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: Over-contributions to Registered Education Savings Plans (RESP) and Grant Repayments
- November 14, 2005
- Notice #174 - Over-contributions to Registered Education Savings Plans (RESP) and Grant Repayments
The following replaces Information Bulletin No. 2001-004, issued on October 24, 2001.
This Bulletin provides amended information and procedures about grant repayment requirements for over-contribution withdrawals.
What is an Over-contribution?
Under the Income Tax Act, the annual contribution limit for each RESP beneficiary is $4,000 per calendar year and the lifetime limit is $42,000. If these limits are exceeded, an over-contribution has occurred. Over-contributions are subject to a 1% per month tax levied against the subscriber on the subscriber's share of the excess amount for each full month an over-contribution exists. To reduce the tax penalty, a subscriber needs to withdraw the over-contribution. Please note that if an over-contribution is withdrawn, the beneficiary's contribution room is not restored as a result.
Promoters are responsible for tracking contributions into RESPs they administer. There are instances where several subscribers make contributions to different plans, possibly with different promoters, for the same beneficiary. An over-contribution may occur when contributions are not coordinated between subscribers for the same beneficiary, or as a result of an RESP transfer or a replacement of a beneficiary.
Withdrawal of Grant-Assisted Contributions and Repayment of Grant
When a contribution is withdrawn from an RESP, grant-assisted contributions are always considered to be withdrawn first. Section 11 of the Canada Education Savings Regulations requires that trustees repay the CESG to HRSDC for all grant-assisted contribution withdrawals, except when a beneficiary is eligible to receive an EAP. However, subsection 11(2) provides a conditional exception to this requirement. If a subscriber makes a withdrawal of an over-contribution, and the amount of over-contributions across all RESPs for the beneficiary totals $4,000 or less at the time of the withdrawal, there is no requirement to repay grant.
This ensures that the beneficiary will not lose grant if an RESP subscriber makes a withdrawal to correct an over-contribution.
Reporting Overcontribution Withdrawals
Over-contribution withdrawals of $4,000 or less are still considered grant-assisted contribution withdrawals, but with zero grant repayment. Promoters should report such withdrawals in a Record Type 400 as follows:
- Report $0 in the grant amount field of a Grant Repayment Transaction Type 21
- Indicate Repayment Reason 10 - Over-contribution Withdrawal
Please note that all other validation rules for Record Type 400 apply. Also, the CESG must still be repaid on all other grant-assisted contribution withdrawals, including withdrawals where the over-contribution is greater than $4,000.
Record-keeping for Over-contribution Withdrawals
To support keeping the grant in the RESP account, promoters must keep on file the information and declaration contained in the revised Subscriber Statement for an RESP Over-contribution Withdrawal of $4,000 or Less.
Grant Repayment Monitoring by CESP
The Canada Education Savings Program will monitor to ensure that over-contribution withdrawals comply with subsection 11(2) of the Canada Education Savings Regulations. If the conditions of subsection 11(2) are not met, the Program may request grant repayments from trustees.
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