Registered Education Savings Plans (RESPs)
Frequently asked questions
- General Information
- Educational Assistance Payments
- Accumulated Income Payments (AIP)
- Plan Termination
1. What is a Registered Education Savings Plan (RESP)?
An education savings plan (ESP) is a savings vehicle generally used by parents to save for their children's post-secondary education. More precisely, it is an arrangement between the subscriber, who can be either of:
1) an individual
2) an individual and their spouse or common-law partner, or
3) a public primary caregiver
and a person or organization (the promoter). The subscriber makes contributions that accumulate tax-free earnings. In return the promoter agrees to use the accumulated funds to pay or to cause to be paid educational assistance payments to one or more beneficiaries designated by the subscriber.
An RESP is an ESP that has been registered with Canada Revenue Agency (CRA).
Types of plans:
Non-family plans: These plans can only have one beneficiary. There are no restrictions on who can be a beneficiary under these plans. This means that anyone can be the beneficiary of a non-family plan. The subscriber is free to decide when and how much he wants to contribute. The subscriber can also decide to take a break in contributions at any time.
Family plans: These plans can have one or more beneficiaries. However, each beneficiary must be connected by blood or adoption to each living subscriber under the plan or have been connected to a deceased original subscriber. The subscriber is free to decide when and how much he wants to contribute. The subscriber can also decide to take a break in contributions at any time.
For more information about RESPs, see the publication RC4092 Registered Education Savings Plan or call any of the following numbers:
You can also consult the Human Resources and Skills Development Canada site http://www.hrsdc.gc.ca
The following sections contain questions and answers arranged by topic heading.
They will be updated and expanded on a regular basis.
2(a) How does a promoter set up an ESP?
A promoter has to send a copy of the proposed specimen ESP to the Registered Plans Directorate for approval before entering into any contracts with subscribers.
The specimen plan must include the following documents:
- the savings contract or agreement, including any related schedules or riders;
- the trust agreement, if applicable;
- the subscriber's application form for the contract or agreement; and
- the prospectus to be filed with appropriate securities commission or other provincial body, if applicable.
2(b) Is it possible to have a three-party contract when the ESP is established?
A contract involving the promoter, the trustee and the subscriber would be acceptable as long as the contract clearly defines the duties and responsibilities of each party. The contract must state that the promoter is responsible for paying or causing to be paid the educational assistance payments and that a trust must be established to hold the assets of the RESP.
2(c) A promoter has sent to the Canada Revenue Agency all the required documents for a proposed specimen ESP. The documents have been reviewed, the proposed specimen ESP has been approved and the promoter has received an approval number. What is the next step?
The promoter can now start selling ESP contracts. In doing so, the promoter must ensure that the subscriber(s) fill out the proper application in relation to the chosen savings incentive (Canada Education Savings Grant (CESG), enhanced Canada Education Savings Grant, Canada Learning Bond (CLB) and/or Alberta Centennial Education Savings grant (ACES)).
The promoter must wait until he has collected all the information necessary to register at least 150 contracts (under one or more specimens) before presenting a request for registration. Listing of contracts sold in 2001 or after must be submitted electronically to the Canada Education Savings Program (CESP). An electronic submission will be considered a request for registration. The CESP system will verify that the information is complete, validate the information and, if so, will acknowledge receipt of the information for registration purposes. We will send a letter one month later registering the contracts. For further information on electronic submission of listings for contracts sold in 2001 and later, please consult the Interface Transaction Standards for CESG System Release 4.2 published by the CESP at HRSDC. You can contact them at 1-888-276-3624 or write to them at email@example.com
2(d) How and when does the promoter submit the list?
Listings must be submitted electronically to the CESP.
The CESP accepts monthly submissions of information for grant purposes. The electronic submission of information for registration of the first 150 contracts listings or of any following listings can be done at the same time. There will be no need for form T550 Application for Registration anymore. However, if the promoter wants the effective date of registration to be the date of the contract he will have to submit electronically all required contract information to the CESP system no later than 60 days after the end of the calendar year the contract was entered into.
2(e) What will happen if the promoter cannot submit complete and valid information within 60 days after the end of the calendar year the contract was entered into?
After the promoter finally collects all the information necessary for registration of the contract he will submit it to the CESP system. The information will be processed in the same manner as any request for registration. This should result in an acknowledgment of receipt of information for registration purposes. The contract will be registered with an effective date of no earlier than January 1 of the year all the required information is submitted to and validated by the CESP system. The legislation specifies that, for any period during a year where a plan trust is not governed by a registered plan, the plan trust is deemed to be an inter vivos trust and subject to applicable taxes for that year. This will apply for the period prior to the effective date of registration.
