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Chapter 14. Repaying the RDSP grant and bond

From: Employment and Social Development Canada

Disclaimer: RDSP issuers

The information contained on this page is technical in nature. The target audience are issuers of the:

  • Registered Disability Savings Plan (RDSP)
  • Canada Disability Savings Grant (CDSG)
  • Canada Disability Savings Bond (CDSB)

For general information, visit the RDSP page.

On this page

Alternate format

A PDF version of the Registered Disability Savings Plan provider user guide is available on the index page.

List of acronyms
AHA
Assistance holdback amount
CDSB
Canada Disability Savings Bond
CDSG
Canada Disability Savings Grant
CDSP
Canada Disability Savings Program
DAP
Disability assistance payment
DTC
Disability Tax Credit
ESDC
Employment and Social Development Canada
FMV
Fair market value
LDAP
Lifetime disability assistance payment
RT
Record type
RDSP
Registered Disability Savings Plan
RESP
Registered Education Savings Plan

Introduction

The Registered Disability Savings Plan (RDSP) is a long-term savings plan intended to help persons, with disabilities save for the future.

When certain events occur, all or a portion of the Canada Disability Savings Grant (CDSG) (grant) and the Canada Disability Savings Bond (CDSB) (bond) must be repaid to the Government of Canada. This chapter lists the different events that may lead to a repayment and how to determine the amount of CDSG and CDSB to be repaid.

Contributions can be made into the plan until the end of the calendar year in which the beneficiary turns 59 years of age. The Government of Canada will help encourage and support savings by contributing a matching grant and adding the bond into the RDSP of an eligible beneficiary.

Beneficiaries must begin regular withdrawals, lifetime disability assistance payments (LDAP), from their RDSP, no later than December 31 of the calendar year in which they turn 60 years of age. The Government of Canada may pay the grant and bond into an RDSP until December 31 of the calendar year in which a beneficiary turns 49 years of age. This "cut-off" is to ensure that grant and bond amounts remain in the RDSP for at least 10 years before beneficiaries turn 60. This requirement is to promote long-term savings.

However, when certain events occur, all, or a portion of the grant and bond previously paid into an RDSP, will have to be repaid to the Government of Canada. Depending on the event, the repayment amount is either the assistance holdback amount (AHA) or an amount that is proportional (3 to 1) to the disability assistance payment (DAP) payment withdrawn from the RDSP.

Note: Any amount of grant and bond repaid to the Government of Canada cannot be reinstated.

AHA

The AHA is the total amount of the grant and the bond paid by the Government of Canada, into the RDSP within a 10-year period for a beneficiary. This is less any amount of grant and bond previously repaid to the government during that same 10-year period.

Proportional Repayment Rule ($3 to $1)

The proportional repayment rule requires that $3 in grant and bond be repaid to the Government of Canada for every $1 that is withdrawn from an RDSP, up to a maximum of the AHA. The grant and bond must be repaid in the same order in which they were initially paid into the plan, from the oldest to the newest.

Note: The proportional repayment rule came into effect on January 1, 2014.

14.1 Repayment types

14.1.1 AHA repayment

The following events may trigger the repayment of the AHA:

  • closure of the RDSP (other than for a transfer)
  • non-compliance of the RDSP (plan de-registered)
  • a withdrawal (lump sum DAP or LDAP)
  • death of the beneficiary

14.1.1.1 Example of AHA repayment

In 2008, a beneficiary opened an RDSP and received the grant and the bond until 2020. Unfortunately, the death of the beneficiary occurred on January 4, 2021. The issuer was only notified of the death 6 months later, on June 4, 2021.

In this scenario, the AHA period start date is 10 years prior to the death of the beneficiary (from January 5, 2011) up until the current date, when the event was reported by the issuer (to June 4, 2021).

14.1.2 Proportional repayment

The proportional repayment rule requires that $3 in grant and bond be repaid for every $1 withdrawn from an RDSP, up to a maximum of the AHA.

A withdrawal (lump sum DAP or LDAP) is the only event that can result in the repayment of the proportional ($3 to $1) amount.

If any amounts of grant and bond have been in the plan for less than 10 years, a withdrawal will result in a repayment.

When a withdrawal occurs, the issuer must calculate and when applicable, repay the lesser of the 2 following amounts:

  • the proportional repayment amount ($3 to $1)
  • the AHA before the payment

Note: A withdrawal is only allowed if the fair market value (FMV) of the plan, after the withdrawal, is greater than the AHA.

