Canada Education Savings Grant

Overview

Consequential amendments have been made to the Canada Education Savings Act (CESA) to ensure that eligibility for the additional Canada Education Savings Grant (CESG) is aligned with the income thresholds used to determine eligibility for the Canada Learning Bond (CLB), as per the Income Tax Act (ITA).

Key Dates

The amendments are retroactive to the 2009 contribution year. As such, RESPs with transactions dated between January 1^st, 2009 and July 1^st, 2010 will be re-examined, and where applicable, reprocessed.

Reprocessing of all affected transactions will take place in the July 2010 processing period.

Previous Information Bulletin

For more information please refer to previous Information Bulletin Notice # 395 Revised Income Bracket for additional CESG.

Overview

Under previous legislation, provincial initiatives that are not administered by the federal government pursuant to an agreement entered into under section 12 of CESA had to be prescribed by regulations in order to be treated as provincial programs.

Budget 2010 clarifies that all payments made to a Registered Education Savings Plan (RESP) through a program, funded directly or indirectly by a province, will be treated in the same way as federal grants and bonds, and will therefore not attract or reduce federal grants and bonds themselves.

To clarify, the current definition of a "designated provincial program" under subsection 146.1(1) of the Income Tax Act (ITA) has been amended as follows:

(a) a program administered pursuant to an agreement entered into under section 12 of the Canada Education Savings Act,

or

(b) a program established under the laws of a province to encourage the financing of children's post-secondary education through savings in registered education savings plans.

Key Dates

Amendments to ITA paragraph 146.1(1)(a) apply to 2009 and subsequent years.

Amendments to ITA paragraph 146.1(1)(b) apply to 2007 and subsequent years, as the Quebec Education Savings Incentive (QESI) was effective from February 21, 2007.

Implications

Changes to CESA, the Canada Education Savings Regulations (CESR) and the Alberta Trustee Agreement have been made in order to align with the legislative changes requiring that all of the property paid into an RESP from designated provincial programs be taken into account when calculating EAPs and partial transfers. In addition, reference to the term "designated provincial program" has been added to CESA (paragraph 2(2)(b)).

Key Date

This amendment applies to 2007 and subsequent years.

Educational Assistance Payments (EAPs)

Notice #347, dated May 15, 2009 (see the Additional Information section of this document) was sent to all RESP promoters, service providers and trustees to instruct these financial institutions to include QESI amounts in the formulae used to calculate the proportion of CESG and CLB attributed to an Educational Assistance Payment (EAP). This was an interim solution until the legislative changes to CESR paragraph 10(1)(b) and CESR subparagraph 10(2)(b)(i) were made, now ensuring that the value of all amounts paid into an RESP by designated provincial programs are represented in the legislated EAP formulae.

Key Date

Legislative amendments to CESR mentioned above apply to 2007 and subsequent years.

Partial Transfers

Legislative changes to subsection 16(2) of CESR were made. These changes ensure that all amounts paid into an RESP by designated provincial programs are calculated proportionally in the case of partial transfers.

Key Date

The amendment of this subsection applies to 2007 and subsequent years.

Overview

In order to pay additional CESG in respect of a beneficiary, CESP requires custody information and the income level of the parents or legal guardian of the beneficiary. In cases of shared custody, CESP currently selects the income of the Primary Care Giver (PCG) that has custody of the child closest to January of the benefit year.

With the introduction of the shared custody provision in Budget 2010, a beneficiary under 18 years of age could have two PCGs in the same month in a given year. In administering this shared custody provision as it pertains to additional CESG, CESP will select the income of the PCG that is named on the contribution transaction that is reported to the CESP system by the promoters to determine the additional CESG entitlement.

Key Date

This will apply to contributions requesting additional CESG dated on or after July 1, 2011.

No System Changes Required

You will receive additional information regarding the above-mentioned Budget 2010 measures as it becomes available.

At this time, there are no system changes foreseen for Promoters and Trustees.

Notice # 347 - Quebec Education Savings Incentive

The purpose of this notice is to clarify the reporting of Fair Market Value (FMV) and the calculation on Education Assistance Payments (EAP) for Registered Education Savings Plans (RESPs) attracting the Quebec Education Savings Incentive (QESI).

The Quebec Education Savings Incentive is delivered by Quebec to its residents under Bill 79 (Quebec legislation), a Bill that has yet to pass into law. It is intended that, once legislated provincially, the Quebec Education Savings Incentive will be prescribed (under the Income Tax Act), effective as of the date of commencement of the program, as a designated provincial program (much like the Alberta Centennial Education Savings Plan). Until it is legislated by the province of Quebec, payments made under the Quebec Education Savings Incentive will be treated as though they were made under a designated provincial program (under the Canada Education Savings Act).

Fair Market Value (FMV)

For the purpose of reporting the Fair Market Value (FMV) of a RESP (RT700), promoters administering the Canada Education Savings Grant (CESG)/ Canada Learning Bond (CLB)/ Alberta Centennial Education Savings (ACES) Plan/ and now the Quebec Education Savings Incentive should include all the assets in the RESPs. As such the FMV amount should include saving incentives from all sources present in the RESP.

Education Assistance Payment (EAP)

For the purpose of administering the CESG, CLB and/or ACES Plan when calculating Education Assistance Payments from a RESP that includes the Quebec Education Savings Incentive, promoters should proceed as follows:

1. RESP containing earnings: promoters are to continue using the current formulas, with the FMV being the all-inclusive value used for RT700 reporting, as indicated above;
2. RESP with no earnings: The Quebec Education Savings Incentive should be included in the formula outlined in paragraph 10(1)(b) and 10(2)(b) of the Canada Education Savings Regulations when calculating the CES grant or CLB portion of an EAP. In broader terms, this means that promoters are to calculate EAPs by including the Quebec Education Savings Incentive amounts with the ACES amounts within the existing formula.

Questions about the Quebec Education Savings Incentive

As the Quebec Education Savings Incentive is a Quebec incentive not related to the Canada Education Savings Program, Quebec Education Savings Incentive amounts are not to be reported separately to CESP other than by their inclusion in the FMV figure, as explained above.

Detailed questions with regards to the Quebec Education Savings Incentive should be directed to:

Ministère du Revenu du Québec
c/o Gestion des relations avec les partenaires
3800, rue de Marly, Secteur 6-4-6
Sainte-Foy, QC, G1X 4A5

E-mail: infoconcepteur@revenuquebec.ca
Telephone: 1-888-830-7747, extension 3734

Promoter Tools

The RESP Provider User Guide, the InfoCapsules and the CESG-CLB Quick Facts will be updated and available for download on the Promoter Tools page at a later date.

Contact Us

Questions on this Information Bulletin should be directed to the Canada Education Savings Program by e-mail at cesp-pcee@hrsdc-rhdcc.gc.ca or by calling 1-888-276-3624.