Budget 2010 Measures
Disclaimer: RDSP issuers
The information contained on this page is technical in nature and is intended for Registered Disability Savings Plan (RDSP), Canada Disability Savings Grant (grant) and Canada Disability Savings Bond (bond) issuers. For general information, visit the RDSP section.
Consult this page frequently for newer versions. The following laws and regulations take precedence over information contained in InfoCapsules in the event of discrepancies:
- Income Tax Act
- Canada Disability Savings Act
- Canada Disability Savings Regulations
Official Title: Budget 2010 Measures
Information Bulletin
- Number:
- CDSP/ PCEI -2010/11-005-032
- Date:
- July 23, 2010
- Subject:
- Notice #032 - Budget 2010 Measures
Purpose
The purpose of this Information Bulletin is to provide Registered Disability Savings Plan (RDSP) Issuers and Authorized Agents with an overview of Budget 2010 announcements with regards to the Canada Disability Savings Program (CDSP).
Provincial Payments into RDSPs
New legislation has been introduced regarding provincial monies being paid into RDSPs. Budget 2010 proposes:
"to clarify that all payments made to a RDSP through a program funded, directly or indirectly, by a province or administered by a province will be treated the same way as federal grants and bonds and will therefore not themselves attract or reduce federal grants and bonds".
Key Dates
In the case of programs that are administered by a province, this measure will apply to payments made after 2006.
In the case of programs that are not administered by a province, this measure will apply to payments made after 2008.
Coming into Force
The Jobs and Economic Growth Act, known as Bill C-9, received Royal Assent on July 12, 2010. As such, these amendments are now law.
Implications
The Canada Revenue Agency (CRA) is currently determining parameters and criteria regarding provincial programs, but for now there are no system changes contemplated.
This position may be revisited in the future. In such a case, we will keep you informed of the situation.
Income Threshold
In March 2009, the budget announcement increased the two lowest personal income tax brackets above their indexed values, thus creating a discrepancy between the income thresholds stated in the Income Tax Act (ITA) and those in the Canada Disability Savings Act (CDSA).
This resulted in consequential amendments to the CDSA in order to bring the income thresholds used to determine eligibility for the Grant and Bond in line with those announced in Budget 2009. The amendments to the CDSA were announced in Budget 2010.
Please refer to Notice #028 "Changes to Registered Disability Savings Plan (RDSP) Income Matching Rates" dated July 6, 2010 for further information.
Key Date
System change was implemented in July 2010.
Coming into Force
The Jobs and Economic Growth Act, known as Bill C-9, received Royal Assent on July 12, 2010. As such, these amendments are now law.
Implications
The new definitions for income brackets and the consequential amendments to CDSA are retroactive to 2009 and 2010 contribution years. As such, all transactions dated during 2009 and 2010 will be examined again, and where applicable, reprocessed. The reprocessing of contribution transactions and Bond requests will result in additional Grant and Bond being paid.
This change will have no impact on Issuers' systems.
Child Benefits - Shared Custody
To improve the allocation of child benefits between parents who share custody of a child, Budget 2010 proposes:
"to allow two eligible individuals to receive the Canada Child Tax Benefit and Universal Child Care Benefit amounts in a particular month, and two eligible individuals to receive GST/HST credit amounts in a particular quarter, in respect of a child when the child lives more or less equally with both individuals."
Key Date
This measure will apply to benefits payable commencing July 2011.
Coming into Force
The amended legislation is expected to be tabled in Parliament in the fall of 2010.
Implications
This will impact the CDSP because in order to pay Grant and Bond to a beneficiary under 19 years of age, the Program requires custody information as well as the income level of the parents or legal guardian. This information is used to determine residency and Disability Tax Credit (DTC) eligibility as well as the entitlement to the Grant and Bond.
With the changes announced in the Budget, a beneficiary under 19 years of age could have two income levels (one for each primary caregiver) for each month of the year. The system will therefore have two income levels to choose from to determine Grant and Bond entitlement. This determination will be done automatically by the CDSP system. The system release is anticipated for July 2011.
There are no impacts anticipated on Issuers' systems at this time.
Rollover of RRSP/RRIF Proceeds to an RDSP
To give parents and grandparents more flexibility in providing for a disabled child's long-term financial security, Budget 2010 proposes:
"to allow a deceased individual's Registered Retirement Savings Plan or Registered Retirement Investment Fund proceeds to be transferred to the RDSP of a financially dependent infirm child or grandchild".
The amount transferred (rolled over) will not attract incentives and, like a regular contribution, will decrease the beneficiary's lifetime contribution room, currently set at $200,000. The amount rolled over, when added to contributions made in the name of the beneficiary, will not be permitted to exceed the $200,000 lifetime limit.
Key Dates
This measure will be effective on deaths occurring on or after March 4, 2010. However, where the death of an RRSP annuitant occurs after 2007 and before 2011, special transitional rules will allow a contribution to be made to the RDSP of a financially dependent infirm child or grandchild of the annuitant. For further information, please contact the Canada Revenue Agency.
To allow time for system development, RDSP contributions benefiting from the proposed rollover measure cannot be made before July 2011.
Coming into Force
The amended legislation is expected to be tabled in Parliament in the fall of 2010.
Implications
Preliminary discussions indicate that given their respective mandates, CDSP and CRA will have, as a minimum, requirements for Issuers to report electronically to the CDSP the amount being rolled over into the beneficiary's RDSP as well as the rollover date. When funds are taken out of the RDSP, Issuers will need to provide the amount of rolled over monies included in the Disability Assistance Payments (DAPs) and the Lifetime Disability Assistance Payments (LDAPs).
We anticipate that the Interface Transaction Standards (ITS) outlining the required system changes will be available in December 2010 with a system implementation in July 2011.
RDSP Carry Forward Provision/Statement of Entitlement
In recognition that families of children with disabilities may not be able to contribute regularly to their plans, Budget 2010 proposes:
"to amend the Canada Disability Savings Act to allow a 10-year carry forward of Grant and Bond entitlements.
Upon opening an RDSP, bond entitlements will be determined and paid into the plan for the preceding 10 years for an eligible beneficiary. The balance of unused grant entitlements will also be determined and maintained for the same period. Grants will be paid on unused entitlements, up to an annual maximum of $10,500."
In addition, an annual Statement of Entitlement (SOE) will be prepared for each beneficiary named on a RDSP. The SOE will show how much Carry Forward Grant is available.
Key Date
The Carry Forward will be available starting in 2011.
Coming into Force
The amended legislation is expected to be tabled in Parliament in the fall of 2010.
Implications
The legislation for this new measure has not yet been drafted; therefore the full implications of this change are still unknown. The impact on the CDSP and its partners will be evaluated in the coming months. We will keep you informed of progress and future development as soon as we have more information.
We anticipate the Interface Transaction Standards (ITS) being available in Spring 2011 with a system implementation in January 2012.
Conclusion
Details regarding Budget 2010 implications on RDSPs and Issuer systems will be provided when available.
Additional Information
Please contact us with any questions you may have by e-mail at rdsp-reei@hrsdc-rhdcc.gc.ca or by phone at 1-888-276-3632.