14.1.3 Proportional repayment calculation

For example: Jonathan is the beneficiary of an RDSP that has been opened for 13 years. Jonathan contacted the issuer requesting a $3,000 withdrawal. Since there are grant and bond amounts that have been in the plan for less than 10 years, the withdrawal request will trigger a repayment. Consequently, the issuer must determine the amount of grant and bond to be repaid, by calculating the following 2 amounts:

  • the proportional ($3 to $1) repayment amount, which requires that $3 in grant and bond be repaid for every $1 withdrawn:
    • therefore, a $3,000 DAP will result in a $9,000 repayment ($3 x $3,000 = $9,000)
  • the AHA, which is the total amount of grant and bond paid into the plan within the last 10 years, before the withdrawal:
    • in this case, the AHA for Jonathan's RDSP is $45,000

Since the proportional repayment amount of $9,000 is less than the AHA of $45,000, the amount of grant and bond to be repaid is $9,000.

Note: There is no distinction whether the repayment is from the grant or bond. The issuer must use the date that the amounts were initially paid into the RDSP and repay them in the same order, from the oldest amount to the newest. It can therefore be either one or the other, or a combination of the 2.

In the above scenario, the issuer must repay $9,000 to the Government of Canada as follows:

  • $4,500 ($3,500 in grant and $1,000 in bond) from 2011
  • $4,500 ($3,500 in grant and $1,000 in bond) from 2012

14.2 Loss of disability tax credit eligibility

Since March 19, 2019, issuers are no longer required to close an RDSP if the beneficiary loses their eligibility to the disability tax credit (DTC).

However, the loss of DTC-eligibility will remain as an acceptable reason to close a plan, should the holder request the closure. In such a case, the loss of DTC-eligibility and the age of the beneficiary will serve as factors in determining the AHA period.

Otherwise, while a beneficiary is DTC-ineligible, the RDSP may remain open, but will be limited to the following rules.

  • No contributions can be made to the plan, including the rollover of Registered Education Savings Plan (RESP) investment income, however:
    • the rollover of proceeds from a qualified retirement savings plan will be permitted
    • it will only be permitted if made by the end of the fourth calendar year following the first full calendar year in which the beneficiary is DTC-ineligible
  • A qualified retirement savings plan can be a:
    • Registered Retirement Savings Plan
    • Registered Retirement Income Fund
    • Registered Pension Plan
    • Pooled Registered Pension Plan
    • Specified Pension Plan
  • The beneficiary is not eligible to receive grant and bond, nor will entitlements accumulate during any period where the beneficiary remains DTC-ineligible
  • Withdrawals are permitted but may trigger the repayment of the lesser of either the proportional repayment amount or the AHA, over a modified period:
    • the AHA will be determined as all grant and bond paid into the RDSP in the 10-year period immediately preceding the time when the beneficiary was no longer DTC-eligible
  • Minus any grant and bond paid into the RDSP during that time that was previously repaid to the Government of Canada:
    • the reference period for the AHA will remain the 10-year period preceding the time when the beneficiary was no longer DTC-eligible
  • It will continue until the beginning of the year that the beneficiary turns 50
  • At this point it will become 9 years, decreasing at the beginning of each subsequent year
  • Then it will continue until the beginning of the year the beneficiary turns 60 when it becomes nil

A plan holder can at any time during which a beneficiary is DTC-ineligible, request closure of the RDSP. Upon closure, the AHA to be repaid to the Government of Canada will be reduced by one year, for each year beginning the year that the beneficiary turns 51.

Note: For more information, refer to the AHA and repayment obligation guide.

14.2.1 DTC-ineligible aged 49 or less

When the following criteria are met:

  • the event occurs in a year where the beneficiary is 49 years of age or less
  • the beneficiary is DTC-ineligible in the year of the event

The AHA period start date is 10 years prior to January 1 of the years of the event or, if the event occurs during a period of consecutive years of DTC-ineligibility then, the AHA period start date is 10 years prior to January 1 of the first years of the period of consecutive years of DTC-ineligibility.

Example 1: Withdrawal during a single year of DTC-ineligibility

A 30-year-old beneficiary opens an RDSP in 2010 and receives CDSG and CDSB until 2020. In 2021, the beneficiary is DTC-ineligible and no CDSG or CDSB is paid in that year.

A withdrawal is made from the plan on July 5, 2021, when the beneficiary is 41 years of age. Since the withdrawal occurs during a single year of DTC-ineligibility, the AHA period is from January 1, 2011, to July 5, 2021.

Example 2: An event occurred during a period of consecutive years of DTC-ineligibility.

A 30-year-old beneficiary opens an RDSP in 2010 and receives CDSG and CDSB until 2020. In 2021 and all subsequent years, the beneficiary is DTC-ineligible. The plan is closed (or is deregistered or the beneficiary dies) on July 5, 2025, when the beneficiary is 45 years of age.

Since the event occurs during a period of consecutive years of DTC-ineligibility, the AHA period start date is 10 years prior to January 1 of the first years of the period of consecutive years of DTC-ineligibility, that is January 1, 2021. The AHA period is January 1, 2011, to the current date.