2(f) What information should the promoter include on the list?
Electronic submission of new contracts listings are subject to the CESP system requirements as specified in the Interface Transaction Standards 4.2 document. Please contact the CESP at 1-888-276-3624 or firstname.lastname@example.org to enquire about their system requirements. However, it should be noted that the Transaction Date on your request for registration must be the date the contract was signed i.e. contract creation date.
2(g) What is the process for amending a specimen plan?
In order to amend a plan, a promoter can either amend specific terms of an existing specimen plan or set up a new specimen including the new terms. However, if an existing specimen is amended, all contracts under that specimen number must also be amended. If subscribers are permitted to and choose not to amend their contract, the associated specimen will have to stay the same and a new specimen plan set up with the new terms. Some subscribers might also want to have their funds transferred from their prior contract to a contract including the new terms.
2(i) Can a minor be a subscriber?
There are no minimum age requirements under the Income Tax Act (the Act) concerning the age of the subscriber. However, the promoter may want to verify contract laws concerning this issue.
2(j) Does the Canada Revenue Agency have a written policy on how a promoter should maintain accounts for the funds held under a RESP?
Canada Revenue Agency does not have a written policy on how a promoter should account for RESPs. However, promoters might want to contact HRSDC to ask about accounting policies for the CESP.
2(k) Can a promoter offer subscribers an advantage when contracting for an ESP?
There are no restrictions under the Act on what can be offered to a subscriber with respect to contracting for an ESP.
2(l) Does the promoter have to keep track of the beneficiary's age for all the age-related rules?
Yes. The promoter must keep a record of each beneficiary's date of birth and has to comply with all age related rules.
2(m) Are there any restrictions on the type of investments an RESP trust can hold?
Yes. Any property acquired under an RESP after October 27, 1998 will have to be a "qualified investment" as defined in the Act. All property that was acquired by an RESP trust on or before October 28, 1998, is considered to be a qualified investment. With the exception of certain annuity contracts, the types of property that qualify for an RESP are the same as those that qualify for a Registered Retirement Saving Plan.
Some of the common types of qualified investments for an RESP are:
- money and deposits;
- guaranteed investment certificates issued by a trust company;
- bonds and other debt obligations of the Government of Canada, a province, a municipality or a Crown corporation;
- shares listed on prescribed stock exchanges in Canada or in a foreign country;
- bonds and other debts obligations of a corporation whose shares are listed on a prescribed stock exchange in Canada or in a foreign country;
- segregated fund policies; and
- prescribed investments (certain mortgages, units or shares of a mutual fund and shares of small business corporations).
2(n) Are there any restrictions on foreign content?
2(o) Can an estate establish an RESP?
No. An estate is defined as a trust under the Act. The Act's definition of ESP excludes a trust from being party to the contract.
A subscriber is the individual who enters into an ESP contract with a promoter, and names one or more beneficiaries for whom he or she will make contributions.
- Starting January 1, 1998, spouses can be joint subscribers under an RESP. Subscribers must be individuals (excluding trusts). Starting January 1, 1999, subscribers must provide us with a social insurance number when the contract is submitted for registration.
- A former spouse can become a subscriber as a result of a court order or written agreement following a divorce.
- An individual including the estate of the subscriber can become a subscriber after the death of the original subscriber.
- A public primary caregiver of a beneficiary can be a subscriber.
3(a) Can a spouse and former spouse be a joint subscriber under an RESP?
Yes. An ESP is an arrangement between an individual, or an individual and their spouse, and a promoter.
In the case of separation or divorce, the Act does not require the assets held in an RESP to be divided between the parties. Consequently, a spouse and a former spouse can continue to be joint subscribers under an RESP. It is good to remember that it is the spousal status of the joint subscribers at the time they enter into a contract that is important. Individuals who are already divorced would not be permitted to enter into a contract.
3(b) You just mentioned that only spouses can be joint subscribers in an RESP. In 1995, my daughter and I entered into a contract for my grandson. Do I have to change my contract to become the sole subscriber?
No. We have chosen not to revoke contracts entered into prior to 1998 and permitting joint subscribers who were not spouses of one another despite the fact that these plans do not comply with the definition of "education savings plan" applicable after 1997. However, your plan will have to be amended to comply with all of the other registration conditions applicable after 1997.
