Shortened Life Expectancy

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

Objective

At the end of this module, you will be able to explain options to access assets from a plan in which the beneficiary has a shortened life expectancy.

1. Introduction

1.1. Prerequisites for this module

To complete this training module, you should have already completed the Registered Disability Savings Plan (RDSP) Administration training module as well as the Payment training module.

Suggested reading:

2. Definitions and Conditions

2.1 Shortened Life Expectancy

When a medical doctor certifies in writing that the beneficiary’s state of health is such that the beneficiary has a life expectancy of five years or less, the beneficiary is considered to have a shortened life expectancy for the purposes of the Registered Disability Savings Plan (RDSP).

Additional Information

RDSP Provider User Guide, Chapter 2-3

InfoCapsule 16 – Beneficiaries with shortened life expectancies

2.2 Specified Year

A specified year starts in the calendar year of the medical doctor’s written certification Footnote 1 but does not include any year prior to the year in which the issuer receives the certification and continues for:

  • each of the five following years Footnote 2 if the beneficiary has an RDSP; or
  • each of the following years if the beneficiary has a Specified Disability Savings Plan (SDSP) Footnote 3 .
Additional Information

RDSP Provider User Guide, Chapter 2-3

InfoCapsule 16 – Beneficiaries with shortened life expectancies

2.3 Specified Disability Savings Plan

An SDSP is an RDSP that has been designated as an SDSP. It provides beneficiaries who have shortened life expectancy with greater flexibility to access their savings from an RDSP. Withdrawals from an SDSP will not trigger a repayment of the assistance holdback amount (AHA) or the proportional repayment amount Footnote 4 .

Additional Information

RDSP Provider User Guide, Chapter 2-3

2.3.1 SDSP Conditions

While a plan is an SDSP:

Additional Information

RDSP Provider User Guide, Chapter 2-3

InfoCapsule 16 – Beneficiaries with shortened life expectancies

2.4 Period Exceeding 5 Years

When the plan is not an SDSP and the beneficiary survives more than 5 years, it will be subject to regular RDSP withdrawal rules.

An SDSP is not affected by the survival beyond 5 years – it remains an SDSP until the designation is removed. For an SDSP, each year is a specified year until the plan is no longer designated an SDSP.

Additional Information

RDSP Provider User Guide, Chapter 2-3

3. Holder Decision

3.1 Options

In a specified year, the holder can:

  1. keep the plan as a Registered Disability Savings Plan (RDSP); or
  2. designate the RDSP as a Specified Disability Savings Plan (SDSP).
Additional Information

RDSP Provider User Guide, Chapter 2-3

InfoCapsule 16 – Beneficiaries with shortened life expectancies

3.2 Keep RDSP As an RDSP

If a holder chooses to keep the RDSP as an RDSP, during a specified year they could:

  • request disability assistance payments (DAP);
  • have the money from the RDSP paid out over the specified year period; and
  • withdraw all funds from the RDSP in one lump sum.

The Assistance Holdback Amount or the proportional repayment amount must however be repaid when a payment is made.

Additional Information

RDSP Provider User Guide, Chapter 2-3

InfoCapsule 16 – Beneficiaries with shortened life expectancies

3.3 Designate as an SDSP

When a holder makes an SDSP election, he or she could:

  • ask for a DAP right away; and
  • withdraw an amount up to $10,000 of taxable amounts; if the legislated formula Footnote 5 results in a greater taxable amount, at least the amount of the formula result.

The assistance holdback amount or the proportional repayment amount would not be required to be repaid at the time of the payment.

Additional Information

RDSP Provider User Guide, Chapter 2-3

InfoCapsule 16 – Beneficiaries with shortened life expectancies

3.4 Check Your Understanding

A) What is the major difference between keeping the plan as an RDSP and designating the plan as an SDSP?

Answer

With the RDSP, the AHA applies, while with the SDSP, the AHA does not have to be repaid.

B) With an SDSP, can the plan holder continue to make contributions and receive grants and bonds?

Answer

No. Contributions cannot be made to the plan, and grants and bonds cannot be received.

