Canada Disability Savings Grant and Bond Carry Forward Entitlements - Questions & Answers

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Official Title: Canada Disability Savings Grant and Bond Carry Forward Entitlements

Canada Disability Savings Grant and Bond Carry Forward Entitlements.

Number:
CDSP/ PCEI -2011/12-001B-054
Date:
April 15th, 2011
Subjet:
Notice #054 - Canada Disability Savings Grant and Bond Carry Forward Entitlements.

1. What is Carry Forward?

As people with disabilities and their families may not be able to contribute regularly to their RDSPs, the Carry Forward provision allows individuals to receive unused grant and bond entitlements from the past 10 years (starting from 2008, the year the RDSP became available). This applies to all RDSPs, regardless of when the plan is registered.

To receive grant and/or bond from unused entitlements, the beneficiary must be currently eligible to receive the grant and/or bond. The Carry Forward provision ends at the end of the calendar year the beneficiary turns 49.

Grant and bond entitlements for a given year are based on the beneficiary's family income. The amount of grant that is paid by the Government of Canada depends on how much is contributed to the RDSP and the matching rate. The matching rate for Carry Forward entitlements will be the same as the one that would have applied if the contribution had been made in the year in which the grant entitlement was earned.

Grants and bonds will be paid on unused entitlements, up to an annual maximum of:

  • $10,500 for grants; and
  • $11,000 for bonds.

2. When does the Carry Forward begin?

The legislation to enact the Carry Forward provision received Royal Assent on December 15, 2010. The provision came into effect on January 1, 2011.

As it will take time to develop the electronic system to process these transactions reported in 2011, the functionality to administer the Carry Forward will not be available immediately. Therefore, 2011 Carry Forward entitlements are expected to be paid into RDSPs in early 2012.

3. Who can benefit from the Carry Forward?

Any beneficiary currently eligible to receive the grant and bond can benefit from the Carry Forward provision—up to and including the year that the beneficiary turns 49.

4. Do I need to complete a special application form to request the Carry Forward of grant and bond?

No, a special application will not be required for the Carry Forward provision. Grant and bond entitlements, as appropriate, will be calculated automatically.

In the case where a beneficiary, who is 18 or older, wants to open a plan and access the Carry Forward entitlements for the period when they were under 18 years of age, the grant and bond entitlements for this period would be based on the beneficiary's family income from two years prior.

5. How will the government obtain family income information dating back to 2008 for beneficiaries between the ages of 18 and 21?

Unless the name of the "Current Eligible Individual" is provided for the years the beneficiary was under the age of 18, the beneficiary will only receive the basic 100% matching rate of grant. To obtain the family income during those years, the government will require the information of the "Current Eligible Individual" (or individuals) who received the Canada Child Tax Benefit during years when the beneficiary was under 18. Therefore, issuers should have the beneficiaries/holders between 18 and 23 years old complete the Application Form for Beneficiaries Under 18 years of Age (EMP5463) in addition to the Application Form for Beneficiaries aged 18 or over, or Legal Representative (EMP5464). This will provide the consent required to enable the government to verify family income for the years before the beneficiary turned 18.

Please note that HRSDC is currently working on a more consolidated and streamlined application form which will accommodate all beneficiaries whether or not they have reached 18 years of age. This improved application form should be available in 2011.

Issuers will need to remit the consent information to the Canada Disability Savings Program via electronic transfer. We are currently working on a new transaction type to allow issuers to do so. It is expected to be available in early 2012.

6. What is the most a person can get in grant and bond in any particular year?

The maximum grant entitlement is $3,500 per year, with a lifetime limit of $70,000 and the maximum bond entitlement is $1,000 per year, with a lifetime limit of $20,000. Under the Carry Forward provision, grants and bonds will be paid on unused entitlements, up to an annual maximum of $10,500 for grants and $11,000 for bonds.

7. Will all contributions made in 2011 be eligible for the Carry Forward or only those made after a certain date?

All contributions made in 2011 will be eligible for the Carry Forward entitlements.

8. Why are the 2008, 2009 and 2010 contributions not eligible for Carry Forward?

The Carry Forward entitlement provision was not available until 2011; therefore, RDSP contributions made in 2008, 2009 and 2010 were made before the availability of this provision. However, any Carry Forward entitlement "room" now remaining from the contributions made in 2008, 2009 and 2010 (i.e. where the grant and bond were not paid out in full) will be calculated, as appropriate, and available for contributions made in 2011 and beyond.

