RESP Redemption Policies

branch ADMINISTRATION Manual

RESP Redemption Policies

Client Named and Intermediary Plans

Definition An RESP Redemption is defined as a withdrawal of funds from an Registered Education Savings Plan, or RESP, which is a savings account used by parents to save for their children's post-secondary education in Canada. The principal advantages of RESPs are the access to the Canada Education Savings Grant (CESG) and a source of tax-deferred income.

Order Entry Type Process: Orders > Redemption

Process Owner: Advisor Assistant

Follow Up:Advisor Assistant

With Whom:Fund Company

Forms, Paperwork Flow

Form / Branch / HO Admin / Fund Co
Mutual Fund Redemption Form / Original in Branch File
Copy to Branch Manager for Independents / NA / Copy
Education Assistance Program (EAP) Form – when required / Original / NA / Copy
Proof of Enrollment – when required / Original / NA / Copy

Location:

The Redemption Form may also be generated on EWMS at the time a trade is placed.

EWMS Process

Enter the client name or ID to search for client

From your EWMS Screen, click on Orders > Redemption

Select the applicable Payee and Delivery option from the drop down list. This selection states where the proceeds of the redemption are to be sent.

Normal Client Payment – Sends the proceeds to the branch

Client Payment – New Address

Client Payment – New Payee & Address

Client Payment – Dealer Address

Transfer to Other Institution – In Kind

Use Banking Information on File at Supplier

Client Payment – New Bank

Transfer to Other Institution – In Cash

Select the applicable Detail Option from the drop down list.

Capital Withdrawal Unsheltered – Standard redemption of assets

Over Contribution Withdrawal – Redemption of accidental Over Contribution to the RESP

PSE Withdrawal – Post Secondary Education Withdrawal

EAP Withdrawal – Educational Assistance Payment Withdrawal

Cash AIP Withdrawal Unsheltered – Accumulated Income Payment Redemption of the principal and/or growth portion not used for educational purposes. The moneyredeemed will go to the RESP subscriber(s).

AIP – Transfer to RRSP

Educational donation

CES Grant Claw back – Part or all of the CES Grant that was credited to a plan that has to be reimbursed to Human Resources and Social Development Canada (HRSDC) if the RESP money is redeemed for non-educational purposes

Sheltered Transfer

External Transfer Out

CLB Claw back – Part or all of the Canadian Learning Bond for modest incomefamilies has to be reimbursed if the RESP money is redeemed for non-educational purposesP-Grant Claw back – Part or all of the Alberta Centennial Education Savings Plan hasto be reimbursed if the RESP money is redeemed for non-educational purposes

All Grants

Select the holding you want to redeem and fill in the details (Type, Amount N/G), then click Add.

You can now select a second holding to redeem if required. When you have finished selecting the required holdings, click Validate.

Generate your Redemption Form and click Process. You can alternatively click Save Order if you wish to complete the Redemption at a later date.

Your generated Redemption Form will appear in a separate window. Note that you MUSTinclude the Wire Order # in order to prevent duplication of your order at the Fund Company.

You can specify options for Withholding Tax, Proceeds Payable and Payment Delivery in the following sections B, C and D.

The completed and signed Redemption Form should then be faxed to the applicable fund company, Franklin Templeton in this example.

Important Information

Concentra is the ONLY Fixed Term Issuer currently supporting an RESP on Univeris.

SD RESP’s are not available on the nominee platform, however, you can hold in a client held account.

In order to receive the Government grant the child needs to have a Social Insurance Number (SIN).

HRSDC GRANTS OVERVIEW

GRANT TYPE / DEFINITION / ELIGIBILITY / LIMITS
Annual / Lifetime
Basic Canada Education Savings Grant / Payment of 20% on contributions made on or after January 1, 1998 in respect of an eligible beneficiary, up until the end of the calendar year in which the beneficiary turns 17. /

• Valid SIN
• Resident of Canada

Special conditions apply for beneficiaries who are 16 and 17 years old. * (see below) / $ 500
Up to $1000 if there Carry Forward Room is available** / $ 7,200
(Basic & Additional Grants combined)
Additional Canada Education Savings Grant / Payment above the Basic CESG of 10% or 20% on the first $500 or less of annual contributions made on or after Jan 01, 2005 depending on total net family income. /

• Same as above
• Payable only into Individual Plans or Sibling-Only Family Plans
• Family income must not exceed $81,452 for 2009

/ $ 100 per beneficiary per year / $ 7,200
(Basic & Additional Grant together)
Canada Learning Bond / Incentive directed to children born on or after Jan 01, 2004 whose primary caregiver is in receipt of the National Child Benefit Supplement. It is not dependent on contributions /

• Children born on or after Jan 01, 2004
• Valid SIN
• Resident of Canada
• Payable only to Individual Plans or Sibling-only Family Plans
• Primary caregiver eligible to receive the National Child Benefit Supplement

/ $500 first year
$100 for the following 15 years if the eligibility requirements are met. / $ 2,000
Alberta Centennial Education Savings Grant or ACES / Incentive directed to children born or adopted in Alberta on or after Jan 01, 2005 or attending Alberta Schools at the age of 8, 11 & 14 on or after Jan 01, 2005. /

