Understanding Your Maturity Options
When your child or beneficiary has made that important decision to either pursue post-secondary studies or consider other options, you will need to make some decisions regarding your Registered Education Savings Plan (RESP).
We're here to help make that process simple. Check out the maturity time resources available to ensure you make the best decision in relation to your goals.
Not sure which maturity options are available?
Click here to check out a video on plan maturity.
Click here to access the maturity Q&A section.
Not sure if your desired post-secondary institution qualifies?
Click here to access the list of approved post-secondary institutions.
Want to fill out an online application for quick processing?
Click here to access your online account and complete the digital form.
Understanding Your Plan's Maturity
Typically, your plan's maturity date is on July 31st of the year your beneficiary turns 18 years old and is expected to start their first year of post-secondary studies. Depending on your document delivery preference of important updates, an information notice will be sent to you within 180 days prior to your maturity date, but no later than July 1st. This notice will invite you to login to your Subscriber Online account in order to guide and instruct you on the steps of the maturity process, as well as the forms to be completed by you and your beneficiary.
Before your maturity date, you must select an option that best suits your beneficiary's academic studies. There are 2 options available: the scholarship option and the self-determined option.
The Scholarship Option
This option is ideal for students taking 2, 3 or 4 years of full-time eligible studies. Your contributions less fees, also known as your "principal," will be returned to you on or after your maturity date and can be used to help fund your beneficiary's first year of post-secondary studies. Educational assistance payments (EAPs) are available in the 2nd, 3rd and 4th years of full-time eligible studies, depending on the scholarship option (option 1, 2 or 3) you chose prior to the release of your contributions less fees. EAPs are paid beginning the 2nd year of full-time eligible studies.
The Self-Determined Option
This option is ideal for students enrolled in eligible studies that are less than 2 years in length, or not attending post-secondary education at all. You may request your contributions less fees at any time between the maturity date and your plan's expiry date, which is the end of the 35th year following the year in which your plan was entered into. The sales charges are not returned under the self-determined option.
If your beneficiary enrolls in a qualifying program – your beneficiary can request EAP(s) at any time up to your plan's expiry date.
If your beneficiary does not enroll in a qualifying program – you can request the earnings in your plan in the form of an accumulated income payment (AIP) provided you meet certain criteria.
Educational Assistance Payments (EAPs)
An educational assistance payment (EAP) is the payment your child receives from their RESP when they enroll in an approved post-secondary institution. The beneficiary will receive EAPs once a year in their 2nd, 3rd and 4th year of eligible studies, depending on the option selected and provided the beneficiary remains eligible. This payment consists of investment earnings and government grant money accumulated in their RESP.
Under both the Scholarship Option and the Self-Determined Option, EAPs consist of the following:
- Income on principal,
- Government grants, and
- Income on government grants.
Additionally, under the scholarship option, EAPs also consist of attrition1. The Heritage Educational Foundation (the "Foundation") may also provide discretionary payments2 from the discretionary payment account to:
Top-up the EAPs; and/or
Return an amount equal to the sales charges, or a part thereof. If the Foundation decides to make a discretionary payment to return the sales charges, they are at 25%, 50% or 100% depending on the scholarship option chosen at maturity.
Example: If you had chosen "four year scholarship option" in 2012, Knowledge First returned 100% of the sales charges. If you chose "two year scholarship option" Knowledge First returned 25% of your sales charges.
Important: Pursuant to the Canada Revenue Agency (CRA) regulations, there is an annual EAP threshold limit of $23,460. If the total EAP is more than this amount, you or your beneficiary will be required to provide Knowledge First with proof of the beneficiary's educational expenses that meet or exceed the annual threshold limit in order to receive any remaining balance.
Please note that attrition1 and discretionary payments2 are not available under the self-determined option.
1. Attrition is the term that applies to the share of pooled income remaining in the Heritage Plans after any beneficiaries in the same group as your beneficiary do not qualify for payments. For those beneficiaries, the contributions less fees (or principal) are returned to the subscriber, but the income that was earned on the contributions less fees stays in the total asset pool to be shared by beneficiaries remaining in the pool. For further explanation on how attrition applies to your plan, please see your Heritage Plans prospectus.
2. Discretionary payment is not guaranteed. You must not count on receiving a discretionary payment. The Heritage Educational Foundation decides if it will make a payment in any year and how much the payment will be. If the Foundation makes a payment, you may get less than what has been paid in the past. You may also get less than what the Foundation pays to the beneficiaries in other groups.
Important information for clients not pursuing post-secondary education:
- You can substitute the beneficiary of your plan as long as no EAPs have been paid or forfeited and provided certain conditions are met.
- Under the self-determined option, you can request the return of your contributions less fees and you can request your accumulated income payment (AIP) to be paid to you or to the joint subscriber (if applicable) subject to the following 2 different taxes:
- your regular income tax, and
- an additional federal tax of 20% (or 12% federal and 8% provincial tax for residents of Quebec).
