Universitas answers your questions
In response to the many comments received further to the changes to the EAP qualification criteria, Universitas Financial wishes to provide all its clients with additional detailed information to fully understand these changes and how they may have affected their group plans.
The video is only available in French.
In recent years, an increasing number of subscribers with group plans were calling for more flexibility when the time came to withdraw funds from their RESPs.
The solution proposed by Universitas last fall was intended to provide our beneficiaries with faster and easier access to their EAP funds and ensure they receive 100% of the grant money in their RESP, regardless of the type of education they pursue.
Summary of the changes to our group plans:
* Subject to the provisions of the Income Tax Act (Canada).
REFLEX Plan beneficiaries now enjoy increased flexibility at the time of EAP withdrawals. Upon enrolment to eligible post-secondary studies, beneficiaries have access to all their EAP funds, including 100% of the grant money.
That being said, post-maturity attrition―the only component of EAPs affected by the easing of the criteria―was already lower under the REFLEX Plan compared to the UNIVERSITAS Plan. Therefore, since more beneficiaries were already qualifying for EAPs under the REFLEX Plan’s former criteria, the increased flexibility’s impact on the EAP levels for this plan is lower.
As the subscriber, you decide the amount and frequency of your EAP withdrawals throughout the beneficiary’s school career, based on his or her financial needs. You can withdraw one or several payments, in accordance with the criteria established by the Income Tax Act (Canada).
However, subscribers should take into account that EAPs are taxed in the beneficiary’s hands and must be added to their tax return as income for the year said payments were received. Don’t hesitate to speak to your scholarship plan representative for advice on RESP withdrawals; he or she can help you establish the strategy best suited to your situation.
No! The refund of your contributions is always 100% guaranteed at plan maturity, whether your child goes to school or not. Basically, every penny you saved for your beneficiary’s post-secondary education will be returned to you as a refund of contributions (ROC) when the time comes.
Furthermore, the government grants and investment earnings (on contributions and grants) in your RESP are funds that are kept in your beneficiary’s name to cover school expenses.
The easing of the qualification criteria only affects the potential gain from attrition after plan maturity (known as post-maturity attrition). This potential gain refers to income left on the table by beneficiaries who do not pursue eligible studies.
Offering a new savings product would not have offered a satisfactory solution for current subscribers with a UNIVERSITAS Plan and/or REFLEX Plan, who were calling for more flexibility in terms of RESP withdrawals. Our recommendation to ease the former qualification criteria was considered at length, and aimed to satisfy current and future clients by promoting greater freedom to choose from a diversity of school careers.
Our goal is and has always been to encourage access to post-secondary education for all types of school careers pursued by our student beneficiaries.
It was impossible to know the exact monetary impact for each subscriber, since at the time of the vote, the calculations presented had to be based on actual historical values and not assumptions.
Since the consultative process, an actuarial calculation of the new EAP amounts was carried out on January 15, 2018. Further to this calculation, we now know the specific amounts available to beneficiaries currently eligible to receive EAPs.
The consultative process and the proposed changes affected each type of plan independently, namely the REFLEX Plan and the UNIVERSITAS Plan. According to the group nature of these plans, the changes adopted had to be applied in a way that ensured equity for all.
If the majority had chosen to maintain stricter withdrawal criteria, the decision would have applied to all subscribers with the same plan type; the same rules and criteria would have governed the plans.
Given the nature of group plans (pooled savings), it was essential to consult all the subscribers affected by the proposed changes, which is what we did. We are not the first RESP (or mutual fund) provider to initiate this kind of procedure.
Moreover, the possibility of amendments to the plans further to a subscriber meeting is stated in our prospectus. Rest assured that the consultation process was in line with industry standards and satisfied all legal requirements.
Recommendations are common practice when similar meetings (consultations) are held.
Universitas Financial’s recommendation was based on industry trends, the impact on our subscribers and the desire to find a solution that would benefit the greatest number. The recommendation submitted by Universitas regarding the proposed changes aimed to propose a solution in the best interest of the majority of our clients and beneficiaries.
In addition, the recommendation reflects today’s student life, which is evolving and giving way to a variety of educational paths, all equally valid. The withdrawal of EAPs according to a rigid schedule is no longer consistent with today’s reality, and thus did not meet the needs of our clients and their children.
Each subscriber is entitled to one vote per type of group RESP (e.g., one vote for all REFLEX Plans held combined), regardless of the number of units purchased, as stipulated in the Trust Agreement that governs our activities.
At Universitas, all individuals participating in a plan are considered equal and have an equal voice in a vote; it would go against our core values to favour subscribers with the financial means to invest more over with a more modest plan.