Policy Directive: CW 004-18 – Registered Education Savings Plans (RESPs)



This policy directive replaces Policy Directive CW005-16, which is no longer in force and effect as of April 30, 2018.

Introduction

The objective of this policy directive is to promote increased educational attainment for eligible children and youth, as defined in this directive.

This policy directive, under s. 42(1) of the Child, Youth and Family Services Act (CYFSA), requires children's aid societies, including Indigenous societies (societies) to use funds equivalent to the June 2016 federal Universal Child Care Benefit (UCCB)[1] payment to establish RESPs for eligible children and youth. The June 2016 federal UCCB amounts are as follows:

  • $160 per month for eligible children in care who are under the age of six; and
  • $60 per month for eligible children and youth in care aged six through 17.

On January 1, 2018, legislative amendments to the Child and Family Services Act (CFSA) to raise the age of protection were proclaimed. These amendments include the Voluntary Youth Services Agreement (VYSA) for youth who are 16 or 17 and who require out of home placements. This cohort of youth is not in the legal care of a society, but they are provided with supports comparable to youth in care, and the society is responsible for the maintenance of youth in a VYSA in accordance with the terms of the agreement. The provisions concerning the age of protection are carried forward in the CYFSA.

This directive expands eligibility for RESPs to include youth in a VYSA. It also includes an option for youth in a VYSA to choose an alternative savings plan in lieu of the RESP.

Requirements

RESP Eligibility and Establishment

  1. Eligibility for the RESP program is as follows:
    1. Societies shall establish RESPs for children and youth under the age of 18 for whom they are receiving, or have received, the Children's Special Allowance (CSA) and who are:
      • In extended society care;
      • In interim society care who have been in interim society care for at least twelve consecutive months; and
      • Children subject to customary care agreements who have been in customary care for at least twelve consecutive months.
    2. Youth in a VYSA, for whom the society is receiving the CSA, are also eligible for the RESP program. At the time of entering a VYSA, the youth will be informed of both the availability of the RESP program, and of an alternative option to have the society establish a personal savings account (savings account) on behalf of the youth. For youth in a VYSA who choose the RESP program, requirements 5-23 apply. For youth in a VYSA who choose the savings account, requirements 23-32 apply.
  2. In order to open an RESP, a valid Social Insurance Number (SIN) for the child or youth is required. To this end, societies must take actions to obtain this document prior to a child or youth becoming eligible for an RESP and document these efforts in the child or youth's file. Societies will support youth in a VYSA to apply for these documents and document these efforts in the youth's file.
  3. Funds equivalent to the June 2016 federal UCCB payment (amounts set out above) received by the society on behalf of a child or youth who does not meet the criteria for establishment of an RESP must be distributed equally across all other RESPs for which the society is a subscriber and the beneficiary is under the age of 18 years, and in the care of the society, subject to a customary care agreement, or in a VYSA.

Communication with Children and Youth Regarding RESPs

  1. Children and youth in the care of societies, subject to customary care agreements, or in a VYSA are more likely to achieve improved educational outcomes when they are provided with supports and guidance. While a child or youth is in the care of a society or subject to a customary care agreement, the society worker must advise the child or youth that they are the beneficiary of an RESP held by the society. Youth in a VYSA will have the option to choose the RESP or an alternative savings program and will be informed that the funds will be available when they transition to independence upon the termination or expiry of the VYSA. Discussions should provide the child or youth with information regarding the circumstances under which the RESP or equivalent savings may be redeemed (see #14). Discussions with children and youth should be age appropriate.
  2. Where the beneficiary of an RESP is receiving Continued Care and Support for Youth or support through the Renewed Youth Supports program, societies are encouraged to continue these discussions as part of the planning process for that youth.
  3. In the event that the beneficiary has reached the age of 21 and the society is not aware that the beneficiary has enrolled in a qualifying program, the society shall make reasonable efforts to locate the youth and to advise the youth in writing that they are the beneficiary of an RESP held by the society. The society is to undertake the same process again where the beneficiary has turned 24 and the society is not aware that the beneficiary has enrolled in a qualifying program. If the society is unable to locate the beneficiary by age 25, then the society shall collapse the RESP (see #15).
  4. Societies receive statements from RESP providers pertaining to each RESP at regular intervals. These statements should be included in the child or youth's file and should be discussed with the child or youth in an age-appropriate manner.

RESP Maintenance

  1. When an RESP has been opened for an eligible child (see #1), the society shall contribute an amount equivalent to the June 2016 federal UCCB payment received for the child into that child's RESP at intervals which maximize the beneficiary's eligibility for the Canada Education Savings Grant (CESG) and/or the Canada Learning Bond (CLB)[2] .

