Notice #661 - Update on repayment for the ACES Plan

Information bulletin

Number:

CESP/PCEE-2015/16-004-661

Date:

February 26, 2016

Subject:

Update on repayment transactions for the Alberta Centennial Education Savings (ACES) Plan

Previous bulletin

This notice follows Information Bulletin #639 dated September 18, 2015, (CESP/PCEE-2015/16-002-639) regarding the closure of the ACES Plan.

Purpose

This Information Bulletin provides additional guidelines to Registered Education Savings Plan (RESP) promoters concerning repayments of ACES Plan grants that were not successfully processed by the Canada Education Savings Program (CESP) system before the January 2016 deadline.

Background

December 30, 2015, was the final cut-off date for RESP promoters to process ACES Plan grant repayment transactions. RESP promoters must have submitted these transactions to the CESP system by the cut-off date of January 7, 2016, and these transactions must have been successfully processed by the CESP system in January 2016.

This notice provides guidelines for ACES Plan grant repayments that were required before December 30, 2015, but were not successfully processed by the CESP system in January 2016.

Guidelines

Promoters are required to convert ACES Plan grants to accumulated income on or after January 1, 2016. The conversion is required prior to the initiation of a transaction dated on or after January 1, 2016, where ACES Plan grants previously existed.

If a repayment of ACES Plan grants was required prior to the closure of the ACES Plan, and the repayment transaction was not successfully processed by the CESP system by January 2016, the RESP promoter should deem the corresponding amount to have been accumulated income in the original RESP. While this may result in some beneficiaries retaining ACES Plan grants in their RESP that would otherwise have been returned, the Government of Alberta is confident that the majority of those funds will be used for the intended purpose of supporting beneficiaries as they move forward with their post-secondary education.

Example scenarios – Repayment transactions

1. When an RESP remains open after the repayment

   An RESP promoter determined in November 2015 that a request for ACES Plan grant was successfully processed by the CESP system for a beneficiary that was not eligible for the grant. The RESP promoter moved the corresponding ACES Plan grants from the RESP into a non-interest bearing trust account and generated a corresponding grant repayment transaction in the promoter’s system.

   The repayment transaction was not submitted to the CESP system until February 2016, and therefore could not be processed.

   In this scenario, the promoter must:

   • move the corresponding ACES Plan grant amount from the non-interest bearing trust account back into the RESP; and
   • treat these funds in the RESP as accumulated income.
2. When a repayment is due to a contract termination

   A subscriber decided to terminate an RESP that contained the Canada Education Savings Grant (CESG) and ACES Plan grants in December 2015. The RESP promoter moved the balance of the CESG and ACES Plan grant accounts from the RESP into a non-interest bearing trust account and generated the corresponding grant repayment transactions in the promoter’s system.

   While the repayment transactions for CESG and ACES Plan grants were submitted by the January 7, 2016, cut-off date, the CESP system rejected them due to an error.

   In this scenario, the promoter must:

   • consider the corresponding ACES Plan grants in the non-interest bearing trust account to have been accumulated income when the RESP was terminated;
   • distribute this new amount of accumulated income in accordance with the Income Tax Act as per the terms and conditions of the RESP; and
   • re-submit the repayment transaction for the required CESG amount to the CESP system.

Repayment transactions for ACES Plan amounts after the January 7, 2016 cut-off date.

RESP promoters can no longer submit repayment transactions to the CESP system for ACES Plan grants.

RESP promoters must administer any ACES Plan grant amounts as accumulated income within the RESP for any repayments that were not submitted to the CESP system by the January 7, 2016, cut-off date and/or successfully processed.

If an RESP promoter continues to submit repayment transactions that include ACES Plan grants after the cut-off date on January 7, 2016, the repayments will not be processed.

Contact us

Should you have any questions regarding this Information Bulletin, please contact us by e-mail at cesp-pcee@hrsdc-rhdcc.gc.ca or call at 1-888-276-3624.  Our hours of operation are from 8 am to 5 pm Eastern Standard Time.