Notice # 326 - Repayment obligation when a Disability Assistance Payment (DAP) or a Lifetime Disability Assistance Payment (LDAP) is processed

Official title: Notice # 326 - Repayment obligation when a Disability Assistance Payment (DAP) or a Lifetime Disability Assistance Payment (LDAP) is processed

Information Bulletin

Number:
CDSP/PCEI-2018/19-001-326

Date:
October 23, 2018

Subject:
Repayment obligation when a Disability Assistance Payment (DAP) or a Lifetime Disability Assistance Payment (LDAP) is processed

Purpose

The purpose of this information bulletin is to provide Issuers/Agents with a summary of resources available relating to the processing of a DAP or an LDAP. Beginning in 2019, grants and bonds that have been in a Registered Disability Savings Plan (RDSP) for more than 10 years will form a part of any DAP or LDAP withdrawn from the plan.

Background

Starting in 2019, some RDSPs will have existed for more than ten years. Holders of these RDSPs will be obliged to withdraw a portion, or all of those grants and bonds that have been in the plans for more than ten years as part of a DAP or LDAP. At the same time, issuers will continue to be required to calculate repayment obligations when processing a DAP or LDAP.

The assistance holdback amount (AHA) is defined as the total amount of grants and bonds paid into an RDSP within the past ten years before a particular date (i.e. before the date of a DAP or LDAP), less any amount of grant and bond paid in that ten-year period that has already been repaid to the government of Canada. Accordingly, any DAP or LDAP made within ten years of the last grant or bond paid into a RDSP will trigger a repayment obligation.

Starting in 2014, the amount of repayment required as the result of a DAP or LDAP (when required) is calculated using the proportional repayment rule. This rule requires that $3 be repaid to the Government of Canada for every $1 that is withdrawn from an RDSP up to the amount of the AHA.

Note: When grants and bonds are repaid to the Government of Canada, the amounts repaid cannot be reinstated. Issuers and Agents have a responsibility to explain to their clients that a withdrawal (DAP or LDAP) may cause some, or all, of the grants/bonds to be repaid to the Government of Canada.

Risk

Due to the complexity of the 10-year rule for RDSPs, some clients may fail to understand the requirements and expect to have access to ALL the grants and bonds in their RDSP once it is more than 10 years old. Other clients may believe that they can withdraw grants and bonds that have “vested” without any repayment obligation. This could lead to an increase in client inquiries and confusion, loss of grant and bond and decreased lifetime entitlements if clients are not informed of the AHA and repayment obligation.

Notice to holders

In the statement of entitlement template mailed to holders in early 2017 and 2018, a reminder of the consequences of withdrawing money from an RDSP following the 10-year anniversary was included. This reminder could create an increase in inquiries and calls from holders with respect to withdrawals from RDSPs.

Available resources

To help maximize client satisfaction and minimize compliance issues, we are pleased to provide this summary of the tools and training resources available to help your front-line employees to assist clients regarding the consequences of requesting either a DAP or LDAP, including the repayment obligations. We encourage you to provide these links to your front-line employees to help them better understand the RDSP product.

Training:

By selecting the Training tab under the following link, front line employees can scroll to the bottom to access the E-learning. On the same page they can also access Webinars and Virtual training.

InfoCapsules:

This link provides access to all the InfoCapsules that are related to RDSPs. Of particular interest for front-line employees would be the three InfoCapsules on DAP, LDAP, and AHA.

User guides and publications:

By selecting the "User Guide and Publications" tab, front line employees can access all the InfoBulletins on the RDSP product and the RDSP Provider User Guide, which covers all topics related to RDSP administration. In particular, Chapter 2-2 contains useful information about the AHA, DAPs and LDAPs.

General inquiries contact information:

Employment and Social Development Canada offers a general information line for the public, Issuers and Agents for enquiries on the disability savings grant and bond: 1-888-276-3624 (TTY 1-866-260-7723)

Canada Revenue Agency (CRA) public enquiries line: 1-800-959-8281

CRA contact information for Issuers/Agents (Registered Plans Division):
1-800-267-3100 (English)
1-800-267-5565 (French)
English webpage: Canada.ca/registered-plans-administrators
French webpage: Canada.ca/administrateurs-regimes-enregistres

Tools and resources for back office support

The following link provides access to all RDSP tools and resources. We encourage you to share this link with your staff: Canada.ca/RDSPresources.

Further consultations

ESDC plans to consult Registered Disability Savings Program Advisory Group (RDSPAG) members in October 2018 regarding enhancements to the InfoCapsules covering the AHA and Repayment obligations, and on whether proposed wording could be included in issuers’ withdrawal forms to ensure that RDSP repayment obligations are clearly communicated to clients. We look forward to these discussions.

Contact us

If you have any questions regarding this information bulletin, please contact us by email at rdsp-reei@hrsdc-rhdcc.gc.ca or call at 1-866- 204-0357. Our hours of operation are from 8 a.m. to 5 p.m., Eastern Time.