Corrections for transaction errors under an RESP

On this page

• Overview
• Roles and responsibilities
• Correcting administrative errors
• Examples
  • Excess contributions
  • Contributions under a family plan
  • Withdrawals
  • Other situations
• Where to get help

Overview

The following information replaces Notice # 946 which was sent out through Employment and Social Development Canada’s Listserv service on May 25, 2022.

An registered education savings plan (RESP) is an arrangement entered into between a subscriber and a promoter to help beneficiaries pursue post-secondary education. Each party should be aware of their respective responsibilities when entering into a RESP arrangement.

This information is a guide on the types of transactions that can be reversed or corrected as well as what is required to make a correction under an RESP.

All situations that are not administrative errors are to be resolved between the promoter and the subscriber and/or beneficiary outside of the RESP.

Roles and responsibilities

The following are the roles and responsibilities of the various parties associated to a registered education savings plan.

The subscriber (in accordance with the plan terms and other promoter requirements):

• designates the beneficiary(ies) under the plan and directs transfers
• ensures the promoter has current residency status and mailing address for all beneficiaries
• makes contributions to the plan and directs the promoter regarding allocation of contributions in a family plan
• applies for applicable incentives for eligible beneficiaries
• advises promoter of changes in directive (for example, from 3-way split of contributions between beneficiaries to 2-way split)
• ensures that a beneficiary’s lifetime contribution limit is not exceeded, across all plans of the beneficiary; files T1E-OVP as required if contribution limit is exceeded
• reviews statements for irregularities
• directs the promoter on amount and type of payment to be made from the plan
• makes investment decisions under a self-directed plan
• provides all necessary information for the promoter to action directives regarding payments, including Education Assistance Payments (EAP) and Canada Education Savings Grant (Grant) paid as part of those EAPs, from all other RESPs held by all subscribers for a beneficiary

The beneficiary (in accordance with the plan terms and promoter requirements):

• may request that an EAP be made to or for themselves
• informs all subscribers of EAPs received as well as the Grant portion of those EAPs in order to avoid Grant overpayments and subsequent debt collection
• provides the subscribers and/or promoters with valid proof of enrolment in a timely manner

The promoter:

• has ultimate responsibility to ensure compliance with the Income Tax Act and Regulations, the Canada Education Savings Act, the Canada Education Savings Regulations and legislation governing designated provincial programs
• ensures all parties to the plan administer the plan in accordance with approved plan terms, applicable legislation and internal processes
• applies for registration of the plan
• transmits all financial and non-financial transactions to the Canada Education Savings Program
• actions directives from subscribers regarding contributions, investments, requests for incentives and payments from the plan, in accordance with applicable legislation, plan terms and internal processes
• provides subscribers with activity and balances of notional information for each beneficiary under the RESP
• calculates the Grant portion of an EAP based on available information
• informs beneficiaries in writing  of the incentive amounts included in each EAP
• issues a T4A tax slip to beneficiaries for the total EAPs in a year
• issues a T4A tax slip to subscribers for the total AIPs in a year
• transmits all transactions under the plan to the Canada Education Savings Program system
• keeps accurate books and records

The Canada Revenue Agency:

• reviews and approves specimen plans submitted by promoters
• registers plans submitted to the Canada Education Savings Program system
• ensures, through audits, that promoters administer the plans in accordance with the approved plan terms and conditions as well as the Income Tax Act and Regulations
• shares audit results that relate to the Canada Education Savings Act, the Canada Education Savings Regulations and legislation governing designated provincial programs with the Canada Education Savings Program
• at the request of the Canada Education Savings Program, sends a Notice of Debt to beneficiaries where there has been Grant overpayment as part of EAPs

The Canada Education Savings Program:

• administers and delivers the education savings incentives (Canada Education Savings Grant, Canada Learning Bond and provincial incentive programs)
• receives and processes transactions submitted by the promoters to the Canada Education Savings Program system
• provides promoters with information related to the transactions submitted to the Canada Education Savings Program system
• performs monitoring and conducts compliance reviews to ensures compliance with the Canada Education Savings Act, the Canada Education Savings Regulations and  legislation governing designated provincial programs
• nforms beneficiaries in the event that they have received too much Grant as part of their EAPs
• requests that the CRA send a Notice of Debt to beneficiaries for the recovery of Grant overpayments
• shares audit results that related to the Income Tax Act and Regulations with the Canada Revenue Agency

Correcting administrative errors

Although there are no administrative relief provisions for RESPs, administrative errors do happen. Administrative errors generally occur when a subscriber’s documented instructions are not accurately reflected in the transaction records submitted by the promoter to the Canada Education Savings Program system.

Administrative errors can usually be corrected without pre-approval. However, all reversals and corrections must be documented by the promoter, subscriber and/or beneficiary in case of a compliance review, whether or not pre-approval is requested.