To avoid incurring any taxes, you can transfer up to $50,000 of income to your or your spouse's* Registered Retirement Savings Plan (RRSP), providing there is RRSP contribution room to do so and you satisfy all Accumulated Income Payment (AIP) requirements.
- The payment is made to the subscriber of the RESP who is a resident in Canada;
- The payment is made to only one subscriber of the RESP (in the case of a plan with joint-subscribers); and
- Any one of the following three conditions apply:
- The plan has been opened for ten years and each individual who is or was a beneficiary is over 21 years of age and not eligible for an EAP; or
- The plan is being closed by the end of the 35th year (40th year in the case of a specified plan) after the year the plan was opened; or
- All beneficiaries named under the RESP are deceased.
Your plan's maturity date is on July 31st of the year your beneficiary turns 18 years of age and is expected to start their first year of post-secondary studies.
Yes. Depending on your document delivery preference of important updates, an information notice will be sent to you within 180 days prior to your maturity date, but not later than July 1st. This notice will invite you to login to your Subscriber Online account to guide and instruct you on the steps of the maturity process and the forms to be completed by you and your beneficiary.
There are 2 options to choose from before your maturity date: the scholarship option and the self-determined option. When selecting the scholarship option, you can choose to receive your EAPs over the course of either one, two, or three years.
In Canada, a recognized post-secondary institution generally includes all universities and community colleges recognized by the Association of Universities and Colleges of Canada, the Association of Canadian Community Colleges or the American Association of Bible Colleges, CEGEP, Registered Private Vocation Schools (registered and approved by the Ministry of Colleges and Universities for each province), and other institutions recognized as having degree or diploma-granting status by provincial statute.
Outside of Canada, a recognized institution generally includes universities and colleges and other institutions having degree or diploma-granting status as recognized by associations in such countries which are equivalent to those referred to above.
The scholarship option is ideal for students taking 2, 3 or 4 years of full-time eligible studies. It provides for payment of your contributions less the fees and provides educational assistance payments (EAPs) to your beneficiary over 1, 2 or 3 years depending on the scholarship option chosen. The self-determined option is ideal for students enrolled in a post-secondary program that is less than 2 years in length, or not attending at all.
It provides for payment of your contributions less the fees and provides EAPs if your beneficiary enrolls in a qualifying program or an accumulated income payment or AIP if your beneficiary does not enroll in a qualifying program.
In order to release your contributions less fees, you need to provide Heritage with your completed maturity application signed by you and the joint subscriber (if applicable) and must also provide proof of registration or verification of enrollment. If the beneficiary is not yet enrolled in a qualifying program, your contributions less fees will be kept in your plan until such proof can be provided. This is done to ensure the government grants are maintained in your plan and will be available to your beneficiary with the EAPs.
If your beneficiary does not intend to enroll in a post-secondary program, you can request the release of your contributions less fees under the self-determined option by providing your completed maturity application. As proof of registration is not being provided, all government grants will be returned to the applicable governments.
Your choice of maturity option must be selected prior to your maturity date. If your selection is not received at Heritage by July 31st, one of the following will apply:
- If your plan was opened prior to August 14, 2009, Scholarship Option 3 will be selected on your behalf; or
- If your plan was opened on or after August 14, 2009, the Self-Determined Option will be selected on your behalf and you will not be entitled to the refund of your applicable sales charges and your beneficiary's share of group plan attrition.
In case we select a payout option on your behalf, you are still required to submit all necessary documents.
The chart below provides a breakdown of the eligible studies under each maturity option.
If you are substituting your beneficiary prior to your maturity date, the new beneficiary must be younger than the current beneficiary (unless they are both under 15 years of age). The maturity date and the year of eligibility will be adjusted for the new beneficiary.
Under the scholarship option, you can substitute your beneficiary after your maturity date as long as no EAPs have been paid from the plan or forfeited. The new beneficiary must be younger than the current beneficiary and the substitution must occur prior to the current beneficiary's 21st birthday. Also, both beneficiaries must have valid Social Insurance Numbers.
Under the self-determined option, you can substitute your beneficiary after your maturity date as long as no EAPs or AIPs have been paid. There is no age limit for substituting the beneficiary.
In a plan where only the CESG is held, in order to keep the CESG for any substitution of beneficiary, both beneficiaries must be siblings or related to the subscriber by blood or adoption AND be under 21 years of age. If these requirements are not met, the CESG will be returned to the government. In a plan where the CESG and other government grants are held, in order to keep all grants for any substitution of beneficiary, both beneficiaries must be siblings AND be under 21 years of age. If these requirements are not met, all government grants will be returned to the applicable governments.
Heritage Education Funds is a division of Knowledge First Financial Inc. Knowledge First Financial Inc. is a wholly owned subsidiary of the Knowledge First Foundation and is the investment fund manager, administrator and distributor of the education savings plans offered by Knowledge First Foundation and Heritage Educational Foundation. For more information about our education savings plans, please visit knowledgefirstfinancial.ca or refer to our prospectus.