9. What matching rate will be used to calculate the entitlements?

The matching rate on unused grant entitlements will be the same as that which would have applied had the contribution been made in the year in which the entitlement was earned. Matching rates on RDSP contributions will be paid in descending order, with contributions using up any grant entitlements at the highest available matching rate first (for the oldest year of entitlement), followed by any grant entitlements at lower rates. [See Example].

10. How much should I contribute to get the most grant in 2011?

If a beneficiary is considered in the low-income category for all years and no prior contributions were made, the contribution that elicits the largest grant would be $4,250 [See Example]. If the beneficiary is not considered low-income for all years and no prior contributions were made, the contribution would be $4,000.

For example: as Carry Forward entitlements are awarded in order of best matching rate available and oldest entitlement, a contribution of $4,250 would have entitlement room calculated in the following way:

  • in 2008, 2009, 2010, 2011: $2,000 of contribution (i.e. $500 for each year for 4 years @ 300%) would earn $6,000 in grant;
  • in 2008, 2009: $2,000 of contribution (i.e. $1,000 for each year for 2 years @ 200%) would earn $4,000 in grant;
  • (Bringing the total grant up to $10,000; note: the maximum annual grant limit is $10,500); and
  • in 2010, the last $250 of the contribution would be @ 200%, earning $500 in grant
  • Total $10,500 in grant, (the annual maximum for a grant)

One of the recent amendments to the Canada Disability Savings Act ensures that individuals receive a "statement of entitlement" to grants based on future contributions. This amendment is: Once a year, the Minister shall cause each holder of a registered disability savings plan to be provided with a statement that sets out the amount of Canada Disability Savings Grants that may be paid for particular years on the basis of future contributions. 

NOTE: work is underway to ensure that in 2012, each RDSP holder will be receiving a "Statement of Entitlement".

11. When will the CDSP begin to process contributions with the Carry Forward functionality?

As indicated above, it will take time to develop the electronic system to process these transactions, and so the functionality to administer the carry forward will not be available immediately. The 2011 Carry Forward entitlements are expected to be paid into RDSPs in early 2012.

12. If the beneficiary is turning 49 in the year when a contribution is made, will the beneficiary still be eligible to receive grant entitlements for past years?

If the beneficiary turns 49 in the year when a contribution was made, he/she will still be eligible to benefit from the Carry Forward.

Examples of Carry Forward

A client opens an RDSP in 2011, and makes a contribution of $4,500. The financial institution reports the contribution and it will be processed by the CDSP system awarding any grant available in 2011. In this case, we had determined that the individual is considered in the low-income category; therefore, the first $500 will attract $1,500 in grant at 300%, and the next $1,000 will attract $2,000 in grant at 200%. Total paid in 2011 would be $3,500. In January 2012 this transaction will be reprocessed using the Carry Forward functionality.

In this case there are grant entitlements available for 2008, 2009, 2010 and 2011; and we will assume that the matching rate is based on the low-income category for all four years. Upon reprocessing, the first $2,000 of contribution will attract $6,000 in grant (at 300%); the next $2,250 will attract $4,500 in grant (at 200%) for a total of grant paid of $10,500 (this will leave $250 of the total contribution that does not attract grant).

Carry Forward entitlements are awarded in order of best matching rate available and oldest entitlement. The Carry Forward grant will be awarded in the following order:

  • in 2008, 2009, 2010, 2011: $2,000 of contribution (i.e. $500 for each year @ 300%) would earn $6,000 in grant;
  • in 2008, 2009: $2,000 of contribution (i.e. $1,000 for each year @ 200%) would earn $4,000 in grant;
  • this brings the total grant up to $10,000, (note: the maximum annual grant limit is $10,500);
  • therefore, in 2010: $250 of contribution @ 200%, would earn $500 in grant; and
  • total: $10,500 (the annual maximum for a grant).

In 2012, this beneficiary will have the following Carry Forward grant entitlements available:

  • 2012 - $500 contribution room available at 300% ($1,500) (grant payments are calculated using the most advantageous match rate first);
  • 2010 - $750 contribution room available at 200% ($1,500), (i.e. $1,000 less the $250 unused from 2010);
  • 2011 - $1,000 contribution room available at 200% ($2,000); and
  • 2012 - $1,000 contribution room available at 200% ($2,000), (total grant of $3,500 available).

This represents a total of $7,000 of grant entitlements in 2012 (after the CDSP has paid the grant & bond against the 2011 contribution of $4,250) that can be caught up with a total contribution amount of $3,250 in 2012.

Contact Us

Questions on this Information Bulletin should be directed to the Canada Disability Savings Program by e-mail at rdsp-reei@hrsdc-rhdcc.gc.ca or by calling 1-888-276-3632.

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