potential tax penalties

Under the ITA, transfers of funds between RESPs are generally not restricted.

However, the Canada Revenue Agency (CRA) may consider contributions previously made to the transferring plan as contributions made to the receiving plan on the original contribution dates. This could result in overcontributions and applicable tax penalties.

Unless the transfer meets one of the following conditions, the receiving plan will assume the contribution history of the transferring plan and may incur tax penalties:

The transferring and receiving plans have a common beneficiary.

OR

A beneficiary in the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is a family plan.

OR

A beneficiary of the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is an individual plan.
AND
The beneficiary of the receiving plan was under 21 years of age when the receiving plan was entered into.

Age limit for adding beneficiaries to family plans

Beneficiaries must either be less than 21 years old when named to a family plan or they must have been beneficiaries under another family plan immediately before being added. See Chapter 1-4 Registered Education Savings Plans, 4.2. Family plans.

Beneficiary's age when the receiving plan was entered into
If the receiving plan has already received a transfer from another RESP, the effective date of the receiving plan could be earlier than the date on which the subscriber actually opened this plan. After receiving a transfer, the effective date of the receiving plan (the date on which the plan is deemed to have been entered into) is the earliest effective date of the two plans involved in the transfer. See 3.7 Earliest effective date of the plan later in this chapter.

Failure to meet the above conditions may result in overcontributions and may require the subscriber(s) to pay penalty taxes. See Chapter 1-4: Registered Education Savings Plans (RESPs), 5. Overcontributions.

It is important for the RESP promoter to communicate to the subscriber the possible consequences of transferring funds. A transfer that does not meet the conditions stipulated above may:

  • result in an overcontribution for the beneficiary, which may incur a tax penalty on each subscriber's share of overcontributions that are not withdrawn; and
  • reduce lifetime RESP limits, even if overcontributions are withdrawn.

Example: Contribution history and potential tax penalties

Transferring plan - A

  • Effective date prior to transfer: April 2, 1998
  • Type of plan: family plan with siblings only
  • Incentives paid in plan: Basic CESG only
  • Beneficiaries: Carl and Janet

Receiving plan - B

  • Effective date prior to transfer: January 10, 2011
  • Type of plan: family plan with cousins
  • Incentives offered by the promoter: Basic CESG only
  • Beneficiaries: Harry, Suzan and Bob

The subscriber of plan A requested the transfer on January 21, 2011. Janet and Bob are siblings in the transferring and receiving plans. The receiving plan B was opened on January 10, 2011 when Bob was 30 years old. Bob was allowed to be named to the family plan B when he was older than 21 because he was already named in another family RESP at that time.

This transfer would not have tax implications because:

  • Bob (receiving plan) is a sibling of Janet and Carl (transferring plan); and
  • the receiving plan is a family plan.

3.2. Transfer conditions for the Education savings incentives

Transfers will be considered ‘ineligible’ in respect of all education savings incentive(s) administered by ESDC unless the transfers comply with conditions stipulated in:

  • Canada Education Savings Regulations; and
  • provincial regulations and agreements for provincial incentives administered by ESDC.

For an eligible transfer of Education savings incentives:

  • RESP transfers must meet all of the conditions for an eligible transfer of each incentive administered by ESDC; and
  • the receiving plan must support all of the conditions for receiving these incentives.
When the receiving promoter does not offer an incentive

The receiving plan must support all of the conditions for receiving all of the incentives included in the RESP transfer. For example, a promoter must enter into an agreement with ESDC and pass industry testing before they can submit transactions for a particular incentive to the CESP.

For additional information, see the following headings later in this chapter:

If conditions for an eligible transfer are not satisfied for any of the incentives administered by ESDC, all of these incentives (CESG, CLB and/or provincial incentives administered by ESDC) must be repaid to ESDC. For more information, see 3.3 Ineligible transfers and repayments later in this chapter.

Eligibility for the incentives and the RESP transfer forms

Both the transferring and receiving RESP promoters must be aware of the conditions affecting eligibility for the CESG, CLB and/or provincial incentives administered by ESDC.

By reviewing the transfer eligibility information in the RESP transfer form, the RESP promoter helps to ensure that the beneficiary continues to be eligible for the incentives for which they have already been qualified.

See Appendix D: Forms index – Education savings incentives, RESP transfer forms (HRSDC SDE 0088, 0089 and 0090).

3.2.1. Conditions for an eligible transfer of the CESG

The following conditions must be satisfied for an eligible transfer of CESG:

The transferring and receiving plans have a common beneficiary.
OR
A beneficiary in the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is a family plan.
OR
A beneficiary of the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is an individual (non-family) plan.
AND
The beneficiary of the receiving plan was under 21 years of age when the receiving plan was entered into.

AND

The receiving plan is an individual (non-family) plan or a family plan in which all beneficiaries are siblings.
OR
No Additional CESG has been paid into the transferring plan.

AND

The receiving plan complies with all conditions applicable to registering education savings plans (ESPs) since January 1, 1999, as required by the ITA.

See also 3.5 When the receiving promoter does not offer additional CESG, later in this chapter.

Determining if conditions for an eligible transfer of CESG are satisfied

Example 1: Conditions for an eligible transfer of CESG

Transferring plan - A

  • Effective date prior to transfer: April 2, 1998
  • Type of plan: family plan with siblings only
  • Incentives paid in plan: CESG
  • Beneficiaries: Maxim and Dianne

Receiving plan - B

  • Effective date prior to transfer: January 10, 2005
  • Type of plan: individual plan
  • Incentives offered by promoter: All incentives administered by ESDC
  • Beneficiary: Joel

The subscriber of plan A requested the transfer on September 15, 2011 when Joel was 30 years old. Maxim, Dianne and Joel are siblings and plan B was opened on January 10, 2005 when Joel was 24 years old.

The transfer is ineligible for CESG because Joel was not less than 21 years old when plan B was entered into. The promoter must use January 10, 2005, plan B's effective date prior to the transfer, to determine if Joel was less than 21 when this plan was entered into. For additional information, see 3.7 Earliest effective date of the plan later in this chapter.

As the transfer is ineligible, the lesser of plan A's fair market value and the incentive accounts (CESG) of plan A must be repaid.

Example 2: Conditions for an eligible transfer of CESG

Transferring plan - A

  • Effective date prior to transfer: April 2, 1998
  • Type of plan: family plan with siblings only
  • Incentives paid in plan: Basic CESG only
  • Beneficiaries: Carl and Janet

Receiving plan - B

  • Effective date prior to transfer: January 10, 2011
  • Type of plan: family plan with cousins
  • Incentives offered by promoter: Basic CESG only
  • Beneficiaries: Harry, Suzan and Bob

The subscriber of plan A requested the transfer on January 21, 2011. Janet and Bob are siblings in the transferring and receiving plans. The receiving plan B was opened on January 10, 2011 when Bob was 30 years old. Bob was allowed to be named to the family plan B when he was older than 21 because he was already named in another family RESP at that time.

This is an eligible transfer for CESG.

3.2.2. Conditions for an eligible transfer of the CLB

The following conditions must be satisfied for an eligible transfer of CLB:

The transferring and receiving plans have a common beneficiary. If the CLB is transferred, it must be between CLB accounts in an RESP held for the same beneficiary.

AND

If the receiving plan is a family plan, all beneficiaries are siblings.

AND

The receiving plan complies with all conditions applicable to registering education savings plans (ESPs) since January 1, 1999, as required by the ITA.

See also 3.6. When the receiving promoter does not offer CLB, later in this chapter.

Determining if conditions for an eligible transfer of CLB are satisfied

Example: Conditions for an eligible transfer of CLB

Transferring plan - A

  • Effective date prior to transfer: January 12, 2005
  • Type of plan: family plan with siblings only
  • Incentives paid in plan: CESG (Basic and Additional) and CLB (for Sarah)
  • Beneficiaries: Sarah and Jonathan

Receiving plan - B

  • Effective date prior to transfer: August 9, 2011
  • Type of plan: family plan with cousins
  • Incentives offered by promoter: All incentives administered by ESDC
  • Beneficiaries: Nancy, Joel and Sarah

The subscriber of plan A requested the transfer on September 7, 2011. This is not an eligible transfer for CLB because the receiving plan beneficiaries are not all siblings. Therefore, the lesser of plan A's fair market value and the incentive account balances (CESG and CLB) in plan A must be repaid.

CLB repayments do not affect the lifetime CLB entitlement of a beneficiary. Sarah could be named in another RESP after CLB amounts, paid to Sarah in plan A, are repaid to ESDC. Sarah could then receive her accumulated CLB in the new RESP and these entitlements would include any repaid CLB amounts.

The CLB could also be left in plan A in order to avoid an ineligible transfer. In that case, no repayment of CESG or CLB would be required. For additional information, see 4.1 Partial transfers later in this chapter.

3.2.3. Conditions for an eligible transfer of SAGES

The following conditions must be satisfied for an eligible transfer of SAGES:

The transferring and receiving plans have a common beneficiary.
OR
A beneficiary in the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is a family plan.
OR
A beneficiary of the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is an individual (non-family) plan.
AND
The beneficiary of the receiving plan was under 21 years of age when the receiving plan was entered into.

AND

If the receiving plan is a family plan, all beneficiaries are siblings.

AND

The receiving plan complies with all conditions applicable to registering ESPs since January 1, 1999, as required by the ITA.

AND

The receiving plan promoter offers SAGES.

Determining if conditions for an eligible transfer of SAGES are satisfied

Example: Conditions for an eligible transfer of SAGES

Transferring plan - A

  • Effective date prior to transfer: May 3, 2010
  • Type of plan: family plan with siblings only
  • Incentives paid in the plan: CESG and SAGES
  • Beneficiaries: Jacob and Debrah

Receiving plan - B

  • Effective date prior to transfer: August 10, 2013
  • Type of plan: individual plan
  • Incentives offered by promoter: All incentives administered by ESDC
  • Beneficiary: Ryan

The subscriber of plan A requested the transfer on January 23, 2014. Jacob, Debrah and Ryan are siblings. Plan B was opened on August 10, 2013 when Ryan was 16 years old.

This transfer is eligible for SAGES because Ryan is a sibling of a beneficiary in the transferring plan and he was less than 21 years old when plan B was entered into.

3.2.4. Conditions for an eligible transfer of BCTESG

The following conditions must be satisfied for an eligible transfer of BCTESG:

The transferring and receiving plans have a common beneficiary.
OR
A beneficiary in the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is a family plan.
OR
A beneficiary of the receiving plan is a sibling of a beneficiary in the transferring plan.
AND
The receiving plan is an individual (non-family) plan.
AND
The beneficiary of the receiving plan was under 21 years of age when the receiving plan was entered into.

AND

If the receiving plan is a family plan, all beneficiaries are siblings.

AND

The receiving plan complies with all conditions applicable to registering ESPs since January 1, 1999, as required by the ITA.

AND

The receiving plan promoter offers BCTESG.