RESP Transfer

  1. As the subscriber of the RESP for a child or youth, societies shall transfer all funds accumulated in an RESP into an RESP that has been opened by the child or youth's caregiver which names the child or youth as the beneficiary, if the child or youth has been placed with the caregiver for twelve continuous months or more, and:
    • The child or youth has left care or customary care to reside with the caregiver and the society file has been closed for a period of at least twelve months with no re-openings; or
    • A custody order has been made with respect to the child under the Children's Law Reform Act (CLRA) or the CYFSA; or
    • An adoption order has been made with respect to the child under the CYFSA.

    Where these criteria are not met, the society must continue to hold the RESP on behalf of the child or youth (see section on RESP Redemption or Collapse).

    For youth in a VYSA, the society will discuss with the youth the option for the society to continue to hold the RESP on the youth's behalf, or to transfer the RESP to a caregiver.

  1. As the subscriber of the RESP for a child or youth who is the subject of a customary care agreement, the society shall transfer all funds in an RESP into an RESP opened by the customary caregiver where the:
    • Child or youth has been placed with the caregiver for twelve continuous months or more following the twelve consecutive months in customary care required for the establishment of an RESP under this directive; and
    • Society determines that the placement is the permanency plan for the child or youth such that the child or youth will remain in the placement until the child or youth returns to his or her parents, or reaches age 18; and
    • Caregiver agrees to open an RESP for which the child is the beneficiary.
  1. To facilitate transfer of RESP funds in the circumstances above (see #9 and #10), societies must:
    • Inform the caregiver in writing that the child or youth is the beneficiary of an RESP for which the society is the subscriber; and
    • Advise the caregiver of the requirements to transfer RESP funds, including the requirement to open an RESP which names the child or youth as the beneficiary.
  1. Upon written confirmation from a caregiver that an RESP has been opened naming the child or youth as the beneficiary, societies must send a letter of direction to the RESP provider that:
    • Collapses the RESP;
    • Provides the name of the new RESP subscriber (i.e., caregiver);
    • Provides the society-held plan number; and
    • Provides the details of the RESP held by the caregiver of the child or youth into which the funds are to be transferred.
  1. Where the RESP funds may be transferred but the caregiver indicates that they will not open an RESP which names the child or youth as the beneficiary, the society must retain subscribership of the RESP and provide to the child or youth and/or caregiver (as appropriate, based on the child or youth's age and/or capacity), a letter indicating that the child or youth is a beneficiary to an RESP for which the society is the subscriber. The letter should also:
    • Identify the circumstances under which an RESP may be redeemed or collapsed (see next section); and
    • Request that the caregiver sign and return to the society the appropriate federal form (to be included as an attachment to the letter) that is required to maintain the RESP's eligibility to attract the CLB/additional CESG.

RESP Redemption or Collapse

  1. The society, where it has retained subscribership of an RESP, shall redeem an RESP when the beneficiary is enrolled on a full or part-time basis in a qualifying program at a designated institution. Qualifying programs and designated institutions are determined by the Canada Revenue Agency.
  2. Once the beneficiary is enrolled in a qualifying program, the society, as subscriber, must authorize any and all payments out of the RESP. The society must have a policy that describes the basis for decision making regarding disbursement of RESP funds (i.e., for tuition, books, ancillary fees, costs related to living independently, and other) to a youth who is attending post-secondary education and the complaint process if a dispute arises with respect to the disbursement of funds.

  1. Where the beneficiary has turned 25, the society shall collapse the RESP where:
    • The beneficiary has been located and has not enrolled in a qualifying program; or
    • Reasonable efforts have been made and the society is unable to locate the beneficiary.
  1. Upon collapse of the RESP in either of the circumstances noted in #15, federal CESG and/or CLB monies will be returned to the federal government. The principal and interest accumulated on the principal will be returned to the society as the subscriber. The funds must then be distributed equally across all other RESPs for which the:
    • Society is a subscriber;
    • Beneficiaries are under the age of 18 years; and
    • Beneficiaries are in the care of the society or customary care, or in a VYSA and have opted for the RESP.
  2. The society shall identify a locus of responsibility within the society for the redemption, disbursement and collapse of RESPs to ensure that RESP management takes place as required by this directive.