C) Who can make an election? The issuer? The beneficiary? The plan holder? The medical doctor who signs the medical certificate?

Answer

The plan holder. While it is the medical doctor who must do the certification, it is the holder who actually makes the election.

4 Withdrawals

4.1 Withdrawals

In a specified year, the holder can request a disability assistance payment (DAP) or a lifetime disability assistance payment (LDAP) to be paid to the beneficiary at any time.

Payments can be made in one or more withdrawals and are subject to certain rules, such as if they take place in a primarily government assisted plan (PGAP) or a non-primarily government assisted plan (non-PGAP).

Additional Information

RDSP Provider User Guide, Chapter 2-2

InfoCapsule 21 – Maximum and Minimum Withdrawals

4.1.1 Withdrawal rules for an RDSP in a specified year

RDSP in a Specified Year
PGAP ( or later)
DAP LDAP DAP+LDAP
Before the end of the year in which the beneficiary turns 60 Max Amount No Maximum
Min Amount No Minimum $1.00 $1.00
Beginning the year the beneficiary turns 60 Max Amount No Maximum
Min Amount Always combined with LDAP Formula Result*

*ITA legislated formula, paragraph 146.4(4)(l)

Additional Information

RDSP Provider User Guide, Chapter 2-2

InfoCapsule 21 – Maximum and Minimum Withdrawals

4.1.2 Withdrawal rules for an SDSP in a specified year

SDSP in a Specified Year DAP LDAP DAP+LDAP
Beneficiary Any Age Max Amount $10,000 in taxable amount or no maximum if Formula* results in taxable amount greater than $10,000
Min Amount Formula Result*

*ITA legislated formula, paragraph 146.4(4)(l)

Additional Information

RDSP Provider User Guide, Chapter 2-2

InfoCapsule 21 – Maximum and Minimum Withdrawals

5. Termination

5.1 Reversing an Election

A plan holder can reverse a Specified Disability Savings Plan (SDSP) election at any time. The holder must provide a written notice to the financial institution, who must then inform Employment and Social Development Canada (ESDC).

When an election is reversed, the usual RDSP rules apply and no Canada Disability Savings Grant (grant) or Canada Disability Savings Bond (bond) can be paid until the calendar year following the election reversal.

Additional Information

RDSP Provider User Guide, Chapter 2-3

InfoCapsule 16 – Beneficiaries with shortened life expectancies

5.1.1 Subsequent election

The holder can make a subsequent election 24 months after the previous election ceases. To do so, the holder must submit a new shortened life expectancy medical certificate to the financial institution.

5.2 Removing an SDSP Designation

A plan ceases to be an SDSP at the earliest of the following times:

Additional Information

RDSP Provider User Guide, Chapter 2-3

5.3 Checking Your Understanding

A) During a specified year, can withdrawals begin at any time?

Answer

Yes

B) When an election is reversed, when can grant and bond be paid into the plan once again?

Answer

When an election is reversed, no grant or bond will be paid until the calendar year following the election reversal.

C) Name three reasons why an SDSP designation would be removed?

Answer
  • The holder elects to reverse the designation.
  • A contribution or a payment from a designated provincial program is made.
  • An education savings rollover is made to the plan.
  • The beneficiary is no longer DTC eligible.
  • The payment from the plan does not satisfy certain required conditions.
  • The plan is cancelled or its registration is terminated voluntarily or for compliance reasons.

6. SDSP Administration

6.1 Specimen Plan

No amendment to the specimen plan is required. The issuer must:

  • treat the holder’s election as an addendum to the individual RDSP contract; and
  • the addendum is added to the beneficiary’s file.
Additional Information

Canada Revenue Agency’s (CRA) website

RDSP Provider User Guide, Chapter 2-3

6.2 Form

The holder is required to elect using a form and submit the election to the financial institution. There are no requirements regarding the format of the form, but it must contain certain specific items Footnote 7 .