Determining if conditions for an eligible transfer of BCTESG are satisfied

Example: Conditions for an eligible transfer of BCTESG

Transferring plan - A

  • Effective date prior to transfer: August 3, 2009
  • Type of plan: family plan with siblings only
  • Incentives paid in the plan: CESG and BCTESG
  • Beneficiaries: Jordan and Jessica

Receiving plan - B

  • Effective date prior to transfer: January 10, 2013
  • Type of plan: individual plan
  • Incentives offered by promoter: All incentives administered by ESDC
  • Beneficiary: Rodney

The subscriber of plan A requested the transfer on November 16, 2015. Jordan, Jessica and Rodney are siblings. Plan B was opened on January 10, 2013 when Rodney was 19 years old.

This transfer is eligible for BCTESG because Rodney is a sibling of a beneficiary in the transferring plan and he was less than 21 years old when plan B was entered into.

3.3. Ineligible transfers and repayments

If the conditions for an eligible transfer are not satisfied and the transfer is allowed to occur, the transferring promoter must repay the lesser of the following amounts to ESDC:

  1. the total of the balance in the CESG account, the balance of all provincial incentive accounts administered by ESDC and the balance of all of the CLB accounts of the transferring RESP immediately before the time of the ineligible transfer, and
  2. the fair market value, immediately before the transfer, of the property held in connection with the transferring RESP.

Note: It may be possible to repay only the incentives that do not satisfy all conditions for an eligible transfer under the pre-transfer repayment policy (see 3.4. Making pre-transfer repayments to avoid ineligible transfers later in this chapter).

Submitting repayment transactions for ineligible transfers

When submitting repayment information to the CESP, RESP promoters must submit the following transaction to the CESP system:

  • Record Type 400, Transaction Type 21 (Grant repayment)

For a repayment due to an ineligible transfer, this transaction will:

  • identify the Repayment Reason as 04 (Ineligible Transfer); and
  • report the amount of each incentive to be repaid due to the ineligible transfer.

Repayment amounts reported to the CESP for a particular promoter are subtracted from the total amount of incentives that the CESP would otherwise pay to the promoter each month. For more information, see Chapter 1-3: The CESP System and Interface Transaction Standards (ITS).

Example: Ineligible transfers and repayments

A subscriber initiated an RESP transfer in order to invest the funds with another RESP promoter. However, when the transfer forms were completed it was determined that this transfer would not satisfy the conditions for an eligible transfer. Even after being advised of the consequences by the transferring promoter, the subscriber decided to continue with the transfer. The transferring promoter must submit the required repayment transaction for this ineligible transfer to the CESP system.

3.4. Making pre-transfer repayments to avoid ineligible transfers

Effective October 1, 2015, the CESP implemented a policy that allows RESP promoters to repay an incentive, prior to a transfer, to avoid conditions that would result in an ineligible transfer.

Previous to this policy, an incentive deemed ineligible for a transfer would have caused the repayment of all incentives in the transferring RESP that are administered by ESDC. The transferring promoter would have repaid these incentives with a repayment reason 04 (ineligible transfer). Under the pre-transfer repayment policy, only the incentives that do not satisfy all conditions for an eligible transfer must be repaid prior to the transfer, and therefore allows the remaining eligible incentives to be transferred.

For example (see heading 3.4.4. Pre-transfer repayment example later in this chapter), the transferring RESP may have already received SAGES payments. If the receiving promoter does not offer SAGES, the transfer would be ineligible if it included SAGES amounts. To avoid an ineligible transfer to the receiving promoter, the transferring promoter could repay the balance of the SAGES account prior to the transfer. This would allow for the eligible transfer of the remaining funds.

If the receiving promoter does not offer Additional CESG or CLB

For additional information, see the following headings later in this chapter:

  • 3.5. When the receiving promoter does not offer Additional CESG
  • 3.6. When the receiving promoter does not offer CLB
3.4.1. Pre-transfer repayment process

The transferring promoter must follow these three steps to complete the pre-transfer repayment(s):

  1. Confirm the transfer eligibility information provided by the receiving promoter.
  2. Repay the incentive(s) which would otherwise cause a transfer to be ineligible.
  3. Report the repayment of the ineligible incentive(s) using repayment reason 04 (ineligible transfer).

Once these steps are complete, the transferring promoter may then continue with the transfer of the remaining assets in the RESP as per the usual transfer process.

3.4.2. Pending grant

Before completing a transfer, there may be pending applications for incentives that would result in an ineligible transfer. If such an incentive is paid into the transferring RESP after the transfer has been completed, it must be repaid using repayment reason 04 (ineligible transfer).

Subsequent payments for pending applications of eligible incentives should be processed normally. For more information, see heading 3.4.4. Pre-transfer repayment example and heading 6.3. When there is a pending incentive later in this chapter.

3.4.3. Partial transfers

The CESG and provincial incentives must be transferred proportionately. This proportional transfer rule prevents any incentive, other than the CLB, from being “left behind”. The entire account balance of an ineligible incentive must be repaid prior to either a full or a partial transfer.

3.4.4. Pre-transfer repayment example

A subscriber would like to transfer 50% of the assets (excluding CLB) from a family RESP administered by promoter A to a new family RESP that is administered by promoter B. The transferring promoter A offers CESG (Basic and Additional), CLB and SAGES whereas the receiving promoter B offers only Basic CESG.

At the time of the transfer request, the transferring RESP had a fair market value of $1,700. There were also pending applications for CESG and SAGES as a result of a recent $100 contribution that was not yet processed by the CESP system. The transferring RESP had the following notional account balances at the time of the transfer request:

Transferring RESP notional accounts Account balances at the time of the transfer request
Assisted contributions $500
Unassisted contributions $100 (pending receipt of grant)
CESG (Basic and Additional) $200
CLB $500
SAGES $50
Earnings $350

While promoter B does not offer SAGES, CLB or Additional CESG, this promoter agreed to administer the rules for Additional CESG and could therefore accept a transfer that included Additional CESG amounts. However, the partial transfer could not include either SAGES or CLB. To satisfy the proportional transfer rule and the required conditions for an eligible transfer, promoter A submitted a repayment transaction to the CESP system to repay the entire SAGES account balance ($50) even though the subscriber had requested a partial transfer. Promoter A also retained the entire CLB balance ($500) to avoid an ineligible transfer.

After promoter A entered the required $50 SAGES pre-transfer repayment transaction into their system, the RESP had a fair market value of $1,650 and the following notional account balances:

Transferring RESP notional accounts Account balances after the SAGES pre-transfer repayment
Assisted contributions $500
Unassisted contributions $100 (pending receipt of grant)
CESG $200
CLB $500
SAGES $0
Earnings $350

Promoter A and B collaborated to complete transfer forms A, B and C and transferred the following amounts (50% partial transfer excluding CLB) to promoter B using the normal transfer process:

Notional accounts Amount transferred (50%)
Assisted contributions $250
Unassisted contributions $50 (pending receipt of grant)
CESG $100
Earnings $175

Promoter A indicated on transfer form C that there was a pending application for CESG at the time of the transfer.

In the month following the transfer, promoter A received a payment of $40 in CESG ($20 of Basic CESG and 20$ of Additional CESG) as a result of the pending CESG application. A payment of $10 in SAGES was also made to the RESP with promoter A as a result of the same $100 contribution. Since the new SAGES payment with promoter A would have resulted in an ineligible transfer, promoter A repaid the entire $10 SAGES amount (RT 400-21 using repayment reason 04). Also, since the new CESG payment with promoter A would not have resulted in an ineligible transfer, promoter A initiated the normal transfer process to transfer 50% of the pending grant amount ($20 in CESG to promoter B).

Promoter A amended the original transfer form C and sent a new copy to promoter B. This amended form indicated that $20 in CESG was transferred as a result of the pending CESG application that existed prior to the original transfer. Since promoters A and B must update the assisted and unassisted contribution notional account balances in their systems to take the new CESG payment into account, the amended transfer form C must also indicate that $50 of unassisted contributions in the original transfer should now be considered assisted contributions in the receiving RESP.

Both promoters A and B submitted new transfer transactions to the CESP system to report the transfer of $20 that was paid for the pending CESG application.

3.5. When the receiving promoter does not offer Additional CESG

If the receiving promoter does not offer Additional CESG and the transferring RESP has received Additional CESG, for the transfer to be eligible, the receiving promoter must agree to ensure that:

  • all beneficiaries named under the receiving RESP are siblings;
  • any additional beneficiaries named to the RESP after the transfer are siblings of every other beneficiary named under the RESP; and
  • the presence of the Additional CESG in the RESP is reported in subsequent transfers.
Refusing to administer the rules of Additional CESG

If the receiving promoter does not offer Additional CESG and Additional CESG was paid into the transferring RESP, the transfer would be ineligible unless the receiving promoter agrees to administer the above rules (See Area IV in RESP Transfer Form B - Receiving Promoter).

For an ineligible transfer, the transferring promoter must repay the lesser of:

  1. the balance of all incentive accounts, administered by ESDC, in the transferring RESP; and
  2. the fair market value of the transferring RESP.

If the receiving promoter does not agree to administer the above rules, the transferring promoter could also repay the entire CESG balance (Basic and Additional CESG combined) in a pre-transfer repayment to avoid an ineligible transfer. For additional information, see 3.4. Making pre-transfer repayments to avoid ineligible transfers earlier in this chapter.

Adding a beneficiary to a siblings-only plan after an eligible transfer

If an eligible transfer included Additional CESG from the transferring plan and, afterwards, a beneficiary who is not a sibling is added to the receiving plan, the lesser of the following amounts must be repaid to ESDC:

  1. the balance of the CESG account of the receiving RESP immediately before the individual becomes a beneficiary; and
  2. the fair market value of the property held in connection with the receiving RESP immediately before the individual becomes a beneficiary.

Example: When the receiving promoter does not offer additional CESG

A subscriber initiated a transfer from an individual RESP "A" that had already received $100 in Additional CESG payments (but no other incentives), to a family RESP "B" administered by another promoter. While the receiving promoter of RESP "B" does not offer Additional CESG, all conditions for an eligible transfer were satisfied at the time of the transfer.

Two years after the transfer, the subscriber named another beneficiary to RESP "B". However, the new beneficiary was not a sibling of the other beneficiaries. Immediately before adding the new beneficiary, RESP "B" had a:

  • CESG account balance of $1000; and
  • a fair market value of $15,875.

Now that all beneficiaries in RESP "B" are no longer siblings, $1000 (the lesser of $1000 and $15,875) must be repaid to ESDC.

Submitting the repayment transaction to the CESP

In the example, the promoter would submit a transaction to the CESP system with the following information:

  • Record Type 400, Transaction Type 21 (Grant repayment)
  • Repayment Reason = 08 (Ceases to meet sibling only condition)
  • Grant Amount = $1000 (CESG amount to repay)

Repayment amounts reported to the CESP for a particular promoter are subtracted from the total amount of incentives that the CESP would otherwise pay to the promoter each month. For more information, see Chapter 1-3: The CESP system and Interface Transaction Standards (ITS).

3.6. When the receiving promoter does not offer CLB

A transfer is ineligible if it includes CLB amounts and the receiving RESP promoter does not offer CLB. If such a transfer is allowed to occur, the lesser of the following amounts must be repaid to ESDC:

  1. the total of the balance in the CESG account, the balance of all provincial incentive accounts administered by ESDC and the balance of all of the CLB accounts of the transferring RESP immediately before the time of the ineligible transfer; and
  2. the fair market value, immediately before the transfer, of the property held in connection with the transferring RESP.
Impact of CLB repayments on lifetime CLB entitlements

Repayment of CLB is not like a repayment of other incentives because it does not affect the lifetime CLB entitlement for a beneficiary. A beneficiary could be named in a different RESP to receive any CLB amounts that had been repaid from that beneficiary's CLB accounts in other RESPs.