3(c) Can the subscriber be changed under an RESP?
Yes. A spouse/former spouse can replace the original subscriber in the event of marriage breakdown, if the separation or divorce is recognized by a decree, order or judgment.
It is also possible to change the subscriber after the death of the original subscriber for contracts that permit it and were entered into after 1997. In this situation, any person (including the estate of the deceased subscriber) who acquires the person's rights as a subscriber under the plan or who makes contributions to the plan for the beneficiary can become a subscriber.
In both situations, the new subscriber is considered to have made all the contributions to the plan. As a result, he or she may be responsible for any excess contributions tax payable after 1997 on excess RESP contributions in the months following the change.
3(d) Does a subscriber need to be a resident of Canada?
There is no residency requirement under the Act for RESP subscribers. However, a subscriber needs to provide a social insurance number (SIN) when the promoter applies to have the ESP registered.
3(e) Can a minor child be a subscriber in a plan for his/her parents?
There is no age restriction under the Act that would prevent a child from being a subscriber in a plan for his or her parents. Promoters may be reluctant to enter into a contract with a minor due to provisions of contract laws.
3(f) Can godparents or family friends contribute to an RESP for a child?
Anyone who wants to contribute to a child's education can contribute to an RESP, subject to the beneficiary's annual and lifetime limits and plan requirements.
However, anyone wishing to establish an RESP for a beneficiary should contact the beneficiary's custodial parents, as the beneficiary's SIN is required.
3(g) Can an employer sponsor an RESP for its employees?
An employer could sponsor an RESP for its employees as long as it is clear that the contract is strictly between the promoter and the employee (subscriber) and that the employer is only acting as an agent. The employee, as subscriber of the plan, should be the only one contributing to the plan, for example, through payroll deductions. However, if an employer is interested in participating, the amount paid by the employer will be considered as a taxable benefit to the employee and included on the employee's T4 as income. We would like to remind you that since RESP contributions are not tax deductible, the employee would not be able to offset the increase in their income.
All information and all documents related to such plan would have to be presented to the Registered Plans Directorate for approval.
A beneficiary of an RESP is a person to whom, or on whose behalf, a promoter agrees to make educational assistance payments.
The beneficiary has to qualify for the payments at the time they are made. Generally, a subscriber is not restricted in choosing a beneficiary for an RESP. However, effective January 1, 2004 an individual cannot be designated as a beneficiary unless the individual's SIN has been provided to the promoter of the plan and the beneficiary is resident in Canada.
In a family plan, each beneficiary must meet both of the following conditions:
- the beneficiary must be connected by blood relationship or adoption to each living subscriber, or have been similarly connected to a deceased original subscriber; and
- the beneficiary must not have reached 21 years of age when he or she is named and contributions are made in the plan for his benefits. In the case of a transfer from one family plan to another, and if the beneficiary is 21 years of age or older, the beneficiary must have been a beneficiary under the old plan.
4(a) How many plans can be established for one beneficiary?
There are no limits on the number of plans a subscriber can establish for a beneficiary, or the number of RESPs a beneficiary may have. However, the annual and lifetime contribution limits are per beneficiary, and cannot be circumvented by establishing multiple plans for the same beneficiary.
4(b) In March 1989, I entered into an RESP family contract. There was no mention in my contract that each beneficiary had to be related to the subscriber by blood or adoption. Consequently, one of the beneficiaries in my plan is not directly related to me. Do I have to remove this beneficiary from the plan?
The provision permitting the designation of non-related beneficiaries in contracts established prior to July 14, 1990 has been grandfathered. The clause permitting the participation of non-related beneficiaries in a family plan can be kept in the plan. Your promoter must amend his corresponding specimen plan to comply with the legislation but may keep this clause in the specimen. You will be able to keep this beneficiary in your plan and contribute for his/her education but your plan will not be entitled to any CESG.
4(c) Can a subscriber also be a beneficiary under a particular plan?
A subscriber can be a beneficiary only under a non-family plan. The requirement that each beneficiary be connected by blood relationship or adoption to each subscriber prevents a subscriber from being a beneficiary under a family plan.
4(d) Who can be a beneficiary in a non-family plan?
There is no restriction on who can be the beneficiary of a non-family plan.
4(e) Can a person with a mental or physical disability become a beneficiary under an RESP?
Yes, as long as this person meets all other provisions of the Act that apply to RESPs.
4(f) What does blood relationship mean?