Additional Information

RDSP Bulletin No. 2R1 on CRA website

RDSP Provider User Guide, Chapter 2-3

6.3 Medical Attestation

The holder(s) must provide the financial institution with certification in writing (does not require a prescribed form) from a medical doctor who is licensed to practice under provincial laws or who is licensed to practice under the laws where the beneficiary resides, that in their professional opinion, the beneficiary is not expected to live longer than five years.

Additional Information

CRA website

RDSP Provider User Guide, Chapter 2-3

6.4 Forwarding SDSP Designation

Once the required documentation is received from the holder(s), the financial institution notifies ESDC of the SDSP election.

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.4.1 Required Information

Naming standards Footnote 8 must be used when sending information Footnote 9 on the SDSP designation for either a document or a spreadsheet. In addition, the current secure file exchange method for production files as outlined in the Data Interface Operation and Connectivity document must also be used.

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.4.2 MSFT

As soon as the document or spreadsheet is complete, the financial institution sends it via the MSFT software.

After sending the file via the secure file exchange, the issuer sends an email to indicate that a request has been forwarded to designate the plan as an SDSP.

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.4.3 Stop Bond Request

If there is an active bond request, the financial institution must submit a 401-06 Stop Bond Payment Request. This will ensure that no further bond is automatically paid into a contract.

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.5 Effective Date

A Specified Disability Savings Plan (SDSP) election becomes effective on the date Employment and Social Development Canada (ESDC) receives the request via Managed Secure File Transfer (MSFT).

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.6 Removal of Designation

To remove the SDSP designation, a medical attestation is not required.

The holder(s) must however indicate in writing that they wish to stop the designation of the beneficiary's plan as an SDSP. The document must be signed by all the holders of a plan and kept by the financial institution.

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.6.1 Required Information

Information Footnote 10 on the SDSP designation removal must be sent in a properly named Footnote 11 document or a spreadsheet format using the current secure file exchange method for production files as outlined in the Data Interface Operation and Connectivity document.

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.6.2 MSFT

As soon as the document or spreadsheet is complete, the financial institution sends it via the MSFT software.

After sending the file via the secure file exchange, the issuer sends an email to indicate that a request has been forwarded to stop an SDSP.

Additional Information

RDSP Provider User Guide, Chapter 2-3

6.6.3 Resume Bond Payment

To resume bond payments, financial institutions must submit 401-05 Bond Payment Request to ESDC. However, please note that no new grants or bonds will be paid into the plan until the year after which the election is reversed.

The holder does not have to complete a new application for grant and bond.

Additional Information

Interface Transaction Standards

RDSP Provider User Guide, Chapter 2-3

6.7 Allowed Transactions

When the holder makes an election, only the following financial transactions are allowed:

Additional Information

RDSP Provider User Guide, Chapter 2-3

7. Quiz

Question 1

How long must a holder wait after an SDSP election ceases before making a subsequent election?

  1. 12 months
  2. 6 months
  3. 24 months
  4. 18 months
Answer

c) 24 months

Question 2

What information is required when making an election?

  1. Holder signature and date
  2. A statement defining what is a “specified year”
  3. A statement indicating the holder wishes to designate the RDSP as an SDSP
  4. All of the above
Answer

d) All of the above

Question 3

To remove a designation, is a medical attestation required?

  1. Yes
  2. No
Answer

b) No

Question 4

When does the SDSP election become effective?

  1. When the medical certificate is issued.
  2. When ESDC receives the request.
  3. When the holder submits the request to the financial institution.
  4. All of the above.
Answer

b) When ESDC receives the request.

Question 5

How is the required SDSP designation information sent to ESDC?

  1. In a file sent by email
  2. In a file sent by mail
  3. In a file sent using a secure file transfer
  4. All of the above answers
Answer

c) In a file sent using a secure file transfer

Question 6

Are withdrawals permitted during an election period?

  1. Yes
  2. No
Answer

a) Yes

Question 7

Shortened life expectancy is defined as having a life expectancy of:

  1. 5 years or less
  2. 4 years or less
  3. 3 years or less
  4. 2 years or less
Answer

a) 5 years or less

8. Conclusion

8.1 Next Module

CDSP System Overview

8.2 Thank You

Thank you for completing this module.

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