To avoid repaying all incentives due to an ineligible transfer of CLB, a subscriber could choose to exclude CLB amounts in a transfer.

Subscribers can transfer all, part or none of the CLB

Transfer of CLB is not like the transfer of other incentives because subscribers can choose to transfer all, part or none of the CLB.

Example: When the receiving promoter does not offer CLB

A subscriber requested a transfer from Maxim's individual RESP "A" with a fair market value of $1,285, which included $800 in CLB and $200 in CESG. The receiving RESP "B" (for Maxim and his sister Sarah) is administered by another promoter that does not offer CLB.

The transfer would be ineligible if Maxim's CLB was included in the transfer to RESP "B" because this promoter does not offer CLB. In this case, $1000 (the combined value of the CESG and CLB account balances in RESP "A") is less than $1,285 (the fair market value of RESP "A"). Therefore, $1000 would have to be repaid. The $800 of CLB repayments could be eventually paid back into another RESP for Maxim. However, the $200 CESG repayment would reduce Maximum's lifetime CESG limit from $7,200 to $7,000.

To avoid an ineligible transfer that results in incentive repayments, the subscriber could choose to exclude the $800 CLB amount and transfer only $200 in CESG to RESP "B". There were two options for the remaining $800 in CLB. It could be left in the original RESP "A" or transferred at a later date to another RESP for Maxim, that offers CLB.

3.7. Earliest effective date of the plan

According to the ITA, after an RESP transfer occurs, the earliest effective date of the two plans must be used to determine the following for the receiving plan:

  • when contributions to the RESP must end
  • when AIPs can start
  • when the RESP must be terminated
  • the age of a beneficiary when the receiving plan was entered into

    Example: Earliest effective date of the plan

    Transferring plan "A" effective date: March 15, 2004
    Receiving plan "B" effective date: April 30, 2005

    After the transfer: Plan A -> Plan B

    Use March 15, 2004 as the effective date to determine the dates (for Plan B) when:
    • contributions must stop;
    • AIPs can begin; and
    • the plan must be closed.
Beneficiary's age when the receiving plan was entered into

One eligibility criterion for transfers to an individual plan is the age of a sibling in the receiving plan when the receiving plan was entered into. For an example, see 3.2.1 Conditions for an eligible transfer of the CESG earlier in this chapter.

If no previous transfers have been made into the receiving plan:

  • use the date the receiving plan was actually opened to determine how old the beneficiary was when the receiving plan was entered into.

If the receiving plan has already received a transfer from another plan:

  • use the earliest effective date of the receiving plan prior to the next transfer, to determine the beneficiary's age when the receiving plan was entered into.

Example: Earliest effective date of the plan

The following table lists the dates on which subscribers actually signed 3 new RESP contracts:

RESP Type Opening date on signed contract
A Family April 2, 1998
B Individual January 10, 2005
C Individual August 4, 2004

Transfer from A to B:

On November 1, 2011, there was a transfer from RESP A to RESP B.

To determine if the sibling in plan B was less than 21 years old when plan B was entered into, the promoter must use the effective date of plan B prior to the transfer. For an eligible transfer from A to B, the sibling would have to have been less than 21 years old on January 10, 2005.

After the transfer from RESP A to RESP B, April 2, 1998 becomes the effective date of plan B because this is earlier than the actual date on which plan B was opened. After this transfer, April 2, 1998 would be used to determine:

  • when contributions to plan B must end;
  • when AIPs can start from plan B;
  • when plan B must be terminated; and
  • the age of a beneficiary when the receiving plan was entered into.

Transfer from C to B:

On November 30, 2011, there was a transfer into plan B from plan C.

However, as there was a previous transfer into plan B, the effective date of plan B prior to the transfer from plan C was April 2, 1998. For an eligible transfer from C to B, the beneficiary would have to have been less than 21 years old on April 2, 1998.

After this transfer, the effective date of plan B would remain at April 2, 1998, because this date is earlier than the effective date of plan C.

4. Types of transfers

If the terms of a subscriber's contract allow for it, a subscriber can choose to make a full or partial transfer of the property in the RESP. The type of transfer will determine how the RESP promoters will manage the funds in each education incentives account (CESG, CLB, and provincial incentives accounts). In the case of a full transfer:

  • the transferring RESP promoter transfers all monies in the transferring RESP (contributions, earnings, and Education savings incentives in the RESP) to the receiving plan; and
  • the receiving RESP promoter will then ensure monies are deposited into the corresponding accounts in the RESP.

4.1. Partial transfers

If only a portion of the property in the RESP is transferred, then:

  • the transferring RESP promoter must calculate and transfer the equal portion of the contributions, earnings, CESG, and provincial incentives to the receiving plan. (An example is provided below; See 4.1.1 Step 1 - Determining the proportion of amounts to be transferred.)

    The CLB is excluded from this calculation.
  • the receiving RESP promoter will then ensure monies are deposited into the corresponding accounts in the RESP.
The CLB must be isolated if included in a transfer

The subscriber can choose to transfer all, part, or none of the CLB when making a partial transfer. The CLB does not have to be transferred in the same proportions as other assets in the plan. Because the CLB is an entitlement for a specific child, the CLB is excluded when calculating the market value of the RESP to determine proportions.

When any CLB amounts are being transferred, they must be deposited to the account in respect of the beneficiary who originally received the CLB payment(s).

Isolating the amount of CLB in this manner allows ESDC to continue tracking the CLB entitlements for each eligible beneficiary.

4.1.1. Step 1 - Determining the proportion of amounts to be transferred

In many cases, RESP promoters' systems are set up to automatically calculate the proportion of contributions, earnings, CESG, and/or provincial incentives that will be included in a partial transfer.

However, it is helpful to understand the process for determining the correct proportion of CESG and provincial incentives accounts that must be transferred, as follows:

  1. Determine the market value of the plan.
  2. Calculate what percentage of the plan's market value is represented by the requested transfer amount, using the following formula.
    Requested transfer amount / RESP market value = Proportional percentage

    For example, if the subscriber wishes to transfer $1,950 to another RESP and the current RESP market value is $7,500, then the above equation would be populated as follows:

    $ 1,950 / $7,400 = 26%

    In this example, the requested transfer amount of $1,950 represents 26% of the plan's current value.

  3. Apply this percentage (or proportion) to each account in the RESP (except the CLB account).

    Remember! The CLB is not included when calculating market value of the RESP when determining proportions to be transferred.

When monies are transferred from one RESP to another, the transferring RESP promoter must debit out the amounts from the accounts in the transferring RESP.

The RESP promoter of the receiving plan must then ensure that the monies are credited into the corresponding accounts in the receiving RESP. This maintains the integrity of the balances in all accounts for both RESPs. For more information see 7. An Overview of the transfer process, at the end of this chapter.

4.1.2. Step 2 - Calculating the proportion of the CESG and the provincial incentives

Based on the previous example, note how the proportion of the CESG and the provincial incentives to be transferred is determined:

Calculating the CESG and provincial incentives proportions

In this example, the accounts in the transferring RESP look like this:

  • RESP market value: $ 7,500
  • Earnings: $ 1,150
  • Contributions: $ 4,500
  • Provincial incentive: $ 500
  • CLB: 0
  • CESG: $ 1,350
  • Requested partial transfer amount: $ 1,950
  • Proportion of RESP: $ 1,950 / $ 7,500 = 26%

The transferring RESP promoter must use this percentage (26%) to calculate the value of each account held in the RESP:

  • Earnings x 26% = $ 299
  • Contributions x 26% = $ 1,170
  • Provincial incentive x 26 % = $ 130
  • CESG x 26% = $ 351

Total amount of transfer = $ 1,950

The transferring RESP promoter will transfer $1,950 to the receiving RESP promoter identified by the subscriber.

Populating proportional amounts onto the RESP transfer forms

Based on the above example the following amounts would be entered onto the RESP transfer forms:

Account balances and market value:

  • Unassisted contributions: $ 0
  • Assisted contributions: $ 1,170
  • CESG: $ 351
  • Provincial incentive: $ 130
  • CLB: $ 0
  • Earnings: $ 299
  • Total market value: $ 1,950

Remember! While the amount of CESG and provincial incentive will be in proportion to the total value of funds transferred, the CLB is accounted for separately. The subscriber can choose to transfer all, part or none of the CLB at the time of the transfer. If they do transfer the CLB, it must be attributed to the beneficiary for whom it was directed and meet specific conditions governing its transfer.

See 3. Implications when transferring funds to another RESP and 3.2. Transfer conditions for the Education savings incentives earlier in this chapter. See also Chapter 2-3: The Canada Learning Bond (CLB).

4.1.3. Example of a partial transfer - When there is a loss in the plan

In the following example, the Book Value of the plan is $2,000. However, the plan has suffered a loss of $400 and there are no earnings in the plan. Therefore, based on the account balances, and taking into account the $400 loss, the Market Value of the plan is $1,600.

Calculating the CESG and provincial incentives proportions

In this example, the accounts in the transferring RESP look like this:

  • RESP market value: $1,600
  • Earnings: $(400)
  • Contributions: $1,000
  • Provincial incentive: $0
  • CLB: $500
  • CESG: $500
  • Requested partial transfer amount: $800 (of the market value)
  • Proportion of RESP: $ 800 / $ 1,100* = 72.727%

* The CLB of $500 is not included when calculating the market value to determine its proportion with relation to the RESP. Therefore, the denominator of $1,100 above reflects the RESP Market Value of $1,600 less $500 (which is $1,100).

The transferring RESP promoter must use this percentage (72.727%) to calculate the value of each account held in the RESP:

  • Earnings = $ 0
  • Contributions x 72.727% = $ 727.27
  • CESG x 72.727% = $ 363.63
  • Total book value of transfer: = $ 1,090.90 **
  • Total market value of transfer: = $ 800.00
  • (Loss) of $400 x 72.727% = $ 290.90

** The difference between the RESP Book Value of the transfer ($1,090.90) and the market value of the requested transfer ($800) is $290.90. This is equal to 72.727% of the $400 loss. Therefore, the loss is accommodated in the transfer.

Populating proportional amounts onto the RESP transfer forms

Based on the example the following amounts would be entered on the RESP transfer forms:

Account balances and market value:

  • Unassisted contributions: $ 0
  • Assisted contributions: $ 727.27
  • CESG: $ 363.63
  • Provincial incentive: $ 0
  • CLB: $ 0
  • Earnings: $ 0
  • Total market value: $ 800

Remember! While the amount of CESG and provincial incentive will be in proportion to the total value of funds transferred, the CLB is accounted for separately. The subscriber can choose to transfer all, part or none of the CLB at the time of the transfer. If they do transfer the CLB, it must be attributed to the beneficiary for whom it was directed and meet specific conditions governing its transfer.

See 3. Implications when transferring funds to another RESP and 3.2. Transfer conditions for the Education savings incentives earlier in this chapter. See also Chapter 2-3: The Canada Learning Bond (CLB).