General

  1. Copies of all written correspondence pertaining to RESPs should be retained in the child or youth's file.
  2. Societies must report to the Ministry of Children and Youth Services ("the ministry") on RESPs annually, in the form and manner prescribed by the ministry.
  3. Societies must report to their Boards on RESPs annually, including the number of children and youth (ages 0-6, and ages 6 and older) who are eligible for RESPs, and for whom RESPs have been established.
  4. Societies must maintain proper documentation for audit purposes for all RESP contributions, transfers of RESP funds, redemption and collapse, including:
    • Records pertaining to all RESP investments;
    • Documents provided by the RESP provider;
    • Statements for each RESP, a copy of which must also be retained in the child or youth's file.
    • An annual aggregate report of all RESPs for which the society is the subscriber, where this report is available from the provider;
    • Records pertaining to any transfers of RESP funds;
    • Records pertaining to the redemption of individual RESPs, including summaries of expenditures aligning with the funds in the RESP; and
    • Records pertaining to the collapse of RESPs and the redistribution across active RESPs.

    Transition Provision

  1. If the society is holding funds equivalent to the June 2016 federal UCCB payment received on behalf of a child who was eligible for an RESP but for whom the society did not open an RESP, and the child has left care (see #9) as of the effective date of this directive, the society shall transfer all funds held for the child into an RESP that has been opened by the child's caregiver which names the child as the beneficiary within 12 months of the child leaving the care of the society.
  2. If the society has not transferred the funds into an RESP by the end of the 12th month following the child leaving care, the society must distribute the funds equally across all other RESPs for which the society is a subscriber in accordance with #16.

Savings Account Eligibility and Establishment

  1. Societies shall establish a savings account for youth in a VYSA who have chosen the savings account option in lieu of an RESP.
  2. For youth in a VYSA who choose the savings account, societies shall begin depositing RESP equivalent funds into a savings account in the month the society receives the CSA, and will deposit those funds retroactively to when the VYSA came into effect. Societies may elect to deposit RESP equivalent funds and Ontario Child Benefit Equivalent (OCBE)[3] savings funds into the same account. Youth who choose this option will be able to access these funds upon expiry of the VYSA and no later than six months after the VYSA has ended, when the youth is transitioning to independence, subject to the requirements in paragraph 28-31 below.

Communication with Children and Youth Regarding the Savings Account

  1. For youth in a VYSA who have chosen the savings account, the society worker will inform the youth that the account has been established and advise the youth of when and how the savings account funds may be disbursed (see paragraph 28-31). These discussions will be documented in the youth's file.
  2. 26. Societies shall generate and provide savings statements at least twice per year (i.e. once every six months) to each eligible youth, indicating the amount of savings and any interest accrued, being held on the youth's behalf.

Savings Account Maintenance

  1. When a savings account has been opened or combined with OCBE savings for an eligible child (see #23), the society shall deposit an amount equivalent to the June 2016 federal UCCB payment received for the child into that child's savings account at monthly intervals. Policy Directive CW002-18 Ontario Child Benefit Equivalent should be consulted for direction with respect to maintaining the account.

Savings Account Disbursement or Collapse

  1. Societies shall disburse savings account funds upon expiry or termination of the VYSA if the youth has:
    • Acquired financial skills and demonstrated financial competency relevant for independent living;
    • Established a personal bank account, or an alternative savings mechanism to receive funds where banking is not feasible; and
    • Developed an appropriate plan for the use of the savings.
  2. Where a youth has not successfully met disbursement requirements, the society shall meet with the youth to establish a plan for the disbursement of all or part of the savings to third parties (e.g., rent payments to landlord) on behalf of the youth.
  3. Societies shall disburse the total savings, including any interest, to the youth or the identified third party, no later than six months after the VYSA has ended for that youth. The discussion with the youth about the timing of disbursement and the agreed upon approach shall be documented in the youth's file.
  4. In cases where an eligible youth cannot be located at the time that the VYSA has expired or terminated, the society shall hold the funds saved on behalf of the youth for a period of one year from the date that the VYSA ended, or one year from the agreed upon date of disbursement to allow for the society to make reasonable efforts to locate the youth or for the youth to contact the society, and shall document these efforts in the youth's file. If the society has not disbursed the funds to the youth or an identified third party by the end of the 12th month following the expiry or termination of the VYSA, or the agreed upon date of disbursement, the society must distribute the RESP equivalent funds equally across all other RESPs for which the society is a subscriber, in accordance with paragraph 16, and reallocate OCBE savings funds to the OCBE Activities program.

Reporting Requirements for Savings Account

  1. Societies shall report to their Boards on the savings account annually, including the number of youth in a VYSA who have chosen the savings account in lieu of the RESP.

Effective Date

This policy directive will come into effect on April 30, 2018.

