Canada Education Savings Grant
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.
Official title: Educational Assistance Payment (EAP)
- September 9, 2010
- Notice #405 - Educational Assistance Payment (EAP)
#090 Providing Notice To Beneficiaries
#284 EAP Guidelines
The purpose of this Information Bulletin is to advise Promoters and Trustees how to prevent an overpayment of Canada Education Savings Grant (CES grant) when issuing EAP and how to correct overpayments should they occur.
Providing Beneficiaries with Written Notice
The agreements that the Department of Human Resources and Skills Development Canada have with both the promoters and trustees for the delivery of the CES Grant and Canada Learning Bond (CLB) include the following requirement:
"At the time of making an EAP, provide to the beneficiary written notice of the beneficiary's obligation to repay to the Minister any portion of an EAP attributable to CES Grants or the CLB, or both, as the case may be, to which the beneficiary is not entitled, as well as any portion of an EAP attributable to CES Grants that exceeds $7,200, and has provided in such notice a breakdown showing the amount of EAP attributable to CES Grants or the CLB, or both, as the case may be".
We would like to remind promoters of the requirement to provide written EAP information to beneficiaries so that they can monitor the total CES grant they receive as educational assistance payments. This should greatly assist both promoters and the CESP in preventing potential overpayments where a beneficiary has received more than $7,200 of CES grant. Your organization may choose any method of notification as long as the notice is in writing, and made at the time of the EAP. Promoters must then be able to demonstrate that notices have been sent during a compliance review.
Correction of EAP Overpayments
As per the Canada Education Savings Regulations, beneficiaries are not entitled to receive more than the lifetime limit of $7,200 in Canada Education Savings Grant (CES grant) in EAPs. Two overpayment scenarios exist:
The beneficiary has one RESP with one promoter: In this scenario, the promoter is responsible to correct the overpayment by reversing, adjusting and resubmitting the transaction. Following the reversal of the overpayment, the promoter may take proportional amounts from the beneficiary's CLB, the provincial incentives and the earnings. This will ensure that the beneficiary can still receive the full amount of EAP that was initially requested. Please note that, if necessary, an amended T4A should be provided to the beneficiary. For additional information on T4A's, please contact the Canada Revenue Agency at 1-800-959-8281 or consult their website at the following address: Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary.
The beneficiary has more than one RESP (either with the same promoter or with different promoters): In this scenario, the CESP will first ask each promoter to verify every EAP transaction, for the beneficiary, and ensure the EAP calculation formula was used and the amounts reported are correct. Should confirmation be received from each promoter and the overpayment still exists, the CESP will pursue collection from the beneficiary directly.
Cases Requiring the Adjustement of the EAP formula
As mentioned in the RESP Provider User Guide, promoters must use the formulas found in section 10 of the Canada Education Savings Regulations when calculating the incentives and interest portions of an EAP. However, if, when processing an EAP for a beneficiary, the promoter is made aware of the receipt of CES grant in EAP from other RESPs, the promoter may adjust the proportions that are attributable to the incentives in the formula in order to prevent an overpayment from occurring.
If the full amount of CES grant calculated from the EAP formula cannot be paid due to the $7,200 CES grant limit, the promoter can use other available amounts (CLB, provincial incentives and interest) in order to arrive at the total EAP amount requested. These additional amounts should be apportioned proportionally.
A beneficiary of a family plan requests a $2,000 EAP from Promoter A. The beneficiary mentions to Promoter A that he has already received an EAP from Promoter B including $7,000 in CES grant received in EAPs.
When using the set EAP formula, Promoter A sees that his EAP will include $1,000 in CES grant, which would give the beneficiary a grand total of $8,000 in CES grant received in EAPs.
Promoter A reduces the amount of CES grant in the EAP formula and provides a $2,000 EAP consisting of $200 in CES grant and $1,800 proportionally from other amounts available, such as interest and other incentives. Therefore, the beneficiary will not receive over $7,200 of CES grant.
If a promoter adjusts the proportion of incentives in the EAP formula, the RESP promoter must obtain and retain documentation supporting the decision (e.g. EAP notification from other plan, RESP statement indicating how much CES grant has been previously received in an EAP, etc.)
Questions on this Information Bulletin should be directed to the Canada Education Savings Program by e-mail at firstname.lastname@example.org or by calling 1-888-276-3624.
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