4.1.4. Partial transfers subject to transfer conditions

Partial transfers are subject to the same transfer conditions as full transfers. The RESP transfer must comply with all conditions applicable to the CESG, CLB and/or provincial incentives to ensure it is an 'eligible' transfer with respect to the incentive.

Confirm the transfer meets all transfer conditions

If the transfer does not meet the conditions for any one of the incentives transferred, all incentives must be repaid to ESDC (this includes the CLB as well). For more detailed information, see 3. Implications when transferring funds to another RESP and 3.2 Transfer conditions for the Education savings incentives earlier in this chapter.

5. Transfer forms

It is mandatory to complete transfer forms each time an RESP transfer occurs, even if the transferring and receiving RESPs are administered by the same promoter. These forms are used to:

  • request and record the transfer of funds from one RESP to another;
  • facilitate the required exchange of information between RESP promoters;
  • ensure compliance with legislative requirements in order to retain the CESG, CLB and/or provincial incentives in the RESP account; and
  • collect the information that must be submitted electronically to the CESP system via an RT 400 financial transaction.

Subscribers and promoters work together to complete these forms and process transfer requests.

5.1. Forms overview

The following three forms must be completed for each RESP transfer:

  • Form A – Subscriber 
    (HRSDC SDE 0088)
  • Form B – Receiving promoter 
    (HRSDC SDE 0089)
  • Form C – Relinquishing (transferring) promoter 
    (HRSDC SDE 0090)

You can download all of these forms, with guidelines for completing them, from the Forms tab on the Resources for RESP promoters page.

A transfer can proceed only after all of the following forms have been completed by the appropriate parties:

  • subscriber completes form A
  • receiving promoter completes form B
  • transferring promoter completes form C

The process begins when the subscriber completes form A. The transferring and receiving promoters must collaborate to complete form B and C and they must also share all completed forms.

5.2. Once the forms have been completed

Once RESP Transfer Forms are completed by both the receiving and transferring RESP promoters, they must enter the information into their respective electronic systems based on their internal procedures. This information must then be sent to the CESP via the RT 400 financial transaction. See also Chapter 1-3: The CESP System and Interface Transaction Standards (ITS), 4. Submitting information to CESP.

6. Guidelines for successful transfers

The following checklist is designed to help each RESP promoter take the necessary steps to ensure a successful transfer process.

Promoters are required to:

  • complete their portion of the transfer form;
  • share all necessary and accurate information with the other promoters;
  • process the transfers in their systems and properly update notional accounts;
  • report the transfers to the CESP in the format required by the CESP system ITS; and
  • correct any transactions that are rejected due to errors.

See Chapter 1-3: The CESP system and Interface Transaction Standards (ITS)

6.1. Mandatory fields and ITS requirements

When information is submitted electronically to the CESP system, each information element must conform to the ITS (e.g. its format, type, and number of characters per field).

All RESP promoters are responsible for ensuring that the information collected on the RESP transfer forms is accurate and compliant with CESP requirements.

6.2. Transfer transaction types

Each RESP promoter must submit transfer transactions to the CESP system. These transactions are reported in the RT 400 record; however, each RESP promoter must submit a specific Transaction Type. This will indicate the Transfer Out and Transfer In information.

  • Transfer out transaction: The transferring RESP promoter submits an RT 400-23.
  • Transfer in transaction: The receiving RESP promoter submits an RT 400-19.

6.3. When there is a pending incentive

When submitting transfer transactions (RT 400) to the CESP system, both the transferring and receiving promoters must submit accurate amounts for all incentives being transferred. Information for a particular transfer can be submitted in a single transaction or in multiple transactions.

If there are pending incentive payments when the transfer is initiated, the transferring and receiving promoters must collaborate to ensure that complete and accurate information is submitted to the CESP once these pending incentives have been paid.

The transferring promoter remains responsible for administering the pending incentives paid into the RESP in respect of a beneficiary until this information has been successfully submitted to the CESP in a transfer transaction.

6.4. Processing transfer transactions

The CESP system generates and sends two types of transaction reports to the RESP promoters' Head Office at the end of each processing run (monthly). These reports are designed to verify the status of all the transfer transactions submitted to the CESP by RESP promoters and include:

  • processed transfer transactions, which report successfully processed transactions
  • rejected transfer transactions, which report transactions with errors that must be corrected
6.4.1. Processed transfer transactions

Processed transfer transactions are included in the Transaction Processing Report. This acknowledges that the transaction has passed all formatting and business rules.

6.4.2. Rejected transfer transactions

Rejected transfer transactions are included in the Transaction Error Report at the end of every monthly production run. This error report will include notice that validation has failed or information submitted is missing, incorrect, or incorrectly formatted. The rejected transaction must be corrected and resubmitted.

For more information about CESP system Record Types and Error Codes, see Chapter 1-3: The CESP system and Interface Transaction Standards (ITS).

7. An overview of the transfer process

The following represents an overview of the steps required to transfer RESP funds, along with related responsibilities.

To undertake the RESP transfer process:

Subscriber(s)

  • 1. The subscriber requests the RESP promoter to transfer RESP funds, identifying:
    • the amount to be transferred; and
    • the name of the receiving financial institution (Receiving RESP promoter).

Transferring RESP promoter

  • 2. The transferring promoter confirms that an AIP has not been made from the RESP.

    Note: RESP property cannot be transferred if an AIP has been made.

Subscriber(s) and RESP promoters

  • 5. The subscriber(s) and the RESP promoter gather and/or provide the information necessary to transfer the funds and complete the RESP transfer forms (HRSDC SDE 0088, 0089 and 0090).

    See 5. Transfer forms earlier in this chapter.

RESP promoters

  • 6. The RESP promoters obtain all of the required signatures on the transfer forms. It is suggested that the forms be completed and signed in duplicate
  • 7. The RESP promoters retain the signed versions of the RESP transfer forms and file according to the organization’s record keeping procedures
  • 8. The RESP promoters submit transfer transactions electronically to CESP.
    • transfer out transactions: RT 400-23
    • transfer in transactions: RT 400-19
    For more information, see 6. Guidelines for successful transfers, earlier in this chapter.

    Reporting periods

    Generally, reporting periods extend from the first to the last day of the same month. The RESP promoter has four (4) business days after the end of the reporting period to send files for processing by the CESP system. Any transactions which occurred after the last day of the reporting period cannot be included.

CESP

Chapter 3-2: Post-secondary education and educational assistance payments (EAPs)

An educational assistance payment (EAP) is a payment from a Registered Education Savings Plan (RESP) to help an eligible beneficiary cover expenses associated with post-secondary education. An EAP consists of educational incentive amounts paid into an RESP, as well as the income earned on contributions and incentive amounts. The Education savings incentives currently administered by Employment and Social Development Canada (ESDC) include:

  • Canada Education Savings Grant (CESG)
  • Canada Learning Bond (CLB)
  • Saskatchewan Advantage Grant for Education Savings (SAGES)
  • British Columbia Training and Education Savings Grant (BCTESG)

To be eligible for an EAP, the beneficiary must be enrolled in a qualifying educational program at a post-secondary educational institution.

See Appendix C for a list of acronyms and terms used in this guide.

1. Defining post-secondary education

When RESP beneficiaries are ready to attend post-secondary education, they may qualify for EAPs to help pay for related educational expenses.

In order to be eligible for an EAP, a beneficiary must be enrolled in a qualifying post-secondary educational program at a post-secondary educational institution.

Qualifying "post-secondary educational programs" and "post-secondary educational institutions" are defined by the Canada Revenue Agency (CRA).

Post-secondary level

A qualifying educational program must be at the post-secondary level for EAP purposes. A post-secondary course usually provides credit towards a degree, diploma, or certificate and students taking such a course have to have completed secondary school.

1.1. Qualifying educational programs - Full-time studies

For EAP purposes, full-time studies (qualifying educational programs) require at least 10 hours of instruction or work each week for the duration of the program.

Instruction or work might include all forms of direct instruction, such as lectures, practical training, laboratory work, or time spent on research for a thesis.

The minimum course duration for full-time studies depends on the type of program and whether or not the educational institution is in Canada, as shown in the table below.

Type of educational institution Location of educational institution Minimum duration of course (consecutive weeks)
Universities In Canada 3 weeks
Outside of Canada
Other post-secondary educational institutions In Canada 3 weeks
Outside of Canada 13 weeks

1.2. Specified educational programs - Part-time studies

As of 2007, a payment may also be qualified as an EAP at the time it is made, if the beneficiary is at least 16 and is enrolled part-time as a student in a specified educational program.

A specified educational program means a program at a post-secondary school level that is not less than three consecutive weeks in duration and that requires each student taking the program to spend not less than 12 hours per month on courses in the program.

1.3. Distance learning

For the purposes of an EAP, distance learning encompasses the use of technology and other delivery methods to provide off-site instruction and learning.

Beneficiaries taking distance education courses must meet the following two conditions to qualify for an EAP:

  • Be enrolled in either a qualifying educational program (full-time) or specified educational program (part-time) as defined
  • Be enrolled as a student at a post-secondary institution (see 2. Post-secondary educational institutions)

For more information about programs, enrolment and study options, contact the CRA Individual Income Tax Enquiries Line at 1-800-959-8281.

2. Post-secondary educational institutions

A post-secondary educational institution for the purposes of an EAP can be one of the following:

  • a university, college or other educational institution in Canada designated by a provincial authority under the Canada Student Loans Act;
  • a university, college or other educational institution in Canada designated by an appropriate authority under the Canada Student Financial Assistance Act;
  • a university, college or other educational institution in Canada designated by the province of Quebec under an Act respecting financial assistance for education expenses;
  • an educational institution in Canada certified by the Minister of ESDC to be an educational institution providing courses (other than courses designed for university credit) that furnish a person with skills for, or improve a person's skills in, an occupation; or
  • a university, college, or other educational institution outside Canada that provides courses at a post-secondary school level.

The post-secondary educational institution must satisfy one of the criteria to be eligible for EAP purposes. It is the promoter's responsibility to examine all relevant authorities to verify if an educational institution is recognized for EAP purposes.

2.1. Educational institutions recognized for EAP purposes

To verify if a particular educational institution in Canada is designated under the Canada Student Loans Act or the Canada Student Financial Assistance Act, please contact your provincial or territorial student financial assistance office. To obtain the contact information for the student financial assistance office in your area, please contact Service Canada at 1 800 O-CANADA (1-800-622-6232) check the list of provincial and territorial student financial assistance offices Web page

The Canada Student Loans Program of ESDC produces a Master List of Designated Educational Institutions. All provinces, with the exception of the Northwest Territories, Nunavut, and the province of Quebec, participate in the Canada Student Loans Program.

For information regarding eligible post-secondary educational institutions in the province of Quebec, please contact Quebec's Loans and Bursaries Program at 1-877-643-3750 or visit the Quebec Web page on student financial assistance.

To verify if a particular educational institution in Canada has been certified by the Minister of ESDC, please contact ESDC's Certification Program at 1-866-517-5650 or view the list of certified institutions.The CRA individual income tax enquiries line can provide information regarding eligible educational institutions within Canada as well. Please contact one of the following numbers:

  • 1-800-959-8281 (English)
  • 1-800-959-7383 (French)

Eligible educational institutions outside of Canada do not have to be on a list for EAP purposes. In order for an EAP to be paid out, the educational institution must provide courses at a post-secondary school level and the beneficiary must have been enrolled in a course of not less than 13 consecutive weeks (3 weeks for university programs).

