Notice #826 – Questions and answers pertaining to the Canada Education Savings Regulations (CESR) amendments

On this page

Information bulletin

Number:
CESP/PCEE-2019/20-003-826

Date:
August 13, 2019

Subject:
Questions and answers pertaining to the Canada Education Savings Regulations (CESR) amendments

Previous bulletin

This notice follows Information Bulletin #802, dated January 8, 2019, which informed promoters about the publication of the amendments in the Canada Gazette and provided examples.

Purpose

The purpose of this Information Bulletin is to provide answers to commonly asked questions regarding the regulatory changes.

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).

The following is a collection of commonly asked questions and answers regarding those regulatory amendments, which impact proportional repayments, proportional partial transfers, repayment of pending grant, and educational assistance payment (EAP) calculations.

Implementation Date

Question 1: Is September 1, 2019 the deadline for these changes to take effect, or do you believe that there could be some delay?


Question 2: Are promoters required to have their systems updated by September 1, 2019?


Question 3: May promoters implement the EAP formula changes prior to September 1, 2019?


Question 4: If a promoter must backdate an EAP prior to September 1, 2019, would the promoter be required to use the “old” formulae to calculate this EAP?

EAP Formulae

Question 1: Are the new Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB) formulae replacing both the formulae for Registered Education Savings Plans (RESP) with earnings and no earnings? Are the proportional formulae changing?


Question 2: When the CESG limit has been reached while calculating an EAP, the resulting calculation provides an EAP amount that is lower than the EAP requested. How is this rectified?


Question 3: Since the EAP formulae no longer differentiate between positive and negative accumulated income, where the plan has investment losses, is the expectation to set the accumulated income variable to $0?

For example:

A subscriber requests an EAP of $5,000 for a beneficiary who has received $6,326.89 of their CESG lifetime limit, and who is eligible to receive the Saskatchewan Advantage Grant for Education Savings (SAGES).

RESP Account Balances:

Accumulated income SAGES Beneficiary’s CLB CESG
(grant account)
Contributions Fair Market Value
$4,788.32 $1,779.45 $0 $11,030.27 $72,383.88 $89,981.92

EAP amount available to the beneficiary:

Accumulated income + eligible provincial grants + beneficiary’s CLB + CESG (if less than $7,200 already paid, the entire grant account of the RESP is included)
= $4,778.32 + $1,779.45 + $0 + $11,030.27
= $17,598.04

CESG portion of the EAP:
The lesser of (A) and (B)

(A)  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, as defined in subsection 10 (2.2) of the Canada Education Savings Regulations
= $5,000.00 x $11,030.27 / $17,598.04
=$3,133.95

(B) 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.
=$7,200.00 - $6,326.89
= $873.11

Accumulated income portion of the EAP

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, as defined in subsection 10 (2.2) of the Canada Education Savings Regulations
= $5,000.00 x $4,788.32/$17,598.04
= $1,360.47

SAGES portion of the EAP

where:
A is the amount of the EAP requested,
G is the balance in the SAGES account of the RESP immediately before the EAP is made, and
C is the total amount available to the beneficiary for an EAP, as defined in subsection 10 (2.2) of the Canada Education Savings Regulations
= $5,000.00 x $1,779.45/$17,598.04
= $505.58

Calculating the first portion:

EAP1 = CESG + Accumulated Income + SAGES
EAP1 = $873.11 + $1,360.47 + $505.58
EAP1 = $2,739.16

Updated RESP account balances subtracting the incentives already calculated (EAP1)

Accumulated income SAGES Beneficiary’s CLB CESG
(grant account)
Contributions Fair Market Value
$3,427.85 $1,273.87 $0 $10,157.16 $72,383.88 $87,242.76

Remainder of the EAP to calculate:

EAP2 = EAP requested – EAP 1
EAP2 = $5,000.00 – $2,739.16
EAP2 = $2,260.84

EAP amount available to the beneficiary:

Accumulated income + eligible provincial grants + beneficiary’s CLB + CESG (if less than $7,200 already paid, the entire grant account of the RESP is included)
= $3,427.85 + $1,273.87+ $0 + $0
= $4,701.72

Accumulated income portion of the EAP

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, as defined in subsection 10 (2.2) of the Canada Education Savings Regulations.
= $2,260.84 x $3,427.85 / $4,701.72
= $1,648.29

SAGES portion of the EAP

where:
A is the amount of the EAP requested,
G is the balance in the SAGES account of the RESP immediately before the EAP is made, and
C is the total amount available to the beneficiary for an EAP, as defined in subsection 10 (2.2) of the Canada Education Savings Regulations.
= $2,260.84 x $1,273.87 / $4,701.72
= $612.55

Calculating the second portion:

EAP2 = Accumulated Interest + SAGES
EAP2 = $1,648.29+ $612.55
EAP2 = $2,260.84

Verifying the results:

Total EAP = EAP1 + EAP2
Total EAP = $2,739.16 + $2,260.84
Total EAP = $5,000.00

Proportional Partial Transfer

Question 1: How does the proportional partial transfer regulatory change impact the repayment of incentives during an ineligible transfer?


Question 2: Does the pre-transfer repayment policy continue to apply?


Question 3: Does the proportional partial transfer amendment in the CESR mean that all provincial education savings incentives will now be exempt from the requirement to be transferred proportionally?


Question 4: Could you provide examples of the changes to transfers involving the BCTESG?

Repayment of a Pending Grant

Question 1: What change is introduced by the ‘repayment of a pending grant’ regulatory amendment?


Question 2: Is the promoter responsible for sending the grant repayment, or will ESDC claw back the money?

Proportional Repayment after an investment loss

Question 1: When repaying CESG and CLB after an investment loss the formula provides the sum of both incentives, however, it does not stipulate how much of each incentive to pay back. How is that determined?

Québec Education Savings Incentive (QESI)

Question 1: How do the regulatory changes affect the QESI?

Updates to the RESP promoter resources

Due to the above changes, the RESP promoter resources will be updated on Canada.ca/RESPresources to reflect these changes in the near future.

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.

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: