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: Age 16/17 rule requirements Validation Process

Information Bulletin

Number:
CESP/PCEE-2006-010
Date:
June 20, 2006
Subject:
Notice #201 - Age 16/17 rule requirements Validation Process

This Information Bulletin follows our Information Bulletin No. 2003-01 which still applies for periods prior to July 1st, 2005.

Purpose

The main purpose of this Information Bulletin is to inform Registered Education Savings Plan (RESP) providers of their new responsibilities in relation to the administration of the Age 16/17 rule.

Background

Since the implementation of the Canada Education Savings Grant (CESG) in 1998, RESP providers were responsible to administer the Age 16/17 rule in respect of all beneficiaries under their plans. In August 2005, the Canada Education Savings Program (CESP) assumed responsibility for the validation of the Age 16/17 rule requirements with respect to contributions made starting the month of July 2005. The CESP has developed a process

  • to confirm the eligibility of 16/17 year old beneficiaries who were refused grant payment, or
  • to reclaim grant paid in error to some 16/17 years old beneficiaries.

Process

To facilitate the transition of responsibility and ensure the integrity of the Program, the CESP has developed the following process to be undertaken in partnership with RESP providers.

To deal with grant refusals from August 2005, the CESP has developed the Proof of Eligibility Report. This report will be used by RESP providers either

  • to confirm that they have all the necessary information to support the payment of the CESG after the year the beneficiary turns 15, or
  • to inform the CESP that they are repaying CESG amounts received in error.

The following are the four steps of the Proof of Eligibility Report process:

  1. For the first Proof of Eligibility Report, the CESP will provide all concerned providers with a pre-formatted Excel template (see Addendum for an example). The report will include all beneficiaries who were refused grant (Refusal Reason 7 in the Record Type (RT) 900 report) between August 2005 (period 78) to January 2006 (period 83) processing runs inclusively. That pre-formatted template will be sent to RESP providers on June 19, 2006 and it is required to be completed and returned no later than midnight December 31, 2006. RESP providers should wait until they have gathered all necessary information before sending this report to the CESP.

  2. In order to reverse the refusal, RESP providers will need to review the beneficiary file and verify that they have supporting documentation to prove that beneficiary meets the Age 16/17 rule requirements. Please, see attached PROOF OF ELIGIBILITY - SUPPORTING DOCUMENTATION FROM PROVIDER for detailed description of acceptable documentation.

  3. RESP providers will be responsible for all the subsequent Proof of Eligibility Reports (Period #84 and onward). Providers will need to review their monthly processing files to determine which beneficiaries need to be investigated. These beneficiaries will have a grant refusal reason of 7 in the RT 900 report. RESP providers will need to report back to the CESP using the Proof of Eligibility Report template. The process will be the same as explained in step 2.

  4. Proof of Eligibility Reports will need to be sent to the CESP through ViaSafe similar to other transaction reports. RESP providers can contact Jason Etmanskie (819-997-7257) when they have submitted their report and wish to confirm receipt.

Repayment

If, after investigation, the beneficiary is found ineligible, the trustee will need to repay grant on or before December 31, 2006. The RESP Provider will need to consider the following:

  • Grant money is still in the plan: If the CESG has not been completely used up for EAPs or there are CESG amounts for other plan beneficiaries (family plan), the provider will have to submit a Financial Transaction Type 21 Grant Repayment - Reason 11 (Other) in the next monthly production run to repay the total (or part if insufficient funds) of grant received in respect of an ineligible beneficiary under a particular contract. Also, we suggest that RESP providers wait until eligibility of all grant payment is resolved before issuing any more EAPs to a beneficiary.
  • Grant money has been completely paid out as part of an EAP: The CESP will contact the beneficiary only when there are no CESG monies in the plan and ineligible grant amounts still need to be repaid.

Below are the repayment deadlines:

  • Date of refusal: From August 1, 2005 to December 31, 2005 (incl.)
  • Repayment Deadline: January 2007
  • Date of refusal: After December 31, 2005
  • Repayment Deadline: 1 year from the date of the "Processing Transaction Report"

If, after the applicable deadline, no proof has been submitted and no repayment processed, the CESP will conclude the beneficiary is ineligible and take the necessary steps to reclaim amounts owed.

CESG payment/claw back

Upon receipt of the Proof of Eligibility Report, the CESP will:

  • analyze the information received,
  • manually input the data in the system which will then reprocess all related contribution transactions, and
  • pay the grant subject to the available grant room.

Reports will be dealt with on a first come-first served basis. The volume and complexity of the information provided in each report will determine the amount of time needed before final determination can be made.

If the information provided is acceptable and supports the beneficiary's eligibility, the CESP will pay the grant during the next monthly processing run. The CESP will contact providers for additional information when needed.