3. EAPs

An EAP is a payment from an RESP to help an eligible beneficiary cover expenses associated with post-secondary education.

An EAP is comprised of amounts from specific accounts in the RESP, including RESP earnings and any incentives received by the beneficiary, as illustrated below.

EAP = Earnings + Federal Incentives + Provincial Incentives

Provincial incentives

Provincial incentives are payments to an RESP through a designated provincial program. At this time, there are four designated provincial programs with the following provincial incentives:

  • SAGES
  • BCTESG
  • Quebec Education Savings Incentive (QESI)

3.1. Can incentives and earnings in the plan be shared?

Specific rules govern the sharing of incentives and earnings, depending on the type of incentive and the type of plan, as summarized in the table below:

Incentive Family plans Group plans
Share incentive? Share earnings? Share incentive and earnings?
Basic CESG Yes, with cousins or siblings No
Additional CESG Yes, with siblings only No
CLB No Yes, with siblings only No
SAGES Yes, with siblings or cousins* No
BCTESG Yes, with siblings only No

The Additional CESG, CLB, SAGES and BCTESG amounts can be paid only into individual plans or family plans in which all beneficiaries are siblings.

* While SAGES can only be paid into a sibling-only plan, a cousin can be added to the plan without having to repay the SAGES already in the RESP.

For more information, refer to the relevant chapter in Section 2: Education savings incentives.

3.2. Income for the beneficiary

The beneficiary must claim the EAP as income; however, depending on the beneficiary's circumstances, there may not be a requirement to pay any taxes on this amount. The RESP promoter issues a T4A slip for income tax purposes.

3.3. The RESP promoter's responsibility

The RESP promoter's responsibilities include the following:

  • Confirm that beneficiaries qualify for an EAP.
  • Respect the limits associated with EAPs.
  • Calculate the portion of EAP which is attributable to each of the related accounts (earnings and incentives).
  • Make and verify the EAP.
  • Inform beneficiaries, in writing, of the amount(s) of incentive(s) they are receiving with each EAP, and the obligation of beneficiaries to repay any CESG and CLB portion of an EAP to which they are not entitled to, including any portion of an EAP attributable to CESG that exceeds $7,200.

3.4. Confirm beneficiaries qualify for an EAP

Before making an EAP, the RESP promoter is responsible for confirming that beneficiaries qualify by obtaining proof of enrolment at a post-secondary educational institution in one of the following programs:

  • Qualifying educational program, or
  • Specified educational program

See 1.1 Qualifying educational programs - Full-time studies and 1.2 Specified educational programs - Part-time studies earlier in this chapter.

See 5. Processing an EAP request - Six month grace period later in this chapter.

An RESP promoter is not required to obtain receipts from a beneficiary as proof of expenses before making an EAP. The RESP promoter determines whether the EAP helps further the beneficiary's education, whether it is reasonable, and whether the payment complies with requirements of the Income Tax Act (ITA) and the terms of the plan.

On August 12, 2008, a yearly EAP threshold of $20,000, indexed annually by the Consumer Price Index, was established by the CRA to assist promoters in determining the reasonableness of an EAP request. The CRA will not question legitimate EAP requests below $20,000, nor will the promoters be expected to assess the reasonableness of each expense item, as long as the conditions permitting an EAP are met.

CRA has updated RESP Bulletin No.1R1 with the following annual EAP threshold limits indexed to 2016.

Annual EAP threshold limits
Year Limit
2016 $22,794
2015 $22,501
2014 $22,125
2013 $21,928
2012 $21,498
2011 $20,912
2010 $20,623
2009 $20,500

For more information, read the RESP Bulletin No. 1R1.

4. EAP limits

An EAP can only be used to pay actual post-secondary educational expenses. Therefore, there are specific limits on the amount of EAPs.

These limits depend on post-secondary enrolment criteria (i.e. how long the beneficiary has been enrolled) and on whether the RESP was opened before or after 1998.

4.1. Full-time studies - $5,000 EAP limit for first 13 weeks

During the first 13 weeks of enrolment in full-time studies, for plans entered into after 1998, the maximum amount of EAPs that can be made to a beneficiary is normally the lesser of $5,000 and the total allowable expenses. See also 5.1.1 Full-time studies - EAPs in excess of $5,000 later in this chapter.

After completing 13 consecutive weeks of full-time studies in a qualifying educational program, the maximum amount of EAPs that can be made to a beneficiary is the total allowable expenses, provided that the beneficiary continues to be eligible for such payments. See 3.4 Educational assistance payments (EAPs), Confirm beneficiaries qualify for an EAP.

If there is a 12-month period during which the beneficiary is not enrolled in a qualifying educational program for 13 consecutive weeks, the $5,000 limit will once again apply.

Note: Contributions withdrawn by the subscriber while a beneficiary qualifies for EAPs are not included in this $5,000 limit.

The total amount of EAPs made to the individual under the RESP (and other RESPs of the same promoter) in the first 13 consecutive weeks of enrolment, cannot exceed the limit of $5,000. Therefore, if a beneficiary has multiple RESPs with a single promoter, the $5,000 limit applies across all plans held with that promoter. However, the limit does not apply across plans held by different promoters.

Example

Sandra has been enrolled for the past two years as a full-time student in a post-secondary education program that qualifies for an EAP.

  • In September of her first academic year, Sandra could only receive a maximum amount of $5,000 in EAPs because she was not enrolled in the previous 12 months.
  • In September of her second consecutive academic year, the $5,000 limit no longer applies because she was enrolled for at least 13 consecutive weeks in the previous 12 month period.

4.2. Part-time studies - $2,500 EAP limit for the 13 weeks preceding payment

For the 13-week period of enrolment in part-time studies preceding the payment of an EAP, the maximum amount of EAP that can be paid to a beneficiary is the lesser of $2,500 and the total of all allowable expenses. See also 5.1.2. Part-Time Studies - EAPs in excess of $2,500.

Note: Contributions withdrawn by the subscriber while a beneficiary qualifies for EAPs are not included in this $2,500 limit.

The total amount of EAPs made to the individual under the RESP (and other RESPs of the same promoter) in the preceding 13-week period cannot exceed the limit of $2,500. Therefore, if a beneficiary has multiple RESPs with a single promoter, the $2,500 limit applies across all plans held with that promoter. However, the limit does not apply across plans held by different promoters.

Example 1

Jane (17 years old) is an RESP beneficiary in an individual (non-family) plan, enrolled in a part-time post-secondary program for a total of 26 weeks which involves 16 hours of courses per month. Jane satisfies the required conditions for a specified educational program because:

  • Jane is at least 16 years old
  • She is studying at a post-secondary level
  • The program is not less than 3 consecutive weeks
  • There are no less than 12 hours of courses per month

The actual educational expense for the program is $6000 and the subscriber would like to request the following EAP payments for Jane on the dates shown.

Date Sept 10 Oct 22 Dec 17 Feb 4 Mar 10
EAP requested $1000 $200 $1,300 $1,200 $1,300
Approve EAP request? Yes Yes Yes Yes No

Promoters must assess each EAP request individually to determine whether it exceeds the $2500 limit for part-time studies.

Sept 10: The request for $1000 on September 10 is approved because it does not exceed the $2,500 limit. (There were no previous EAP requests,)

Oct 22: The request for $200 on October 22 is approved because only two EAP requests are within a 13 week period and their sum ($1000 + $200 = $1,200) does not exceed $2,500.

Dec 17: The request for $1300 on December 17 is approved because only two EAP requests are within a 13 week period and their sum ($1300 + $200 = $1,500) does not exceed $2,500.

Feb 4: The request for $1200 on February 4 is approved because only two EAP requests are within a 13 week period and their sum ($1300 + $1,200 = $2,500) does not exceed $2,500.

Mar 10: The request for $1,300 on March 10 is refused because there were already two EAP payments (total of $2,500) in the past 13 weeks. Beneficiaries can request EAPs greater than $2,500. See 5.1.2 Part-Time Studies - EAPs in Excess of $2,500.

Example 2

John is an eligible beneficiary enrolled in a 26-week program of part-time studies costing $5,000. He requests an EAP payment of $2,000 in week 1 and is paid this amount because it does not exceed $2,500. In week 15 John is eligible for another EAP payment of $2,500. He would like to request the balance of his tuition which is $3,000. As this would exceed the $2,500 limit for part-time studies, John could request an EAP amount of $2,500 and if there are contributions in the RESP, ask the subscriber for the remaining $500 in a PSE contribution withdrawal. An alternative would be to make a request to the Minister to receive an EAP for the full amount of $3,000. See 5.1.2. Part-Time Studies - EAPs in Excess of $2,500 later in this chapter.

4.3. EAP limits for RESPs opened before 1998

Different EAP rules may apply to those RESPs opened before 1998 which were not amended to comply with the ITA amendments of January 1, 1999.

These RESPs existed before the CESG was introduced and are considered to be "grandfathered". Rules applying to "grandfathered" RESPs entered into before 1998 may include the following:

  • Some plans may permit EAPs for part-time studies - without any restrictions.
  • For some plans, there is no limit on the amount of the EAP during the first thirteen weeks of a qualifying post-secondary educational program.

For more information contact the CRA Registered Plans Directorate at 1-800-267-3100.

5. Processing an EAP request

The RESP promoter is responsible for verifying each EAP request under or over $5000, whether it is the beneficiary's first or last one, to ensure that the beneficiary is eligible for the EAP. The process for obtaining and approving each EAP request is as follows:

Beneficiary:

1. Must be enrolled* as a student in a qualifying program at a designated post-secondary educational institution.

Subscriber:

2. Contacts the RESP promoter and requests the EAP.

RESP Promoter:

3.Verify whether the beneficiary is enrolled* as a student in a qualifying program in a designated post-secondary educational institution recognized by the CRA.

See 1. Defining post-secondary education and 2. Post-secondary educational institutions.

4. Verify whether the amount requested covers valid educational expenses which will help the beneficiary further their education.

The RESP promoter's organization may have established guidelines or policies with respect to acceptable educational expenditures.

5. Verify how long the beneficiary was enrolled as a student to determine if any limits will be applied to the EAP request. See 4. EAP Limits.

If there is a 12-month period when the beneficiary was not enrolled in a qualifying educational program, the $5,000 limit will apply once again.

6. Calculate the EAP.

When an EAP is requested, there are specific rules that determine how the EAP is calculated. These rules are necessary to track payments from the RESP, in case repayment of all or a portion of the incentive account is required. 6. Calculating the EAP.

7. Inform beneficiaries, in writing, of the amount(s) of incentive(s) they are receiving with each EAP, and the obligation of beneficiaries to repay any CESG and CLB portion of an EAP to which they are not entitled to, including any portion of an EAP attributable to CESG that exceeds $7,200.

Subscriber:

8. Requests the return of their contributions, if desired.

The subscriber can withdraw contributions without restrictions or give them to the beneficiary.