Under the Act, a blood relationship is that of a parent and child (or other descendant, such as a grandchild or a great grandchild) or that of a brother and sister. Other individuals might also qualify as related by blood in some circumstances - see question 4(g).
4(g) Is an adopted child related to his grandparents?
The definition of adoption includes both a legal adoption and an adoption in fact. Whether an adoption in fact has occurred is determined based on the facts in each case. For instance, an adoption is considered to have occurred if circumstances show that a child is wholly dependent on, and in the custody and control of, the "adopting" parent. In this situation, the child is connected by adoption to his parents.
Under the Act, there is a blood relationship connection between a parent and a child (or other descendant, such as a grandchild or a great grandchild) or between a brother and a sister. An individual's niece, nephew, aunt, uncle or cousins are not connected by blood to that individual.
According to the Act, individuals connected by blood relationship, marriage or adoption are related persons. Consequently, an adopted child is related to his grandparents since the child is connected by adoption to his parents who are connected by blood relationship to their parents. Similarly, the child of a spouse living in a long-term common-law relationship is the adopted child in fact of the other spouse if that spouse exercises effective parental care and guidance on a continuing basis. The child will also be related to both sets of grandparents.
4(h) Can the beneficiary be changed or replaced?
Yes, as long as the terms of the plan allow it. This applies to both family plans and non-family plans.
For the purposes of the penalty tax on overcontributions to an RESP, all contributions made to the plan for the previous beneficiary are considered to have been made to the plan at the earlier date for the new beneficiaries. However, the penalty tax will not apply if the new beneficiary is less than 21 years old before being named, and one of his or her parents is the parent of the previous beneficiary.
The tax also does not apply if both the previous and new beneficiaries were less than 21 years old at the time, and were connected by blood relationship or adoption to an original subscriber of the plan.
4(i) What happens if the beneficiary does not go to post-secondary school?
If the beneficiary does not go to post-secondary school and if another beneficiary is not named, the property held under the trust can be used for any combination of the purposes outlined under the definition of trust in the RESP section of the Act.
For example, the investment earnings could be paid, under specified conditions, in the form of accumulated income payments to the subscriber(s) or to a designated educational institution.
Contributions to RESPs are not deductible from the subscriber's income.
A plan can only accept a contribution for a beneficiary under the plan if the beneficiary is resident in Canada and the beneficiary's SIN has been provided to the promoter of the plan.
A contribution to an RESP does not include an amount paid into the plan under the Canada Education Savings Act (CESA) or under a designated provincial program.
Lifetime contribution limits depend on the calendar year. The lifetime limit for 1996 to 2006 was $42,000, and for 2007 and future years is $50,000. These limits apply to each beneficiary regardless of the number of plans for that particular beneficiary.
5(a) Do contributions to an RESP include insurance premiums, or administration or trustee fees?
Contributions to an RESP cannot include insurance premiums.
If administration or trustee fees are charged outside the plan, they are not part of the contributions. If they are charged within the plan, they can be considered part of the contributions. However, keep in mind that only actual contributions are subject to the lifetime limits, and qualify for the CESG.
5(b) Is it possible to assign RESP contributions or to use them as collateral for a loan?
No. One of the conditions for registering an ESP is that the property of any trust it controls must be held irrevocably for one of the following purposes:
- educational assistance payments;
- accumulated income payments (after 1997);
- refund of payments;
- repayment of certain amounts under the CESA or under a designated provincial program;
- payment to a designated educational institution; or
- transfers to another RESP trust.
Use of RESP funds as collateral for a loan would not qualify for any of these purposes.
A refund of contributions could result in an obligation to repay the CESG. For more information, contact HRSDC at: http://www.hrsdc.gc.ca/eng/learning/education_savings/index.
5(d) What are the consequences of overcontributing to an RESP?
Excess contributions to an RESP are subject to a 1% per month penalty for the excess amount contributed.
Subscribers have to file Form T1E-OVP , Individual Income Tax Return For RESP Overcontributions for 1996 and Future Years, for overcontributions based on contributions to all of the plans for a beneficiary. For more information, call the Tax Service Office General Enquiries line at 1 800 959-8281.
5(e) Do the contributions belong to the subscriber or to the beneficiary?
Control of the subscriber's contributions remains with the subscriber. However, this does not prevent the payment of these amounts to the beneficiary by or on behalf of the subscriber.
5(f) Must contributions made to a family plan be allocated to specific beneficiaries?
