Notice #802 – Publication of the regulations amending the Canada Education Savings Regulations

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Information bulletin

Number:
CESP/PCEE-2018/19-006-802

Date:
January 08, 2019

Subject:
Publication of the Regulations Amending the Canada Education Savings Regulations

Purpose

The purpose of this information bulletin is to help Registered Education Savings Plan (RESP) providers get ready for compliance with the Regulations Amending the Canada Education Savings Regulations.

Background

The Regulations Amending the Canada Education Savings Regulations have been made and were published in the Canada Gazette, Part II on December 26, 2018 (See the official pdf and non-official html versions).

There are four amendments that may impact RESP providers: proportional repayment; proportional partial transfers; repayment of pending grant; and educational assistance payment (EAP) calculations. These amendments will come into force on September 1, 2019.

For a description of the amendments please see the Regulatory Impact Analysis Statement published in the Gazette II.

Promoter/Trustee Agreement Amendments

The EAP formulas for the British Columbia Training and Education Savings Grant (BCTESG) and Saskatchewan Advantage Grant for Education Savings (SAGES) as set out in the annexes to the Promoter and Trustee Agreements, will be amended to align with the new formulas for the CESG and CLB.

The Promoter and Trustee Agreement annexes will be amended in accordance with the amendment provisions set out in the agreements prior to the September 1, 2019, coming into force.

Proportional Repayment and EAP Formula Examples

During the Gazette I publication consultation (June 2018), a number of promoters requested examples of the proposed formulas for proportional repayment and EAP calculations.

Examples of the EAP formulas

Example 1: $7,200 in CESG already paid

A subscriber requests an EAP of $1,000 for the beneficiary. The subscriber informs the Registered Education Savings Plan (RESP) promoter that the beneficiary has already received $7,200 in Canada Education Savings Grant (CESG) in other RESPs. For the purposes of this example, the beneficiary is eligible to receive the Canada Learning Bond (CLB) and the accumulated income in an educational assistance payment (EAP).

RESP account balances:

Accumulated income Provincial grant Beneficiary's CLB CESG (grant account) Contributions Fair market value
$2,000 $0 $2,000 $1,000 $5,000 $10,000

EAP amount available to the beneficiary:
Accumulated income + eligible provincial grants + beneficiary's CLB + CESG (if less than $7,200 already paid)
= $2,000 + $0 + $2,000 + $0
= $4,000

CLB portion of the EAP = A x B/C
where:
A is the amount of the EAP requested,
B is the balance in the beneficiary's CLB account immediately before the payment of the EAP, and
C is the total amount available to the beneficiary for an EAP.

= $1,000 x $2,000/$4,000
= $500

CESG portion of the EAP = the lesser of (A) and (B)

  1. A × D/C
    where
    A is the amount of the EAP requested,
    D is the balance in the grant account of the RESP immediately before the payment of the EAP, and
    C is the total amount available to the beneficiary for an EAP
    = $1,000 x $1000/$4,000
    =$250
  2. the amount by which $7,200 is greater than the aggregate of all amounts determined under this subsection in respect of an EAP previously made by the promoter to the beneficiary.
    = $7,200 - $7,200
    = $0

    The lesser of (A) and (B) = $0

Accumulated income portion of the EAP = A × E/C

where:
A is the amount of the EAP requested,
E is the amount of the accumulated income in the RESP immediately before the payment of the EAP, and
C is the total amount available to the beneficiary for an EAP.

= $1,000 x $2,000/$4,000
= $500

Example 2: Non-resident of Quebec

A subscriber requests a $1,000 EAP for a beneficiary at a time when the beneficiary is not a resident of Quebec. Section 1029.8.142 of the Quebec Taxation Act specifies that the Quebec Education Savings Incentive (QESI) portion of the EAP is $0. This is the beneficiary's first EAP.

RESP account balances:

Accumulated income QESI Beneficiary's CLB CESG (grant account) Contributions Fair market value
$1,000 $1,000 $1,000 $2,000 $5,000 $10,000

Amount available to the beneficiary = Accumulated income + eligible provincial grants + beneficiary's CLB + CESG, if less than $7,200 already paid

= $1,000 + $0 + $1,000 + $2,000
= $4,000

CLB portion of the EAP = A x B/C

where:

A is the amount of the EAP requested,
B is the balance in the beneficiary's CLB account immediately before the payment of the EAP, and
C is the total amount available to the beneficiary for an EAP.

= $1,000 x $1,000/$4,000
= $250

CESG portion of the EAP = the lesser of (A) and (B)

  1. A × D/C
    where:
    A is the amount of the EAP requested,
    D is the balance in the grant account of the RESP immediately before the payment of the EAP, and
    C is the total amount available to the beneficiary for an EAP

    = $1,000 x $2,000/$4,000
    = $500

  2. the amount by which $7,200 is greater than the aggregate of all amounts determined under this subsection in respect of an EAP previously made by the promoter to the beneficiary.

    = $7,200 - $0
    =$7,200

    The lessor of (A) and (B) = $500

Accumulated income portion of the EAP = A × E/C

where:

A is the amount of the EAP requested,
E is the amount of the accumulated income in the RESP immediately before the payment of the EAP, and
C is the total amount available to the beneficiary for an EAP.

= $1,000 x $1,000/$4,000
= $250

Proportional repayment formula examples

The objective of the amendment to paragraph 11(4)(b) is that, when a repayment is required under subsection 11(4) and there have been significant investment losses, the CESG and CLB and any provincial incentives in the RESP be repaid proportionally. This aligns with the current guidance in the Interface Transaction Standards.

Note: Quebec Education Savings Incentive amounts are not reported to Employment and Social Development Canada (ESDC).

Example 1: CESG and CLB

RESP account balances:

CESG CLB Accumulated income Provincial grant Contributions Fair market value
$1,000 $1,000 $0 $0 $1,000 $1,500

Amount of CESG and CLB to be repaid to ESDC:

(C × Y) / (Y + G)

where

  • C is the fair market value of the property held in the RESP, determined immediately before the time of the occurrence,
  • Y is the total balance in the grant account and all of the CLB accounts of the RESP immediately before the time of the occurrence, and
  • G is the total balance in the RESP of the amounts that were paid into the RESP under a designated provincial program, in the RESP immediately before the time of the occurrence.

    = ($1,500 x $2,000) / ($2,000 + $0)
    = $1,500

Example 2: CESG, CLB and provincial incentive

RESP account balances:

CESG CLB Accumulated income Provincial grant Contributions Fair market value
$1,000 $1,000 $0 $1,000 $1,000 $1,500

Amount of CLB and CESG to be repaid to ESDC:

(C × Y) / (Y + G)

where

  • C is the fair market value of the property held in the RESP, determined immediately before the time of the occurrence,
  • Y is the total balance in the grant account and all of the CLB accounts of the RESP immediately before the time of the occurrence, and
  • G is the total balance of the amounts that were paid into the RESP under a designated provincial program, in the RESP immediately before the time of the occurrence.

    = ($1,500 x $2,000) / ($2,000 + $1,000)
    = $1,000

In this scenario the remaining $500 in the RESP would be repaid as provincial grant.

Contact us

If 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 8:00 to 17:00 Eastern Time.

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