It is important to remember that corrections must be based on facts and as such, the particular facts of each situation will be carefully examined in order to determine if a correction is warranted. Also important to note is that anyone who participates in the making of false statements or omissions in order to avoid tax or obtain greater benefits may be liable to penalties under the Income Tax Act.

An administrative error does not include:

• investment decisions, whether self-directed or based on advice from someone else
• retroactive tax planning (changing past events in order to avoid tax or receive additional benefits)
• lack of oversight or direction on the part of the subscriber
• subscriber decisions on amounts and type of payments, whether self-directed or based on advice from someone else

An administrative error includes, but is not limited to,:

• keying error (for example, a contribution of $100 keyed and reported as $1,000)
• clerical error (for example, documented request for a Post-Secondary Education Payment reported as an Educational Assistance Payment)
• contribution amounts not reported for each beneficiary according to the subscriber’s documented directions (for example, subscriber directed that contributions be split equally between beneficiaries but they were reported for one beneficiary only)

Documentation must support that there was a keying or other clerical error or that the subscriber’s instructions were not followed by the promoter. This includes but is not limited to:

• dated and signed withdrawal forms
• dated written/electronic directive on type of payment and amounts requested
• dated written/electronic directive on allocation of contributions in a family plan
• dated written/electronic communication between the subscriber and promoter regarding the error
• certified and complete transcript of telephone conversations relevant to the case

Where there is uncertainty or the error has not been detected in a timely manner, a request for review and approval of reversals or corrections is to be submitted by the promoter. The submission must include a cover letter detailing the request and all documents to support the request.

The cover letter must include the name of the contact person for the request, the telephone number where they can be reached and a mailing address.

Examples

This section provides some examples of different types of situations. All scenarios may not be covered.  

Excess contributions

Subscribers are responsible for ensuring their directives are actioned in a timely manner. Where a correction is done for excess contributions more than 12 months from the initial date of the error, and pre-approval was not sought, the subscriber may be contacted regarding the excess and be required to provide documentation regarding the error as well as the withdrawal. Every subscriber under a registered education savings plan is responsible to pay a tax of 1% per month on their share of excess contributions for each month. The promoter is responsible for repaying any applicable incentives.

The following examples are based on the $50,000 contribution limit for a beneficiary being exceeded in June 2021.

Example 1

A subscriber requests that pre-authorized contributions (PAC) be stopped as of July 2021. The promoter stops pre-authorized contributions in September 2021 resulting in additional contributions and a share of excess contributions for the subscriber.

This would be considered an administrative error. The promoter is to document and reverse contributions from July to September inclusive. No  pre-approval is required.

Example 2

A subscriber requests that pre-authorized contributions be stopped as of July 2021. The promoter stops PAC in September 2022 resulting in additional contributions and a share of excess contributions for the subscriber.

This would be considered an administrative error. Promoter to document and reverse contributions from July 2021 to September 2022 inclusive. Pre-approval recommended but not required.

Example 3

The subscriber requests that pre-authorized contributions be cancelled in September 2021. The promoter stops the pre-authorized contributions immediately or the following month.

This would not be considered an administrative error. Promoter to process excess contribution withdrawal. Subscriber to file T1E-OVP for June to September, with proof of withdrawal.

Example 4

The subscriber requests that PAC be cancelled in September 2021. The promoter stops pre-authorized contributions in January 2022.

This would not be considered an administrative error for contributions from June to September 2021. Promoter to process withdrawal for June to September.

This would be considered an administrative error for contributions from October 2021 to January 2022. Promoter to document and reverse amounts from October to January. Subscriber to file T1E-OVP for June 2021 to January 2022, with proof of withdrawal for June to September 2021 and supporting documentation for reversals from October 2021 to January 2022.

Example 5

Ad hoc contributions.

This would not be considered an administrative error. Promoter to process withdrawal. Subscriber to file T1E-OVP from month of first excess, with proof of withdrawal.

Contributions under a family plan

Subscribers are responsible for ensuring their directives are actioned in a timely manner. Where there was no administrative error, there may be tax implications for the subscriber. Where a beneficiary was in an excess contribution situation before a correction was done and pre-approval was not sought, subscribers may be required to provide documentation regarding the error. Corrections done more than 3 years from the initial date of the error will have an impact on incentives.

Example 1

A Subscriber directs that contributions be split equally between two beneficiaries. Another beneficiary is added two years later, along with revised direction to split contributions three ways. The promoter does not action request for new allocation or actions the directive six months later.

This would be considered an administrative error. Promoter to document and re-allocate contributions as required.