* Six month grace period

There is a six-month grace period for receiving an EAP which allows for more flexibility for a beneficiary to access RESP savings. Under this measure, an RESP beneficiary is eligible to receive an EAP for up to six months after ceasing to be enrolled in a qualifying program, provided that the beneficiary would have qualified while still enrolled.

5.1. Special requests for EAPs in excess of the $5,000 or $2,500 limits

5.1.1. Full-time studies - EAPs in excess of $5,000

Note: Contributions are not included as part of an EAP.

The Minister of ESDC may approve the payment of an EAP over the $5,000 limit, in response to a written request.

If the RESP promoter concludes that an EAP of over $5,000 during the first thirteen weeks of studies is required, then the promoter must follow this procedure:

  1. Obtain a Request for an Educational Assistance Payment (EAP) Over $5,000 from a Registered Education Savings Plan (RESP) form and request the beneficiary to complete and sign this form.
    Obtaining the required form

    The form and a related guideline document can be forwarded to RESP promoters via e-mail upon request. Requests can be made by:

    Telephone: 1-888-276-3624
    E-mail: cesp-pcee@hrsdc-rhdcc.gc.ca

  2. Sign the form as a representative of the RESP promoter.
  3. Mail the completed form to:
    • Canada Education Savings Program, ESDC
    • 140 Promenade du Portage, Phase IV
    • Gatineau, Quebec
    • K1A 0J9

    Note: Due to privacy concerns, this information should not be submitted electronically.

  4. CESP will review and either approve or deny the request. The promoter will receive a written reply of the CESP decision. Both the beneficiary and CRA's Compliance Division will also be notified of the decision.
5.1.2. Part-time studies - EAPs in excess of $2,500

Note: Contributions are not included as part of an EAP.

The Minister of ESDC may approve the payment of an EAP over the $2,500 limit, in response to a written request.

If the RESP promoter concludes that an EAP of over $2,500 is required for a specific 13 week period, then the promoter must follow this procedure:

  1. Obtain a Request for an Educational Assistance Payment (EAP) Over $2,500 from a Registered Education Savings Plan (RESP) form and request the beneficiary to complete and sign this form.
    Obtaining the required form

    The above form and a related guideline document can be forwarded to RESP promoters via e-mail upon request. Requests can be made by:

    Telephone: 1-888-276-3624
    E-mail: cesp-pcee@hrsdc-rhdcc.gc.ca

  2. Sign the form as a representative of the RESP promoter.
  3. Mail the completed form to:
    • Canada Education Savings Program, ESDC
    • 140 Promenade du Portage, Phase IV
    • Gatineau, Quebec
    • K1A 0J9

    Note: Due to privacy concerns, this information should not be submitted electronically.

  4. CESP will review and either approve or deny the request. The promoter will receive a written reply of the CESP decision. Both the beneficiary and CRA's Compliance Division will also be notified of the decision.

6. Calculating the EAP

An EAP includes a portion from each of the following RESP notional accounts if they are available to the beneficiary receiving the EAP:

  • accumulated income (earnings)
  • CESG, including Additional CESG
  • CLB
  • provincial incentives
    (accounts maintained for each designated provincial program)

Provincial incentives

An RESP promoter must be able to track transactions associated with each of the designated provincial programs that the promoter delivers to the public.

For example:

  • Promoters delivering SAGES will have RESP accounts to track all activities associated with SAGES.
  • Promoters delivering BCTESG will have RESP accounts to track all activities associated with BCTESG.
  • Promoters delivering the QESI will have RESP accounts to track all activities associated with QESI.

RESP contributions are the subscriber's property. Contributions withdrawn when a beneficiary is eligible for an EAP (Post-secondary education contribution withdrawals) are not included in EAP amounts.

Notional accounts of an RESP:

Used in educational assistance payments
  • Accumulated income
  • CESG (Basic and Additional)
  • CLB (per beneficiary)
  • Provincial incentives (per designated provincial program)
Subscriber's property
  • Assisted contributions
  • Unassisted contributions

6.1. The EAP calculation process

EAP formulas determine how much to withdraw from RESP accounts when a promoter makes an EAP. These formulas result in the same proportion being taken from each RESP account available to the beneficiary receiving an EAP.

The RESP promoter takes the following steps to calculate EAP payments:

  1. Determine if the RESP includes accumulated income.
  2. Determine amounts available to the beneficiary.
  3. Calculate EAP portions to withdraw from each available account.
6.1.1. Determine if the RESP includes accumulated income

Promoters must use different EAP formulas depending on whether or not there is accumulated income (earnings) in the plan. Therefore, the first step in the EAP calculation process is to determine if there is accumulated income.

RESP notional accounts are the book value of an RESP, which may not reflect the actual value of plan assets. An RESP has accumulated income when the current fair market value of RESP assets is greater than the combined total of the following RESP accounts:

  • assisted contributions
  • unassisted contributions
  • CESG
  • CLB
  • all provincial incentives
6.1.2. Determine amounts available to the beneficiary

As there is only one beneficiary in an individual plan, accumulated income and all incentive amounts in individual plans are available for an EAP.

In family plans, the following amounts could be available for a single beneficiary receiving an EAP from the plan:

  • accumulated Income
  • all CESG amounts (includes Basic and Additional CESG)
  • all SAGES amounts
  • all BCTESG amounts
  • only the CLB account balance for the beneficiary receiving the EAP
Sharing of other provincial incentives in family plans

The sharing of a provincial incentive may or may not apply for other designated provincial programs. Consult the provincial authority.

Residency requirements for an EAP

CRA determines residency status for tax purposes. Beneficiaries can study outside of Canada and still be considered by CRA as residents of Canada. For more information, contact CRA at 1-800-959-8281 (English) or 1-800-959-7383 (French).

Promoters must consider a beneficiary's residency status to determine whether or not an RESP notional account is available for an EAP.

  • Accumulated income (earnings): If a beneficiary is enrolled in a qualifying program, earnings may be included in an EAP even if the beneficiary is not a resident of Canada when the EAP is made. Consult CRA for more information.
  • CESG: To receive CESG in an EAP, the beneficiary must be a resident of Canada when the EAP is made.
  • CLB: To receive CLB in an EAP, the beneficiary must be a resident of Canada when the EAP is made.
  • SAGESTo receive SAGES in an EAP, the beneficiary must be a resident of Canada when the EAP is made.
  • BCTESG: If a beneficiary is enrolled in a qualifying program, BCTESG may be included in an EAP payment, even if the beneficiary is not a resident of Canada when the EAP is made.
  • Other provincial incentives: Consult the provincial authority for EAP residency criteria.
6.1.3. Calculate EAP portions to withdraw from each available account

The RESP promoter uses the following formulas to calculate EAP portions attributable to each incentive amount available in an RESP. Note that these formulas differ if there has been a loss in the plan (no accumulated income).

Formulas for calculating EAP incentive portions
Incentive RESP with earnings RESP with no earnings
CESG (A x F) / (C - D - E) (A x F) / (B + F + G)
CLB (A x B) / (C - D - E) (A x B) / (B + F + G)
SAGES (A x J) / (C – D – E) (A x J) / (B + F + G)
BCTESG (A x K) / (C – D – E) (A x K) / (B + F + G)
Other provincial incentives (A x Y) / (C - D - E) (A x Y) / (B + F + G)

Where:

A: is the amount of the EAP

B: is the balance in the beneficiary's CLB Account of the RESP immediately before the EAP is made

C: is the fair market value of the property held in connection with the RESP, determined immediately before the EAP is made

D: is the total of all contributions made to the RESP before the EAP is made that have not been withdrawn

E: is the total in all CLB Accounts of the other beneficiaries under the RESP immediately before the EAP is made

F: is the balance in the CESG Account of the RESP immediately before the EAP is made

G: is the total of all amounts paid into the RESP under a designated provincial program (total of all provincial incentive account balances in the RESP immediately before the EAP is made)

J: is the balance in the SAGES Account of the RESP immediately before the EAP is made.

K: is the balance in the BCTESG Account of the RESP immediately before the EAP is made.

Y: is the balance in another provincial incentive account of the RESP immediately before the EAP is made

Formulas for other provincial incentives

Other provincial incentives could use formulas with different variable letters but achieve the same end results.

Calculations for a particular EAP must be performed using the same set of the above values for each amount available in an EAP. RESP accounts are updated to reflect the amounts deducted, only after EAP portions have been calculated for all of the available RESP amounts.

6.2. Understanding EAP formulas

EAP formulas help to ensure that promoters withdraw the same proportion from each of the RESP accounts available to the beneficiary for an EAP.

6.2.1. When the RESP has accumulated income

When promoters make an EAP, they must take the same proportion from each of the RESP accounts available for the beneficiary taking the EAP. For example, when there are accumulated earnings, the EAP formula (see 6.1.3) for the CESG amount is:

(A x F) / (C - D - E)

Promoters can rearrange this formula into a [proportion] x [account balance] format where the [proportion] is the same amount for all available accounts:

A / (C - D - E) x F
[proportion] x [account balance]

Where:

A: is the amount of the EAP

C: is the fair market value of the property held in connection with the RESP, determined immediately before the EAP is made

D: is the total of all contributions made to the RESP before the EAP is made that have not been withdrawn

E: is the total in all CLB Accounts of the other beneficiaries under the RESP immediately before the EAP is made

F: is the balance in the CESG Account of the RESP immediately before the EAP is made

The same proportion is taken from all available RESP accounts in an EAP.

Proportion to withdraw when there is accumulated income

When there is accumulated income, the proportion to withdraw from each available RESP account is equal to "A / (C - D - E)".

"(C - D - E)" is the result of taking contributions and the CLB of the other beneficiaries from the fair market value. In other words, this expression represents the amount available to a particular beneficiary for an EAP.

Maximum EAP amount when there is accumulated income

When there is accumulated income in the plan, the maximum EAP amount available to a particular beneficiary is equal to "(C - D - E)".

6.2.2. When the RESP has no accumulated income (loss in the plan)

When promoters make an EAP, they must take the same proportion from each of the RESP accounts available for the beneficiary taking the EAP. For example, when there are no accumulated earnings, the EAP formula (see 6.1.3) for the CESG amount is:

(A x F) / (B + F + G)

Promoters can rearrange this formula into a [proportion] x [account balance] format where the [proportion] is the same amount for all available accounts:

A / (B + F + G) x F
[proportion] x [account balance]

Where:

A: is the amount of the EAP

B: is the balance in the beneficiary's CLB Account of the RESP immediately before the EAP is made

F: is the balance in the CESG Account of the RESP immediately before the EAP is made

G: is the total of all amounts paid into the RESP under a designated provincial program (total of all provincial incentive account balances in the RESP immediately before the EAP is made)

The same proportion is taken from all available RESP accounts in an EAP

Proportion to withdraw when there is no accumulated income

When there is no accumulated income, the proportion to withdraw from each available RESP account is equal to "A / (B + F + G)".

"(B + F + G)" is the result of combining the CLB account for the beneficiary with the CESG account balance and the combined amounts of all provincial incentives. In other words, this expression represents the amount available to a particular beneficiary for an EAP.

Maximum EAP amount when there is no accumulated income

When there is no accumulated income in the plan, the maximum EAP amount available to a particular beneficiary is equal to "(B + F + G)".