Yes. Every time a subscriber makes a contribution to a family plan, the subscriber must assign amounts to specific beneficiaries.
5(g) How long can contributions be made to an RESP?
For 2008 and subsequent taxation years, contributions may be made into the plan by or for the subscriber up to the 31st year following the year in which the plan was opened. However, if the beneficiary may claim disability tax credit for the 31st year following the year in which the plan was opened and he or she is in a non-family plan, the maximum period during which contributions may be made to the RESP can be extended to 35 years, if your existing plan provides for it.
5(h) What is a designated provincial program?
A designated provincial program is a program administered in accordance with an agreement entered into under section 12 of the CESA or a prescribed program. The education savings incentive program offered by the Government of Quebec in its 2007 budget is prescribed for this purpose. Contributions do not include an amount paid into the plan under a designated provincial program.
An educational assistance payment (EAP) is a distribution to a beneficiary, under certain conditions, of amounts in an RESP. These amounts include accumulated income on contributions, the Canada Education Savings Grant (CESG), enhanced CESG , Canada Learning Bond (CLB) and the Alberta Centennial Educations Savings grant (ACES) as well as income accumulated on these incentives. The EAP is to assist the individual to further his or her post-secondary education.
For a payment to qualify as an EAP at the time it is made, the individual has to be enrolled full-time or part-time in a qualifying educational program at a post-secondary educational institution (either in attendance at the institution or enrolled in distance education courses). An EAP may be paid to an individual at any time in the six-month period immediately following the particular time at which the student ceases to be enrolled as a student.
Also, the maximum amount payable to an individual is $5,000, unless the individual has completed 13 consecutive weeks in a qualifying educational program, in the previous 12 months. The Minister designated for purposes of the Canada Education Savings Act is required to approve, on a case-by-case basis, an EAP amount that is higher than the $5,000 limit stipulated in the Act.
Beginning in 2007, a payment may also qualify as an EAP at the time it is made, if the individual is at least 16 and is enrolled as a student in a specified educational program. A specified educational program means a program at a post-secondary school level that is not less than three consecutive weeks in duration and that requires each student taking the program to spend not less than 12 hours per month on courses in the program. The total amount of EAPs made to the individual under the RESP (and other RESPs from the same promoter), in the preceding 13-week period cannot exceed $2,500. The Minister designated for purposes of the Canada Education Savings Act is required to approve, on a case-by-case basis, an EAP amount that is higher than the $2,500 limit stipulated in the Act.
6(b) The expenses related to my child's post-secondary education for the first 13 weeks amounted to $3,800. Can we ask for the $5,000 permitted for the first EAP?
No. The amount of the first EAP payable to cover the first 13 consecutive weeks in a qualifying program is limited to the lesser of the amount of the expenses and $5,000. Since the expenses totalled $3,800, the first EAP can only be of this amount.
6(c) What documentation should a promoter get from a beneficiary before making an EAP?
The promoter is required to obtain proof that the beneficiary is enrolled in a qualifying educational program at a post-secondary school level at a designated educational institution. A promoter is not required to obtain receipts from a beneficiary as proof of expenses before making an EAP.
The purpose of an EAP is to assist the beneficiary to further their education at a post-secondary school level. If an EAP does not satisfy this requirement, the payment will not be considered an EAP but rather an accumulated income payment (AIP) and would be taxed accordingly. This means that the payment would be subject to the beneficiary's basic tax rate plus the additional 20% (12% in Quebec) AIP tax. Promoters may wish to remind subscribers and/or beneficiaries of the consequences of an EAP being paid that is not to assist the beneficiary to further their post-secondary education.
6(d) Who determines the "reasonableness" of an expense? What if the subscriber and the promoter disagree on a specific expense?
The promoter is responsible for administering the plan in accordance with the Act. Therefore, the promoter determines the "reasonableness" of a specific expense for an EAP.
Any expense paid in accordance with the Act and the terms of the plan would be a reasonable expense. An important factor to consider is whether the expense actually helps the beneficiary to further his or her studies.
6(f) A promoter makes a partial EAP to a beneficiary who dies before receiving the second part of the EAP. Can this payment be made to the beneficiary's estate?
No. The definition of an EAP under the Act provides that the payment be made "...to assist the individual to further the individual's education at a post-secondary school level". Since the beneficiary's estate would not be able to meet this requirement, the second part of the EAP cannot be made to the beneficiary's estate.
6(g) Can an EAP be paid to a beneficiary for fees from a previous semester if he/she is no longer enrolled in school?