Example 2

The subscriber directs that contributions be split equally between three beneficiaries. One of the beneficiaries has either reached the maximum Grant or is no longer eligible. The subscriber does not provide new direction for allocation of contributions.

This would not be considered an administrative error.

Example 3

The subscriber directs that contributions be split equally between three beneficiaries. One of the beneficiaries has either reached the maximum Grant or is no longer eligible. The subscriber provides new direction for allocation of contributions. The promoter does not action request for new allocation or actions the directive six months later.

This would be considered an administrative error. Promoter to document and re-allocate contributions as required.

Example 4

Subscriber directs that contributions be split equally between three beneficiaries. All contributions are reported to the Canada Education Savings Program for one beneficiary only.

This would be considered an administrative error. Promoter to document, re-allocate and report contributions as required.

Withdrawals

The following section addresses Educational Assistance Payments (EAP), Post-Secondary Education Payments (PSE) and Accumulated Income Payments (AIP).

Subscribers are responsible for ensuring their directives are actioned in a timely manner. Corrections of withdrawals are time-sensitive. Errors actioned within 6 months during the same tax year do not generally require pre-approval. Where errors are found only after a T4A slip was issued, pre-approval should be sought. Corrections done more than 3 years from the initial date of the error may have an impact on incentives.

Example 1

The subscriber signs a withdrawal request for an educational assistance payment (EAP) in August 2021. The request is processed as requested. The subscriber subsequently requests that the type of payment be changed from EAP to a post-secondary assistance payment (PSE).

This would not be considered an administrative error. Request was processed as requested

Example 2

A subscriber signs a withdrawal request for an educational assistance payment (EAP) in August 2021. The request is processed and reported as a post-secondary assistance payment (PSE) rather than EAP.

This would be considered an administrative error. Promoter to  make the correction and issue required tax slips for the 2021 tax year.

Example 3

The subscriber requests an educational assistance payment (EAP) for Beneficiary 1 under a family plan but the payment is processed and reported as having been made for Beneficiary 2 under the plan.

This would be considered an administrative error. Promoter to document and make necessary corrections.

Example 4

The subscriber requests an educational assistance payment (EAP) for a beneficiary under more than one plan but does not inform the promoters of the other EAPs. This results in a Grant overpayment to the beneficiary who is asked to repay the excess.

This would not be considered an administrative error. Beneficiary to repay Grant overpayment.

Example 5

A subscriber requests an educational assistance payment (EAP) for a beneficiary under more than one plan and advises promoters of Grant paid for other EAPs. The promoter does not adjust the formula which results in a Grant overpayment to the beneficiary.

This would be considered an administrative error. The promoter can make adjustments but the total taxable amount should not change. Although this is an administrative error, a request for approval or advice is recommended

Example 6

The subscriber requests an accumulated income payment (AIP) in August 2021. The request is processed as requested. The subscriber requests that the payment be cancelled and reprocessed for February 2022.

This would not be considered an administrative error. Subscriber to include amount of payment in income for 2021.

Example 7

A subscriber requests an educational assistance payment (EAP) for a beneficiary. The request is processed as an accumulated income payment (AIP).

This would be considered an administrative error. The promoter will  document and make necessary corrections. Note that where there is an overlap of tax years, a request for approval or advice is recommended.

Other situations

There are certain types of errors that do not have an impact on tax or incentives. These can usually be corrected without pre-approval. These types of errors must still be documented and should be corrected as soon as possible.

One example is where the notional information was reported incorrectly due to a keying error or was incomplete at the time of a transfer.

Another example is where a contract was registered as a family plan rather than an individual plan (or vice versa) or where the effective date of a contract is in question.

Where to get help

Registered Plans Directorate, Canada Revenue Agency

Protected information cannot be accepted or responded to electronically. Requests must clearly identify for which Division they are intended.

Audit Division: Reversals and corrections of EAPs, PSEs, AIPs and contributions

Registration Division: Registration issues

By mail and courier

Due to a building refit spanning multiple years, the Registered Plans Directorate’s mailing address has been temporarily changed. Please use the following address for all correspondence until further notice:

Registered Plans Directorate
Canada Revenue Agency
2215 Gladwin Cres
Ottawa ON  K1B 4K9

Canada Education Savings Program, Employment and Social Development Canada

Client Services

By phone toll Free: 1-888-276-3624

Hours of operation: Monday to Friday, 8:00 a.m. to 5:00 p.m

By email: NC-CESP-PCEE-INFORMATION-GD@hrsdc-rhdcc.gc.ca

By mail or courier:

Canada Education Savings Program
Employment and Social Development Canada (ESDC)
140 Promenade du Portage, Phase IV
Mailstop: Bag 4
Gatineau, Quebec
K1A 0J9

We welcome feedback on this information. Send comments by email to RPD.LPRA2@cra-arc.gc.ca.