If there is a significant loss in the plan, the fair market value could be less than this amount. In that situation, the maximum EAP amount available is the fair market value of the plan.

7. Calculating the incentive portions of the EAP - In an RESP with earnings

The following example is used to demonstrate how to calculate EAP payments when there is accumulated income in the plan.

Example:

Calculating an EAP when there are accumulated earnings

Phillip and Mark are brothers and are beneficiaries in a family plan. An EAP of $3,500 (A) is requested for Phillip. At the time of the EAP request, the market value of the RESP is $48,000 (C), with accumulated earnings of $14,900. Before the EAP request, the CLB account balances were $2,000 for Phillip and $1,700 for Mark. The other RESP account balances are summarized below:

CLB of others
(E)
Contributions
(D)
CESG
(F)
CLB of Phillip
(B)
SAGES
(J)
Earnings
$1,700 $23,000 $5,900 $2,000 $500 $14,900

Letters to use for provincial incentives

G: is the total of all amounts paid into the RESP under a designated provincial program

J: is the balance in the SAGES account of the RESP immediately before the EAP is made

In this example, there is only one provincial incentive which means G = J = $500.

7.1. Step 1 - Determine if the RESP includes accumulated income

The fair market value of $48,000 is more than the sum of the following RESP accounts ($33,100):

  • $23,000 = Assisted and unassisted contributions
  • $5,900 = CESG
  • $3,700 = CLB
  • $500 = All provincial incentives

The difference between the fair market value ($48,000) and the above accounts ($33,100) is the accumulated income (earnings) of $14,900. This confirms that there is actually accumulated income in the plan at the time of the EAP.

7.2. Step 2 - Determine amounts available to beneficiary

Before undertaking the required calculations, the RESP promoter must identify the total available assets from which the beneficiary's EAP will be paid.

The CESG, CLB, SAGES, and earnings will be paid out in an EAP in proportion to their value in the RESP. (Contributions are not counted here as contributions remain the property of the subscriber and do not make up part of the EAP). Using the example, these amounts would include:

Total CESG: $5,900 (25%)
Beneficiary's CLB:* $2,000 (9%)
Total SAGES: $500 (2%)
Total Earnings: $14,900 (64%)

Total: $23,300 (100%)

*Since the CLB is directed to a specific beneficiary, the beneficiary requesting the EAP is eligible for only the CLB paid on his or her own behalf.

Each amount is represented by the percentage of their value in the RESP. Once the calculations for each incentive available to the beneficiary have been completed, each portion of these accounts making up the EAP will be represented by the same percentages.

7.3. Step 3 - Calculate EAP portions to withdraw from each available account

The following values are needed to calculate the EAP portion that must be taken from each available account (see 6.2.1):

A = Amount of EAP $3,500
C = RESP market value $48,000
D = Total of all RESP contributions $23,000
E = CLB - other beneficiaries $1,700 (Mark's CLB account)

The proportion to take from each available RESP account is:

A / (C - D - E) = 3500 / (48,000 - 23,000 - 1,700) = * 0.1502145

The EAP portions to take from each account would be:

CESG portion $5,900 x 0.1502145 = $886.26
Beneficiary's CLB portion $2,000 x 0.1502145 = $300.43
SAGES portion $500 x 0.1502145 = $75.11
Earnings portion $14,900 x 0.1502145 = $2,238.20

Total EAP $23,300 x 0.1502145 = $3,500

* Rounded for illustration purposes.

7.4. Breakdown of the EAP

Once the calculations have been completed, the value of each account making up the EAP can be compared with the value of these accounts in the RESP.

Before the EAP
Total CESG: $5,900 (25%)
Beneficiary's CLB:* $2,000 (9%)
Total SAGES: $500 (2%)
Total earnings: $14,900 (64%)

Total: $23,300 (100%)

The EAP will be made up of these amounts in proportion to their value in the RESP. Notice how corresponding values in the EAP compare. For the sake of simplicity, the values below have been rounded to whole numbers.

EAP amounts
CESG portion $886 (25%)
CLB portion $300 (9%)
SAGES portion $75 (2%)
Earnings $2,240 (64%)

Total EAP $3,500 (100%)

The calculations demonstrated how to calculate the EAP when the RESP included accumulated earnings. The following pages will outline the process for calculating each incentive portion of the EAP when there are no accumulated earnings (there is a loss) in the RESP.

8. Calculating the incentive portions of the EAP - In an RESP without earnings

An RESP has no accumulated earnings when the fair market value is equal to or less than the total of the following RESP accounts (contributions and incentives):

  • assisted contributions
  • unassisted contributions
  • CESG
  • CLB
  • all provincial incentives

All losses are first attributed to accumulated earnings and then to contributions. When losses have depleted the accumulated earnings and contributions to nil, then the remaining losses - if any - are considered to be attributed to the incentives. However, losses are not actually deducted from RESP accounts when making EAP calculations. Notional account values are updated, only after making an EAP, to reflect the actual amounts that were taken from each available account.

The following example is used to demonstrate how to calculate EAP payments when there is no accumulated income in the plan.

Example:

Calculating an EAP when there are no accumulated earnings

John is the RESP beneficiary in an individual (non-family) plan. An EAP of $2,000 (A) is requested for John. At the time of the EAP request, the market value of the RESP is $3,000 (C). Before the EAP request, the CLB account balance was $1,700 for John. The other RESP account balances are summarized below:

CLB of others
(E)
Contributions
(D)
CESG
(F)
CLB of John
(B)
SAGES
(J)
Earnings
$0 $9,000 $2,300 $1,700 $200 $0

8.1. Step 1 - Determine if the RESP includes accumulated income

The fair market value of the RESP ($3,000) is less than the combined value of contributions and incentive account balances ($13,200) for a loss of $10,200 at the time of the EAP. There is no accumulated income in this plan.

As losses are first attributed to accumulated earnings, the earnings account is set to $0.

8.2. Step 2 - Determine amounts available to beneficiary

Before undertaking the required calculations, the RESP promoter must identify the total available assets from which the beneficiary's EAP will be paid.

These amounts would include:

Beneficiary's CLB:* $1,700 (40%)
Total CESG: $2,300 (55%)
Total SAGES: $200 (5%)

Total: $4,200 (100%)

Since the CLB is directed to a specific beneficiary, the beneficiary requesting the EAP is eligible for only the CLB paid on his or her own behalf. As this is an individual plan, there is only one CLB account.

Once again, each amount is represented by a percentage of their value in the RESP. Once calculations for each incentive available to the beneficiary have been completed, each portion of these accounts making up the EAP will be represented by the same percentages.

8.3. Step 3 - Calculate EAP portions to withdraw from each available account

The CLB, CESG, and SAGES will be paid out in an EAP in proportion to their value in the RESP.

The following values are needed to calculate the EAP portion that must be taken from each available account:

A = Amount of EAP $2,000
B = CLB of beneficiary taking EAP $1,700
F = Total of CESG $2,300
G = Total of all provincial incentives $200

When there is no accumulated income, the proportion to take from each available RESP account is (see 6.2.2):

A / (B + F + G) = 2000 / (1700 + 2300 + 200) = * 0.4761904

Therefore, the EAP portions to take from each account would be:

CESG portion $2,300 x 0.4761904 = $1,095.24
Beneficiary's CLB portion $1,700 x 0.4761904 = $809.52
SAGES portion $200 x 0.4761904 = $95.24

Total EAP $4,200 x 0.4761904 = $2,000

* Rounded for illustration purposes.

8.4. Step 4 - Breakdown of the EAP

Once the calculations have been completed, the value of each account making up the EAP can be compared with the value of these accounts in the RESP.

Before the EAP
Total CESG: $2,300 (55%)
Beneficiary's CLB: $1,700 (40%)
Total SAGES: $200 (5%)

Total: $4,200 (100%)

The EAP will be made up of these amounts in proportion to their value in the RESP. Notice how corresponding values in the EAP compare. (For the sake of simplicity, the values have been rounded to whole numbers).

EAP amounts
CESG portion $1,095 (55%)
CLB portion $810 (40%)
SAGES portion $95 (5%)

Total EAP $2,000 (100%)

9. EAP values reported to the CESP

When promoters process an EAP for a beneficiary, they must report the corresponding information electronically to the CESP (RT 400-13).

Requirements for these EAP transactions are specified in the CESP Interface Transaction Standards which can be downloaded from the Resources for RESP promoters under the Systems Documentation tab.

Included with the various information that must be submitted in EAP transactions are the following amounts:

  • EAP Amount
  • EAP CESG Amount
  • EAP CLB Amount
  • EAP SAGES Amount
  • EAP BCTESG Amount

CESP does not administer the QESI. Therefore, promoters are not required to report specific QESI amounts in EAP transactions reported to the CESP. However, if there are QESI amounts in an EAP, they must be included in the total EAP Amount reported to the CESP.

Reporting other QESI data to the CESP

Promoters must include all assets in RESPs when reporting the FMV of an RESP in their monthly summary reports (RT 700). As such, the FMV amount should include saving incentives from all sources present in the RESP, including the QESI if applicable.

Chapter 3-3: Options for assets remaining in the RESP

An educational assistance payment (EAP) is any amount, other than a refund of payments, paid out of a Registered Education Savings Plan (RESP) for a beneficiary attending post-secondary education.

Under certain circumstances, subscribers may need to make decisions about handling assets that may remain in the RESP after the beneficiary has completed their education or if the beneficiary chooses not to attend or complete post-secondary education. These assets may also include the following education savings incentives administered by Employment and Social Development Canada (ESDC):

  • Canada Education Savings Grant (CESG)
  • Canada Learning Bond (CLB)
  • Saskatchewan Advantage Grant for Education Savings (SAGES)
  • British Columbia Training and Education Savings Grant (BCTESG)

This chapter is designed to assist the RESP promoter in describing options available to the subscriber for handling the RESP property – including earnings – that may still remain in the plan.

See Appendix C for a list of acronyms and terms used in this guide.

1. Option: When assets remain in the RESP

If the beneficiary has completed post-secondary education, or has decided not to attend or complete post-secondary education, the plan may still hold contributions, earnings, and perhaps even the incentives paid into the plan by ESDC.

The RESP promoter can help the subscriber in choosing the most appropriate option for handling these remaining amounts, based on the subscriber’s circumstances.

Note: Certain options may impact the incentives in the plan requiring the CESG, CLB, SAGES and BCTESG to be repaid. Refer to the information about repaying the incentives in the related chapter(s) in Section 2: Education savings incentives.

1.1. Options for handling RESP property remaining in the RESP

Note the following options for distributing the property that may remain in the RESP:

  • Leave the money in the RESP until the plan is terminated.
    The RESP must be terminated by the end of the 35th year (40th year in the case of a specified plan) after the year the plan was opened.
  • Replace the beneficiary, if permitted under the terms and conditions of the plan.
    The replacement beneficiary must comply with the sibling-only requirement associated with Additional CESG, CLB and BCTESG. Otherwise, these incentives must be repaid. While SAGES can only be paid into a sibling-only plan, a cousin can be added to the plan without having to repay the SAGES already in the RESP.
  • Transfer the funds to another RESP, if permitted under the terms and conditions of the plan.
    Regarding the incentives, the transfer must comply with conditions stipulated by the Income Tax Act (ITA), the Canada Education Savings Regulations, provincial regulations, agreements with the Government of Saskatchewan (with respect to SAGES) and agreements with the Government of British Columbia (with respect to BCTESG). Failure to comply with these conditions may require the repayment of incentives. For more information see Chapter 3-1: RESP transfers and the Education savings incentives.
  • Terminate the plan and select the desired option for distributing RESP earnings.