Original signed by:

Jennifer Morris, Assistant Deputy Minister
Policy Development and Program Design Division
Ministry of Children and Youth Services

Nadia Cornacchia, Assistant Deputy Minister
Service Delivery Division
Ministry of Children and Youth Services

Appendix

The following terms and definitions apply to this directive and the "Questions and Answers" document related to the directive:

  1. Registered Education Savings Plan (RESP): a savings plan that is registered by the Government of Canada to allow savings for education to grow tax-free until the beneficiary named in the RESP enrolls in a qualifying program.
  2. Beneficiary: any person named by the subscriber of an RESP to receive money from the RESP towards their education in a qualifying program in the form of Education Assistance Payments (EAPs).
  3. Subscriber: a person or children's aid society who opens an RESP on behalf of an individual named as beneficiary.
  4. Caregiver: for the purposes of this document the term caregiver refers to a birth parent, custodial parent, adoptive parent, or customary caregiver. The term is used interchangeably with the term parent throughout the document.
  5. Canada Education Savings Grant (CESG): a grant offered by the federal government to encourage subscription to RESPs whereby deposits are made directly from the federal government into the RESP. The Basic CESG is a payment of 20% on RESP contributions made in respect of an eligible beneficiary, up until the end of the calendar year in which the beneficiary turns 17. The Additional CESG for a beneficiary who is a child or youth under the age of 18, is a payment (over and above the Basic CESG amount) of either 10% or 20% on the first $500 based on the caregiver's net income for the year.
  6. Canada Learning Bond: a grant offered by the federal government to help caregivers start saving for their child's postsecondary education. Deposits are made directly from the federal government into the RESP.
  7. Education Assistance Payments (EAPs): payments out of the RESP to the beneficiary. EAPs include the federal incentives (i.e., CESG and/or CLB) and any earnings on the principal contributions to the RESP.
  8. RESP Provider: any person or organization offering an RESP to the public.
  9. Customary Care: as defined under the CYFSA, "the care and supervision of a First Nations, Inuk or Métis child by a person who is not the child's parent, according to the custom of the child's band or First Nations, Inuit or Métis community".
  10. Canada Child Benefit: a tax-free monthly payment made by the federal government to eligible families to help them with the costs of raising children under the age of 18, effective July 1, 2016. The Canada Child Benefit replaced the Canada Child Tax Benefit (CCTB) and the Universal Child Care Benefit (UCCB) and provides a maximum of $6,400 per child under the age of six and $5,400 per child aged six through 17.
  11. Universal Child Care Benefit (UCCB): a previous taxable benefit paid by the federal government for children under the age of 18 years is paid in installments of $160 per month per child under the age of six and $60 per month per child aged 6 through 17. As of July 1, 2016, this benefit no longer exists.
  12. Children's Special Allowance (CSA): is a tax-free monthly payment for a child who: is under the age of 18; physically resides in Canada; and is maintained by an agency. For qualified children, the CSA payment is equivalent to the maximum amount of the Canada Child Benefit.
  13. Voluntary Youth Services Agreement (VYSA): is a voluntary agreement between a youth who is 16 or 17 and a society for supports and services, including a living arrangement. The youth is not in the legal care of a society, but is provided with supports comparable to youth in care. The society is responsible for the maintenance of youth in a VYSA.
  14. Ontario Child Benefit Equivalent (OCBE) Savings Program: The provincial government provides monthly funding equivalent to the Ontario Child Benefit (OCB) directly to societies for the establishment of a savings account to assist older youth (ages 15-17) who have been in care or customary care for twelve months, or youth in a VYSA, in recognition of their need for support to transition successfully to adulthood. It provides all eligible youth with financial training skills to help prepare them for independent living and savings to assist with the costs of their basic needs upon leaving care (e.g. food, shelter, education costs).
  15. OCBE Activities Program: Provides all children and youth in care and customary care (ages 0-17), and youth in a VYSA, for whom the society is in receipt of the CSA, with access to recreational, educational, cultural and social opportunities that support positive outcomes including higher education outcomes, higher degrees of resiliency, social skills and relationship development, and a smoother transition to adulthood.

Footnotes

[1]The UCCB no longer exists and has been subsumed under the Canada Child Benefit/ Children's Special Allowance.

[2]The CESG and CLB are federal grants which provide an incentive for caregivers to save for a child or youth's post-secondary education by providing funds which are contributed to an RESP for the child or youth.

[3]The provincial government provides monthly funding equivalent to the Ontario Child Benefit (OCB) directly to societies to provide activities for children in care and youth in a VYSA, as well as the establishment of savings accounts for eligible older youth who have been in care or in customary care, or have entered a VYSA, to assist them in transitioning successfully to independent living. Upon entering the VYSA, the youth becomes eligible to receive RESP and OCBE savings. Please refer to the OCBE Policy Directive CW002-18.

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