Yes. If the plan provisions permits it, beneficiaries who cease to be enrolled in a qualifying educational program after 2007 are allowed to receive EAPs for up to six months after ceasing enrolment, provided that the payments would have qualified as EAPs if they had been made immediately before the student's enrolment ceased. If an EAP does not satisfy all these requirements, the payment will not be considered an EAP but rather an AIP, and it would be taxed accordingly. For more information on AIPs, see publications RC4092 and IC93-3R1 .
6(h) My daughter is currently enrolled in a qualifying educational program. She was previously enrolled in a different qualifying educational program at a post-secondary educational institution during the years 2003-2005. Can an EAP be paid today from her RESP for her past post-secondary education?
Yes, one of the conditions for an EAP payment is that the student be enrolled full-time or part-time in a qualifying educational program at a post-secondary education. If your daughter is currently enrolled in a qualifying educational program at the time the payment is made, an EAP can be made in respect of the years 2003-2005.
6(i) Is there a maximum amount a beneficiary can receive as an EAP? What is considered reasonable?
No. As long as the payment qualifies as an EAP at the time it is made there is no maximum limit (see EAP introduction). It should be noted that on August 12, 2008, a yearly EAP threshold of $20,000, indexed annually by the Consumer Price Index, was established to assist promoters in determining the reasonableness of an EAP request. The CRA will not question legitimate EAP requests below $20,000, nor will the promoters be expected to assess the reasonableness of each expense item, as long as the conditions permitting an EAP are met. Refer to RESP Bulletin no 1.
However, the Minister designated for the purposes of the Canada Education Savings Act is still required to approve, on a case-by-case basis, an EAP amount that is higher than $5,000, if the student has not completed 13 consecutive weeks in a qualifying educational program in the previous 12 months.
Any expense paid in accordance with the Act and the terms of the plan would be a reasonable expense. An important factor to consider is whether the expense actually helps the beneficiary to further his or her studies.
6(j) What is a post-secondary educational institution for the purposes of an EAP?
A post-secondary educational institution for the purposes of an EAP can be one of the following:
- a university, college or other educational institution in Canada designated by a provincial authority under the Canada Student Loans Act;
- a university, college or other educational institution in Canada designated by an appropriate authority under the Canada Student Financial Assistance Act;
- a university, college or other educational institution in Canada designated by the province of Quebec under An Act respecting financial assistance for education expenses;
- an educational institution in Canada certified by the federal Minister of Human Resources and Skills Development to be an educational institution providing courses (other than courses designed for university credit) that furnish a person with skills for, or improve a person's skills in, an occupation;
- a university, college, or other educational institution outside Canada that provides courses at a post-secondary school level and at which a beneficiary was enrolled in a course of not less than 13 consecutive weeks; or
- after 2010, a university outside Canada at which a beneficiary was enrolled on a full-time basis in a course of not less than three consecutive weeks.
The post-secondary educational institution must only satisfy one of the criteria above to be eligible for EAP purposes. For instance, if the educational institution is not designated under the Canada Student Loans Act but is certified by the federal Minister of Human Resources and Skills Development, it is acceptable for EAP purposes. It is the promoter's responsibility to examine all relevant authorities to verify if an educational institution is recognized for EAP purposes. Please see the next question for more information.
6(k) How does one confirm if a post-secondary educational institution is recognized for EAP purposes?
To verify if a particular educational institution in Canada is designated under the Canada Student Loans Act or the Canada Student Financial Assistance Act, please contact your provincial or territorial student financial assistance office. To obtain the contact information for the student financial assistance office in your area, please contact Service Canada at 1-800-O-CANADA (1-800-622-6232) or visit HRSDC's Web page at the following link:
The Canada Student Loans Program of Human Resources and Skills Development Canada (HRSDC) produces a Master List of Designated Educational Institutions. All provinces, with the exception of the Northwest Territories, Nunavut, and the province of Quebec, participate in the Canada Student Loans Program. For more information regarding this list, please visit HRSDC's Web page at the following link:
For information regarding eligible post-secondary educational institutions in the province of Quebec, please contact Quebec's Loans and Bursaries Program at 1-877-643-3750 or visit their Web page at the following link:
To verify if a particular educational institution in Canada has been certified by the Minister of Human Resources and Skills Development, please contact HRSDC's Certification Program at 1-866-517-5650 or visit their Web page at the following link:
The CRA individual income tax enquiries line can provide information regarding eligible educational institutions within Canada as well. Please contact one of the following numbers:
- 1-800-959-8281 (English)
- 1-800-959-7383 (French)
Eligible educational institutions outside of Canada do not have to be on a list for EAP purposes. In order for an EAP to be paid out, the educational institution must provide courses at a post-secondary school level and the beneficiary must have been enrolled in a course of not less than 13 consecutive weeks. After 2010, an EAP can be paid to a beneficiary enrolled at a university outside Canada on a full-time basis in a course of not less than three consecutive weeks.