14.2.2 DTC-ineligible aged between 50 and 59

When the following criteria are met:

  • the event occurs in a year where a beneficiary is between the ages of 50 and 59 as of the end of that year
  • there was continuous DTC-ineligibility from the year the beneficiary turned 49 or earlier in the year that the event occurred

The AHA period start date is 10 years prior to January 1 of the first years of the period of consecutive years of DTC-ineligibility. This 10-year period will then be reduced by 1 year, for each year that the beneficiary's age at the end of the year of the AHA event exceeds 50 years of age.

Example: An event occurred where there was a period of continuous DTC-ineligibility from the age of 49 or earlier.

A 38-year-old beneficiary opens an RDSP in 2013 and receives CDSG and CDSB until 2022. In 2023, and for all subsequent years, the beneficiary is DTC-ineligible. The plan is closed (or deregistered or the beneficiary dies) on July 5, 2032, when the beneficiary is 57 years of age.

Since the event occurs when the beneficiary is 57 years of age and there has been continuous DTC-ineligibility since the year, the beneficiary turned 48 years of age, the AHA period start date is 10 years prior to January 1 of the first years of the period of consecutive years of DTC-ineligibility.

This 10-year period is then reduced by 7 years (1 year, for each year that the beneficiary's age at the end of the year of the AHA event exceeds 50 years of age). During these 7 years, no funds were added to the RDSP because the beneficiary was not DTC-eligible. The AHA period is January 1, 2020, to the date of the event.

14.2.3 DTC-eligibility reconfirmed

If the beneficiary is DTC-eligible in a future year, the AHA period will "move up" to the year during which DTC-eligibility is reconfirmed.

Note: Once DTC-eligibility is reconfirmed, although the plan becomes active, the beneficiary cannot carry forward grant and bond entitlements for any years during which the beneficiary was DTC-ineligible.

If an AHA event occurs while the beneficiary is DTC-eligible, the AHA period start date is 10 years prior to the event date and includes any period of DTC-ineligibility.

14.2.4 Impact on limits

Repaid grant and bond amounts cannot be reinstated. Once repaid, they are lost forever and deducted from the lifetime limit of $70,000 in grant and $20,000 in bond.

For example, if $10,000 in grant and $4,000 in bond is repaid to the Government of Canada, the total amount available that could be paid by the Government of Canada will be $60,000 ($70,000 - $10,000) in grant and $16,000 ($20,000 - $4,000) in bond.

14.2.5 Submitting repayment information

Financial transactions record type (RT) 401 is to report the movement of funds in or out of the RDSP. A repayment of grant or bond is a financial transaction.

When submitting repayment information to Employment and Social Development Canada (ESDC), the issuer or authorized agent will submit the electronic transaction RT 401, transaction type 10 (repayment of grant or bond) and include a repayment reason "06" death of the beneficiary to report the event leading to a repayment. In the repayment transactions, the issuer reports the amount of grant and bond repaid to ESDC.

For more information on how transactions are processed and exchanged between the issuer and the Canada Disability Savings Program (CDSP) system, refer to Chapter 15. RDSP Canada Disability Savings Program system under section 15.3 Introduction to the CDSP system.

14.2.6 When sufficient funds exist

If there are sufficient funds in the RDSP, the issuer will repay the grant and the bond amounts.

For example: The beneficiary of an RDSP is deceased. The RDSP FMV is $62,147:

  • earnings: $2,147
  • contributions: $15,000
  • grant: $35,000
  • bond: $10,000

The total amount of grant and bond to be repaid is $45,000.

Based on this example, the issuer must withdraw the funds from the RDSP and submit a repayment transaction, RT 401-10 to ESDC, reporting the repayment reason "06" as death of the beneficiary.

Within that transaction, the repayment amount will be $35,000 in grant and $10,000 in bond.

14.2.7 When there are insufficient funds

When an RDSP is closed, the AHA must be repaid.

If the RDSP has experienced a loss and there are insufficient funds to cover the total amount of grant and bond to be repaid, the issuer must submit a termination adjustment transaction, RT 401-10 to ESDC to report the loss.

Losses are first attributed to earnings, then to contributions, and then to rollovers. Once these accounts are depleted, any remaining losses are apportioned equally across the grant and the bond that are in the RDSP.

For example: The RDSP is closed, repayment reason 03. The RDSP FMV is $800:

  • earnings: $0
  • contributions: $0
  • grant: $0
  • bond: $1,000

Note: Losses in the plan were applied to the earnings and then to contributions. Therefore, these accounts show a balance of $0.

Total amount of bond to be repaid is $1,000. Based on this example, the AHA ($1,000) exceeds the FMV of the RDSP ($800). Therefore, the issuer can only repay the lesser amount of $800.

To account for the difference of $200, the issuer must submit a termination adjustment transaction to ESDC to report the loss.

Even if the bond repayment is $0, due to losses that have depleted all the earnings, all the contributions and the bond, both amounts must be reported to ESDC with the entire bond amount in the termination adjustment field.

Note: In most cases, the issuer system will automatically calculate the amount of grant and bond to be repaid. However, understanding how to determine the amount to be repaid will help issuers communicate this information to their clients.

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