The grant will be paid to the provider who submitted the original contribution transaction. If the plan has been terminated following a full transfer, the sending provider will need to:

  • reopen the plan to receive the grant,
  • transfer the grant to the receiving provider, and
  • terminate the plan one more time.
  • If: Any grant amounts are available in the plan (for example, in a family plan),
  • Then: The provider will be responsible to repay the ineligible grant amounts paid into that plan
  • If: The plan has been fully transferred
  • Then: The sending promoter informs the CESP who will contact the receiving provider for the repayment
  • If: All available grant amounts have been used for EAPs purposes
  • Then: The CESP will contact the beneficiary

Subscriber's role

The RESP Provider will determine if the subscriber needs to be contacted based on available information in each file.

If the subscriber needs to be contacted, the RESP Provider can use a wording similar to what's suggested below:

"No Canada Education Saving Grant has been paid in relation to the (amount) contribution made to your RESP contract number ----on (date). The CESG legislation requires that a minimum amount of contributions be made to a plan and not withdrawn by the end of the year a child turns 15 in order to keep receiving the CESG for the next 2 years. Our files do not indicate that these minimum contribution amounts have been made to this plan. Please contact us if you have any information that would prove that the minimum contributions amounts have been met."

If subscribers have questions about the eligibility of their contributions, they can contact our Client Services representatives at 1-888-276-3624.

Compliance Reviews

Once implemented, this process will be included in the regular CESP Compliance Review process. The RESP provider will be responsible for keeping accurate records for any transactions such as:

  • submitting an original contribution transaction,
  • transferring related funds to another plan, or
  • repaying ineligible grant amounts.

RESP providers do not need to forward the subscriber's statement to the CESP; rather, they will need to keep these statements on file in case of a compliance review.

Addendum

Proof of Elegibility Report

Supporting Documentation From Providers

Example of the Pre-formatted Excel Template
SIN Surname Name Spec. Plan

No
Contract

ID
Subscriber's

Statement
Pre-1998 contribution Other
4 x $100 contributed & not withdrawn $2000 contributed & not withdrawn
Ex.

123 456 789

Smith John ABC123 VXT0345 x

The Subscriber's statement box

Write "YES" in the Subscriber's statement box if you have an acceptable subscriber's statement on file. An acceptable subscriber's statement is a dated statement containing an original subscriber signature confirming that by the end of the year in which the beneficiary turned 15 years old, the beneficiary met one of the following conditions:

  • a minimum of $100 was contributed during any 4 different years and not withdrawn

    or
  • contributions totaling $2,000 were contributed and not withdrawn

We suggest that you use the following wording:

16/17 Year Old Requirements

I understand that one of the two conditions below must be met in order for the CESG to be paid on RESP contributions I make during the calendar year that the Beneficiary turns 16 or 17 years old.

  • A minimum of $2,000 in RESP contributions in respect of the Beneficiary were made, and not withdrawn before December 31 of the year in which the Beneficiary turned 15 years old.

    or
  • A minimum of $100 in annual RESP contributions in respect of the Beneficiary were made and not withdrawn in any four years before December 31 of the year in which the Beneficiary turned 15 years old.

Declaration for a Beneficiary Who is 16 or 17 Years Old This Calendar Year

  • I herein declare that one or both of the conditions above have been met: Yes/No
  • Subscriber's Signature:
  • Date:
  • Joint Subscriber's Signature:
  • Date:
Example of an Acceptable Statement:

A beneficiary was born in 1988. A plan was opened in 1994 when the beneficiary was 6 years old. During the last quarter of 2003, the RESP provider, realizing that contributions were not sufficient to meet the Age 16/17 rule requirements, asked the plan subscriber to sign a statement certifying that the Age 16/17 rule requirements were met at the time of signature for that particular beneficiary. The subscriber signed the statement attesting that contributions have been made under another plan in respect of the beneficiary and returned it to the provider. This statement would be acceptable.

Note: A subscriber's statement provided at the time the plan was opened as part of the CESG Application form when the beneficiary was less than 15 years old is not acceptable.

The Pre-1998 contributions box

Write "YES" in the appropriate box if you, as the RESP Provider, have on file contributions or information demonstrating that either the 4 X $100 or the $2,000 (contributed but not withdrawn) rule has been met.

The Other box

The RESP Provider will write "YES" in this box and provide a short explanation if any other situation applies. This could include a situation where, for example, other contributions were made in respect of a particular beneficiary but not reported to the CESP, or any transfer-related situation, etc.

For example, a provider submitted a contribution transaction in September 2005 and the transaction was refused grant payment. In February 2006, the subscriber transferred the plan to another provider. The sending provider now receives a Proof of Eligibility Report from the CESP for that beneficiary. The sending provider can use the "other" column to indicate that the plan has been transferred and indicate the name of the receiving RESP Provider. The CESP will then contact the receiving RESP Provider.

Situations involving multiple plans and/or multiple RESP providers will be dealt with on an individual basis. Providers should ask the subscribers of these plans to contact us.

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