An AIP is any distribution from an RESP, excluding a refund of payments, repayment of a Canada Education Savings Grant (CESG), enhanced CESG, Canada Learning Bond (CLB) or Alberta Centennial Education Savings grant (ACES), an EAP, a payment to an educational institution, or a transfer to another RESP.
AIPs usually include earnings on contributions made to the plan, and may include earnings on the CESG and (CLB). AIPs may be allowed, if all the following conditions are met:
- the subscriber is a resident of Canada;
- the payment is made to, or on behalf of, a subscriber and not jointly to, or on behalf of, more than one subscriber;
- the plan has been in existence for at least 10 years and each living individual who is or was a beneficiary under the plan has reached 21 years of age before the payment is made and is not currently eligible to receive EAPs; or
- the payment is made in the year it is required to be terminated, or
- each individual who was a beneficiary under the plan is deceased when the payment is made.
When AIPs are made from an RESP, the plan must be terminated by the end of February of the year after the year in which the first payment is made. These payments are also subject to two different taxes: the regular income tax and an additional 20% tax (12% for residents of Quebec).
It is possible for some subscribers to reduce the payable tax by transferring their AIPs to their registered retirement savings plan (RRSP) or a spousal RRSP if they have accumulated enough contributions room. This transfer is limited to $50,000.
7(a) A subscriber set up an individual non-family plan for his niece a little more than 7 years ago. His niece recently died. Is the subscriber entitled to AIPs or does he have to wait until the plan has existed for 10 years?
Under the Act, if a plan allows for AIPs, the requirement that the plan exists for 10 years does not have to be met if the beneficiary is deceased.
7(b) Subscribers set up an Individual non-family plan for their only child. The plan has also existed for a little more than 7 years. The child was recently diagnosed with a severe and prolonged impairment that will prevent him from pursuing post-secondary education. Are the subscribers entitled to AIPs?
Starting in 1998 and if the plan allows for the payment of AIPs, it is possible for the Department to waive the requirements that the beneficiary be 21 years old and that the plan had been in existence for 10 years if the beneficiary is seriously disabled and the disability prevents the beneficiary from enrolling in a qualifying program at a post-secondary educational institution. The promoter of the plan should send a written request to:
Registered Plans Directorate
Canada Revenue Agency
7(c) Is it possible to transfer assets from an RESP to an RRSP?
The only assets that could be transferred from an RESP to an RRSP are those that would qualify as an AIP (income earned on contributions, CESG, enhanced CESG, CLB and on ACES). The requirements for the payment of an AIP, specified in the first paragraph of section 7, would have to be met before such transfer would be permitted. The amount that would be permitted to be transferred would be limited to the lesser of the amount of accumulated contribution room in the RRSP and $50,000. Although the promoter of the RESP would send the assets directly to the financial institution administering the RRSP, it would be an indirect transfer. This means that the subscriber would have to include the amounts transferred in his income and deduct the same amounts as contributions to his RRSP.
7(d) A subscriber is entitled to an AIP and wants to contribute that amount to his RRSP. However, the subscriber does not have enough accumulated RRSP room. Could he add his spouse to his RESP before termination?
A spouse can be added to an RESP that permits joint subscribers at any time before termination.
Transfers of property between RESPs are generally not restricted. The effective date of the plan where funds have been transferred, whether it is a partial or total transfer, will be the earlier of:
- the effective date of the plan the funds came from; and
- the effective date of the plan the funds were transferred to.
The effective date is relevant in determining when contributions and transfers to an RESP must end, when accumulated income payments can start and when the plan must be terminated.
Transfers after 2010 can be made without resulting in any penalty tax in the following cases:
- there is a common beneficiary under the transferring plan and the plan receiving the transfer; or
- a beneficiary under the transferring plan is a sibling of a beneficiary under the receiving plan and either:
- the receiving plan allows more than one beneficiary under the plan; or
- in any other case, the beneficiary under the receiving plan was under 21 years of age at the time the receiving plan was entered into.