2. Option: Distributing earnings if terminating the RESP

Once the decision is made to terminate an RESP (whether by choice or because the plan has reached the end of its term), the subscriber has the following options for distributing any earnings that may remain in the RESP:

  • Request an accumulated income payment (AIP).
  • Request a rollover of RESP investment earnings to a Registered Disability Savings Plan (RDSP).
  • Request a rollover of RESP investment earnings to a Registered Retirement Savings Plan (RRSP).
  • Make a payment to a designated educational institution in Canada.

Contributions paid into an RESP are made with post-tax dollars; therefore they can be returned to the subscriber at any time without tax consequences, according to the terms of the RESP contract.

Regardless of the option selected, any incentives remaining in the RESP must be repaid. For more information about repaying the CESG, CLB, SAGES or BCTESG, refer to the appropriate chapter in Section 2: Education savings incentives.

3. Accumulated income payments

An AIP is a distribution of earnings from the RESP made to the subscriber.

The AIP may include earnings on contributions and incentives, but it does not include the actual contributions or incentives themselves. An AIP must be made to or for a single subscriber at a time for income tax purposes. For example, an AIP could not be made to a husband and wife as a single payment. However, separate AIP payments could be made from the same RESP – to a subscriber and joint subscriber.

An AIP is not:

  • a repayment of contributions to the subscriber
  • an EAP made to the beneficiary
  • a repayment of the CESG, CLB, SAGES or BCTESG
  • a payment to a designated educational institution in Canada
  • a transfer to another eligible RESP

AIPs are taxable. For more information about related tax implications:

  • contact the Canada Revenue Agency (CRA) Registered Plans Directorate at 1-800-267-3100;
  • visit the Business Window, CRA Taxation Services Office; or
  • visit CRA’s website.

AIPs and transfers

A transfer to another RESP is not permitted if an AIP has been made from the transferring RESP.

If a subscriber requests a transfer of funds to another RESP after an AIP has been made, the receiving RESP promoter cannot accept the transfer.

3.1. Conditions for an AIP

An RESP may allow for an AIP when all of the following conditions have been met:

  • The subscriber is a resident of Canada.

AND

  • The payment is made to one subscriber of the plan.

AND

  • The plan has been open for ten (10) years and each individual who is or was a beneficiary is over 21 years of age and not eligible for an EAP.

OR

  • The plan is being closed by the end of the 35th year (40th year in the case of a specified plan) after the year the plan was opened.

OR

  • All beneficiaries have died.

Note: CRA may waive the conditions requiring that the plan exist for 10 years, and that each beneficiary be at least 21 years of age and ineligible to receive an EAP. For more information, contact the, Registered Plans Directorate, CRA at 1-800-267-3100.

3.2. When an AIP is made from an RESP

When an AIP is made from the RESP, certain rules must be followed:

  • Remaining CESG, CLB, SAGES and BCTESG must be repaid.
  • The RESP must be terminated by the end of February of the year after the year in which the first AIP is paid.
  • The subscriber must report the AIP as taxable income.
3.2.1. Remaining incentives must be repaid

If an AIP is made from an RESP, the remaining CESG, CLB, SAGES and BCTESG must be repaid. The amount to be repaid is:

  • The balance in the grant and/or bond account(s) at the time of the AIP.

OR

  • The fair market value of the property at the time of the AIP, whichever is less.
3.2.2. The RESP must be terminated

When an AIP is made from an RESP, it must be closed by the last day of February in the year following the year in which the first AIP is made.

Text description of Figure 1

When an AIP is made from an RESP on September 12, 2007, it must be closed by February 28, 2008.

4. Rollover of RESP investment earnings to an RDSP

To provide greater flexibility to beneficiaries with disabilities, it may be possible to roll over the RESP investment income into an RDSP without incurring taxes, if certain conditions are met.

4.1. RESPRDSP rollover conditions

The following conditions determine if a rollover of investment earnings from an RESP to an RDSP is permitted:

  • Both RESP and RDSP are established for the same beneficiary.
  • Both RESP and RDSP specimen plans must be approved by the Registered Plans Directorate, CRA:
    • The RDSP specimen plan must allow RESP rollovers;
    • The RESP specimen plan must allow AIPs and comply with the Income Tax Act, paragraph 146.1 (2) (i.1).
4.1.1. RDSP rollover conditions

The following conditions determine if a rollover of investment earnings from an RESP to an RDSP is permitted:

  • The beneficiary is Disability Tax Credit (DTC) eligible at the time of the rollover.
  • The beneficiary is less than 60 years of age in the year that the rollover is done.
  • The beneficiary is a resident in Canada.
  • The rollover amount cannot exceed the lifetime contribution limit.
4.1.2. RESP rollover conditions

One of the following three conditions determines if a rollover from an RESP to an RDSP is permitted:

  • The beneficiary has a severe and prolonged mental impairment that can reasonably be expected to prevent him/her from pursuing post-secondary education.

OR

  • The RESP has been in existence for at least 10 years and the beneficiary is at least 21 years of age and is not pursuing post-secondary education;

OR

  • The RESP has been in existence for more than 35 years.
Note that the RESP must terminate by end of February of the year following the education savings rollover.

4.2. Rollovers from RESP family plans

When the rollover of RESP investment earnings is from a family plan, three options are available.

4.2.1 Option 1

For promoters who do not offer individual plans, a family plan with only one beneficiary may be opened.

Text description of Figure 2

Family RESP

A family plan with multiple beneficiaries can be split into one or several individual (non-family) plans. In this scenario, the RESP subscriber can request a partial transfer, in the same proportion, of contributions, earnings, CESG and provincial incentives from the family plan to the new individual plan.

Individual RESP

Once the transfer is complete, the RESP subscriber may then request to have the investments earnings amount rolled over into an RDSP from this new RESP.

RDSP

Once the rollover to the RDSP is complete, the new individual RESP is closed.


Advantages – The family plan with the remaining beneficiaries could remain open.

Disadvantages – The subscriber would not be able to transfer only the earnings to the new RESP for the DTC-eligible beneficiary. Since only a portion of the property in the RESP is transferred, then the partial transfer rules outlined in subsection 16(2) of the Canada Education Savings Regulations would require the transferring RESP promoter to calculate and transfer the equal portion of the contributions, earnings, CESG and provincial incentives to the receiving plan.

4.2.2 Option 2

The subscriber can wait until the other beneficiaries of the family plan are eligible for post-secondary education (PSE) or will not be pursuing PSE before rolling over the investment income from the family RESP to the DTC-eligible beneficiary’s RDSP.

Advantages – It would no longer matter that any grant and bond remaining in the family RESP (including amounts paid in other beneficiaries’ names) would need to be repaid and that the plan would have to terminate by the end of February of the year after the education savings rollover occurred, because the other beneficiaries will have either used the funds necessary for their PSE or they will not be using the funds for PSE.

Disadvantages – This could take a long time depending on the age of the other beneficiaries.

4.2.3 Option 3

Close the family RESP and transfer the AIP to the beneficiary's RDSP.

Advantages – All the investment earnings in the RESP could be transferred to the DTC-eligible beneficiary’s RDSP (including those accumulated for other beneficiaries).

Disadvantages – All grant and bond remaining in the family RESP (including amounts paid in other beneficiaries’ names) would need to be repaid and the family RESP would need to terminate by the end of February of the year after the rollover occurred.

4.3. Specimen plan

The RDSP issuer must specify in their specimen plan if rollovers of education savings proceeds into an RDSP are permitted. The specimen plan must be approved by the Registered Plans Directorate in CRA.

The RESP must also allow AIPs in its specimen plan.

4.4. RESP rollover election – Prescribed information

The following information must be included in the RESP rollover election document:

  • rollover amount
  • RESP promoter name, specimen plan name, specimen plan number and contract number
  • RDSP issuer name, specimen plan name, specimen plan number, and contract number
  • RESP/RDSP beneficiary name, SIN
  • RESP subscriber name, SIN/BN
  • RDSP holder name, SIN/BN
  • RESP promoter’s address
  • space for the RESP subscriber’s signature and date
  • space for the RDSP holder’s signature and date
  • space for the RESP promoter’s (authorized person) signature and date
  • space for the RDSP issuer’s (authorized person) signature and date

A form can be downloaded from the CRA website:

4.5. Roles and responsibilities

RESP subscriber and RDSP holder:

  • Jointly elect in the election document to have a rollover take place.
RESP promoter:
  • Send the election document to the RDSP issuer.
  • Keep a copy of the election document.

RDSP issuer:

  • Keep a copy of the election document.
  • Report the rollover transactions to ESDC.

Any incentives that remain in the RESP must be repaid to the Government of Canada.

5. Rollover of RESP investment earnings to an RRSP

In certain circumstances, it may be possible to move the remaining RESP earnings to the subscriber’s RRSP or to the subscriber’s spousal RRSP. This can reduce the taxes payable by the subscriber.

Any incentives that remain in the RESP must be repaid to the Government of Canada.

6. Payments to a designated educational institution

The terms of an RESP can stipulate that, under the following circumstances, the amount of earnings remaining in the RESP could be paid to a designated educational institution in Canada:

  • The beneficiary is no longer eligible for an EAP.
  • Incentive(s) have been repaid, as required.
  • The subscriber does not qualify for an AIP See 3.1 Conditions for an AIP earlier in this chapter.

A payment to a Canadian designated educational institution would be a gift and not a donation. Therefore, a tax receipt will not be issued to the subscriber or to the beneficiary.

Any incentives remaining in the RESP must be repaid to Government of Canada before making the payment to the educational institution.

7. Forfeited CESG and earnings on the CESG in group plans

The Canada Education Savings Act and Canada Education Savings Regulations stipulate:

CESG amounts and the earnings generated on them may only be shared among the beneficiaries of the RESP.”

The term “RESP” used in Section 18(1) of the Regulations refers only to the individual contract itself and not the group RESPs under the same specimen plan.

As a result, forfeited CESG and forfeited earnings on the CESG can no longer be redistributed amongst group RESP cohorts after July 1, 2005.

While any forfeited CESG amounts must be repaid to Government of Canada, forfeited earnings can be managed in one of these ways:

  • an AIP
  • a payment to a designated educational institution

These options are outlined in more detail within this chapter.

Forfeited CESG and earnings – Prior to July 1, 2005

For those contracts that reached maturity in 2002, 2003, and 2004, and contained forfeited CESG and earnings under the prior CESG regulations, RESP promoters were holding these monies in lieu of requests for EAPs as per the terms of contracts with subscribers.

Any CESG and any earnings on the CESG that were forfeited by a beneficiary before July 1, 2005, and were awaiting disbursement amongst the remaining beneficiaries of that cohort, will be deemed to have been paid into a receiving beneficiary’s plan at the time of the initial allocation.

This means that only amounts forfeited prior to July 1, 2005, may be distributed to the remaining age cohort.

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