• Children born on or after Jan 01, 2005 or adopted on or after Jan 01, 2005
• Children aged 8, 11 and 14 years on or after Jan 01, 2005 and attending an Alberta school
• Payable only to Individual Plans or Sibling-only Family Plans
• No contribution is required to receive the $500 Grant
• A minimum $100 contribution is required within the year immediately preceding each application to receive the $100 Grant

/ $500
Grant paid at birth
$ 100
Grant paid at the age of 8, 11 and 14 / $ 800

ADDITIONAL RESP INFORMATION

Individual Plans

A plan designed to save for one particular person, here, the recipient does not have to be related to the subscriber and does not have to be under age 21 when named. The subscriber and the recipient can also be the same individual. Contributions to this plan can be made up to 22 years after its creation.

Family Plans

A plan designed if saving for more than one child. Family plans allow funds to be divided between one or more beneficiaries. Each beneficiary (child) must be connected by blood or adoption to each living plan subscriber. If a child chooses not to pursue post-secondary education, funds may be transferred to another child under the same plan. Contributions can be made to this plan until the child turns 21.

Government Contributions

The government contributes to RESP savings. Funds are provided in two forms: the Canadian Education Savings Grant (CESG) and the Canadian Learning Bond (CLB). However, these programs are for children only. Adults saving for their own educations are not eligible. CESGs add an annual amount based on family income, with a lifetime contribution limit of $7,200. The CLB is a grant offering yearly payments to modest income families with children born after December 31, 2003. The CLB has a lifetime limit of $2,000 per child.

An RESP offers two different payment options:

Educational Assistance Payments (EAPs)

Payments of contributions to a beneficiary (PSE) or subscriber (Capital)

Educational Assistance Payments (EAP)Definition: An Educational Assistance Payment withdrawal is the payment of RESP earnings and CESG amounts to a beneficiary to help finance the cost of post-secondary education in Canada or outside Canada. For the purpose of an EAP, a qualifying educational program is identified as follows:

Qualifying for an EAP:

Full-time studies: a program must last at least three consecutive weeks and requires at least 10 hours of instruction or work each week.

Part-time studies: a student must be at least 16 years old and the program must last at least three consecutive weeks and requires at least 12 hours of instruction each month.

EAP Limits:

Program type / Time of redemption / Limit
Full- time studies / 1st 13 weeks / $ 5,000
After 13 weeks / $ 20,000
Part-time studies / 1st 13 weeks / $ 2,500
After 13 weeks / $ 20,000

EAP checklist:A completed EAP form or letter of direction containing the following information:

Fund account number

Fund(s) name or number

Dollar amount or percentage split (per fund)

Dealer/Advisor codes

Payment type (cheque made payable to client, beneficiary or educational institution

OR EFT deposit to client or beneficiary bank account)

Academic Year Start Date and the total number of weeks in the academic year

Program type (University, College, etc.)

Program length

Program year in which the student is enrolled

Current proof of enrollment in a qualifying education institution (must be submitted within 6 months of the completion of the qualifying program).

Void cheque (if electronic deposit is requested).

Tax Implications

A T4A/Relevé 2 tax receipt for the total grant and earning paid will be issued to the beneficiary.

When making a withdrawal from an RESP, the total equity of the plan is divided into three categories:

Capital: The total amount of all contributions made to the plan since its inception. Capital, when withdrawn, is neither taxable to the subscriber nor to the beneficiary, for all types of withdrawals.

Government grants: Government grants received by the RESP are tracked separately between CESGs, Canada Learning Bonds and if applicable, Alberta grants. Government grants must be withdrawn directly to the beneficiary or may be otherwise refunded to the appropriate government authority. This is considered taxable income to the beneficiary for the year in which it is withdrawn as an EAP.

Accumulated earnings: After accounting for government grants and capital, any remaining amount in an RESP is considered accumulated earnings. Accumulated earnings are taxable to the beneficiary for the year in which it is withdrawn as an EAP.

Payments of contributions to a Subscriber or Beneficiary

1. Post Secondary Education (PSE) withdrawals
2. Capital withdrawals

Post Secondary Educational (PSE) withdrawals

A Post Secondary Educational withdrawal is the payment of RESP contributions to a beneficiary to help finance the cost of post-secondary education. A valid proof of enrollment is required but there is no limit on the dollar amount or frequency of the withdrawals.

Capital Withdrawals

There is no limit on the dollar amount and frequency of the withdrawals. Capital withdrawals are not taxed therefore no receipts are issued. If both ‘assisted’(contributions that have received CESG) and ‘unassisted’ contributions (contribution that have not received CESG) have been made into an RESP, assisted contributions

will be redeemed first as the corresponding grant received needs to be repaid to HRSDC.

A letter of direction signed by the subscriber indicating redemption is for non-educational purposes is sufficient to process a capital withdrawal.

Confidential, for internal use only- 1 -last revised: 3-Dec-2018 | Volume 1