8(a) I want to transfer to a new plan. Can I transfer the RESP money to the new plan before it is registered?
No. The receiving plan must be registered with CRA before the funds are transferred. If not, the transfering plan will be considered as having been paid to the subscriber as an AIP. It is up to the subscriber and the promoter to ensure that the new plan is registered before transferring the funds.
8(b) My contract has a grandfathered clause. I'd like to take advantage of all the new benefits permitted by the legislation and receive the CESG. Could I transfer the assets of my plan to a new contract?
It is possible to transfer the assets of a plan to a new plan if your existing plan provides for it. If, as mentioned above, it is for the same beneficiary, no penalty tax should be incurred.
8(c) Can we transfer an Individual non-family plan to any other Individual non-family plan? Is the relationship between the different subscribers and/or beneficiaries important in such transfer? What would be the possible consequences of such transfer?
There are no requirements concerning the relationship between subscriber and beneficiary in a non-family plan. Transfers between such plans are therefore permitted at any time if plan terms provide for it. Since non-family plans can cover only one beneficiary, it is assumed that the status of the beneficiary of one of the plans will be changed. The amounts transferred will be deemed to have been contributed in the receiving plan at their original date unless the same individual was beneficiary under the two plans or the beneficiary under the receiving plan was under 21 years of age and a sibling of the beneficiary under the transferring plan.
As mentioned above and for the application of certain rules, the effective date of the receiving plan could be deemed to be different. It is also to be remembered that even if the amounts transferred were well under the applicable limits, it could be possible to have excess contributions where the contributions are transferred to a much younger beneficiary who might not have been alive at the time the original contributions were made.
8(d) Can an RESP be transferred to a plan with a different subscriber but the same beneficiary? For example, can a grandmother who has an RESP for her granddaughter transfer this plan to her daughter's plan for the same child?
Yes. Transfer rules would permit such transfer. The rules also specify that if the beneficiary under the receiving plan was, immediately before the transfer, a beneficiary under the transferring plan, the contribution history would not apply to the receiving plan for excess contributions purposes. This would apply for family and non-family plans.
It should be noted that a subscriber cannot be changed within a contract except as stipulated under the answer to 3 (c) above.
8(e) Is there a Canada Revenue Agency "transfer form" to use when initiating transfers?
No. It is the promoters' responsibility to adequately document a transfer in their records.
In addition, the promoter of the RESP transferring the property has to give the promoter of the RESP receiving the property enough information to continue to administer the transferred property. For more information refer to paragraphs 54 and 55 of IC93-3R1.
The promoter might want to check for HRSDC requirements on their transfer form.
8(f) Can a family plan be split into non-family plans or non-family plans combined into a family plan?
Non-family plans can effectively be set up to receive amounts transferred from a family plan, as well as the reverse.
In both cases, the promoter of the receiving plan would have to apply the rules concerning the effective date of the new plan. In each situation, rules concerning the beneficiaries of a family plan could apply.
If the beneficiary is the same individual under both plans, or the beneficiary under the originating plan is a sibling of a beneficiary under the receiving plan, no excess contributions tax would apply after the transfer.
8(g) A subscriber is entitled to an accumulated income payment (AIP) under the plan set up for his/her son. Can the subscriber receive part of the AIP and transfer the balance in the plan to a plan set up for his/her daughter?
Providing the plan set up for your son allows for AIPs and that the conditions described in Section 7 Accumulated Income Payments are met, it is possible to receive the AIP. However, the Act provides that a plan cannot allow for the receipt of property by way of direct transfer from another plan that has made an AIP. Consequently, the subscriber should transfer the desired amount to his/her daughter's plan and then, receive an AIP under his/her son's plan.
9(a) When does an RESP have to terminate?
An RESP must be terminated on or before the last day of the 35th year following the year in which the plan was entered into.
However, if the beneficiary may claim disability tax credit for the 31st year following the year in which the plan was opened and he or she is in a non-family plan, the maximum period during which the RESP may be in existence can be extended to 40 years following the year the plan was entered into, if your existing plan provides for it.
9(b) What happens to the assets following termination of a plan?
The assets of an RESP can only be used for the following purposes:
- the payment of educational assistance payments;
- the payment after 1997 of accumulated income payments;
- a refund under the Canada Education Savings Act or under a designated provincial program;
- a payment to a designated educational institution;
- a transfer to another RESP; or
- refund of contributions.
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