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 $24,676. 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.
What is the criteria to request the earnings as an Accumulated Income Payment (AIP)
- 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.
Ready to fill out your maturity application?
Access your online account and complete the digital form.
*Your spouse must be named as the joint subscriber to your RESP.