Canada Education Savings Grant

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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.

Official title: Interpretation of paragraph 3.1(a)(v) of the Canada Education Savings Grant Agreement with trustees related to administrative charges and other RESP fees - Effective October 1, 2003

Information Bulletin

Number:
CESG/SCEE 2003-002
Date:
August 20, 2003
Subject:
Notice #002 - Interpretation of paragraph 3.1(a)(v) of the Canada Education Savings Grant Agreement with trustees related to administrative charges and other RESP fees - Effective October 1, 2003

The purpose of this Information Bulletin is to notify RESP trustees of a change, effective October 1, 2003, in the CESG Program's current interpretation concerning the use of CES grant for RESP administrative charges and other fees.

Background

In 2002, trustees entered into individual CESG Trustee Agreements with the Minister of Human Resources Development wherein they agreed, pursuant to subparagraph 3.1(a)(v), not to make any distribution (i.e. payment) from RESP grant accounts except for the purpose of making educational assistance payments. Subparagraph 3.1(a)(v) reads as follows:

3.1 Duties of Trustee

Subject only to the express limitations contained in the Act, the CES Grant Regulations, the Income Tax Act (Canada) and the regulations thereunder, and this Agreement, and in addition to any powers and authorities conferred by this Agreement or which the Trustee may have by virtue of any present or future legislation or rule of law, the Trustee hereby agrees and undertakes with respect to each RESP for which it acts as Trustee:

(a) (v) not to make a distribution from an RESP if, after that distribution, the fair market value of the remaining property held in connection with the RESP is less than the balance in the grant account of the RESP, unless the distribution is an educational assistance payment (hereinafter referred to as an "EAP") which complies with the provisions of the CES Grant Regulations and without limiting the generality of the foregoing, a distribution may include a loss sustained on the realization of any investment, administrative charges and other fees payable from the trust under the terms of the RESP;

For greater certainty, subparagraph 3.1(a)(v) specifies that the term "distribution" may include payments to cover any loss sustained by trustees on the realization of investments, administrative charges and other fees payable from RESPs under the terms thereof.

It has been the practice of the CESG Program to allow trustees to make distributions from RESP grant accounts to cover any loss they sustained on the realization of any investment, administrative charges and other fees payable from the RESPs under the terms of the current agreement. This has been allowed in the past upon termination or transfer of the RESP in cases where insufficient property was available to cover the losses mentioned above.

Interpretation Effective October 1, 2003

In accordance with the terms of subparagraph 3.1(a)(v) of the CESG Trustee Agreements, trustees will no longer be authorized, as of October 1, 2003 and until further notice, to make distributions from RESP grant accounts to cover administrative charges and other fees payable from the RESPs. This applies even where insufficient property is available in the non-grant portion of the RESP.

Trustees will however be authorized, as they currently are, until further notice to make distributions from RESP grant accounts to cover any loss they may sustain on the realization of any investment.

Please inform your RESP promoter accordingly.

For consistency and clarity, we will be issuing a separate Change Notice amending the Interface Transaction Standards (ITS) document which refers to administrative charges and other fees in the procedures for the termination adjustment transaction.

Enquiries

Contact the Canada Education Savings Program by e-mail at cesp-pcee@hrsdc-rhdcc.gc.ca, by submitting a contact form or by calling 1-888-276-3624 for questions on this Information Bulletin.

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