Chapter 5. RDSP Specified Disability Savings Plan
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 payments
- DTC
- Disability Tax Credit
- ESDC
- Employment and Social Development Canada
- LDAP
- Lifetime disability assistance payments
- MSFT
- Managed secure file transfer
- RDSP
- Registered Disability Savings Plan
- SDSP
- Specified Disability Savings Plan
Introduction
For beneficiaries who have a life expectancy of 5 years or less, there are options for increased flexibility in accessing their Registered Disability Savings Plan (RDSP) access.
Note: Life expectancy of 5 years or less must be certified by a medical doctor or a nurse practitioner.
During a specified year, holders may choose to keep the plan as an RDSP in a specified year, or to have it designated as a Specified Disability Savings Plan (SDSP).
5.1 Shortened life expectancy
A medical doctor or nurse practitioner may attest, in writing, that the beneficiary's state of health is such that they have a life expectancy of 5 years or less. The beneficiary is considered to have a shortened life expectancy for the purpose of the RDSP.
In this case, the RDSP holder can choose one of the following options:
- keep the plan as an RDSP which is now in a specified year
- designate the plan as an SDSP
Designating the RDSP as an SDSP is done through an SDSP election. This allows the withdraw of plan assets without requiring the repayment of the assistance holdback amount (AHA) or the proportional repayment amount.
5.1.1 Death of the beneficiary
In both cases, in the event of the beneficiary's death, any Canada Disability Savings Grant (CDSG) or Canada Disability Savings Bond (CDSB) paid into the plan over the previous 10 years preceding the time of death will have to be repaid to the Government of Canada.
5.2 Specified Disability Savings Plan
An SDSP provides beneficiaries who have a shortened life expectancy with greater flexibility in accessing their RDSP savings.
Withdrawals from an SDSP will not trigger a repayment of the AHA or the proportional repayment amount. However, once the election is made, no contributions can be made, and the plan will not be entitled to any new CDSG or CDSB. Furthermore, beneficiaries will not be eligible to carry forward any CDSG or CDSB amounts for those years.
Education savings rollovers are not permitted when the plan is an SDSP. Only rollovers of retirement savings proceeds are permitted.
5.2.1 Conditions
An RDSP may be designated as an SDSP when:
- a medical doctor or nurse practitioner attests, in writing, that the beneficiary's state of health is such that they have a life expectancy of 5 years or less
- the plan holder makes an SDSP election in the prescribed form and submits the election with the medical certificate to the issuer
- the issuer notifies Employment and Social Development Canada (ESDC) of the SDSP election
5.3 Specified year
A specified year begins when the issuer receives the medical certificate. It continues for each of the 5 years following the date of the attestation signed by a medical doctor or nurse practitioner. This applies if the beneficiary has an RDSP in a specified year.
Note: The 5 years are reduced if the medical certificate is not given to the issuer in the first year.
Each subsequent year applies if the beneficiary has an SDSP.
Example: The medical certificate is issued in 2015, but it is not provided to the issuer until 2018. The plan will only be in a specified year for 3 years (2018 to 2020 inclusive).
5.3.1 SDSP conditions
While a plan is an SDSP:
- no contribution is allowed
- no CDSB or CDSG is paid
- no payment from a designated provincial program is paid
- unused CDSB and CDSG entitlements will not be carried forward except for the calendar year in which the election is made
- no education savings rollover is allowed
- rolling over proceeds from a:
- Registered Retirement Savings Plan
- Registered Pension Plan
- Specified Pension Plan
- Pooled registered Pension Plan
- Registered Retirement Income Fund is allowed
In general, withdrawals of no more than $10,000 of the taxable amount are allowed.
5.3.2 Beneficiary surviving more than 5 years
When the plan is an RDSP in a specified year and the beneficiary lives for more than 5 years, it will be subject to regular RDSP payment rules.
An SDSP is not affected by survival beyond the 5 specified years. It remains an SDSP until the holder requests that the designation be removed or if one of the SDSP conditions is broken.
5.4 Holder election
In a specified year, the holder can keep the plan as an RDSP which is now in a specified year or designate the plan as an SDSP.
Electing to designate an RDSP as an SDSP allows the holder to withdraw the plan assets without requiring the repayment of the AHA or the proportional repayment amount.
5.4.1 Keep the plan as an RDSP in a specified year
If a holder chooses to keep the plan as an RDSP during a specified year, there is no annual payment limit. The holder could:
- request payments (disability assistance payments [DAP] and lifetime disability assistance payments [LDAP])
- withdraw all funds from the RDSP in one lump sum
- have the funds spread over the next 5 years
The AHA or the proportional repayment rule applies.
5.4.2 Designating the RDSP as an SDSP
When a holder makes an SDSP election, payments must start by December 31 of the calendar year following the year the plan is designated as an SDSP. The holder could:
- request a DAP or an LDAP
- withdraw up to $10,000 in taxable amount and its associated contribution portion if the formula results in a taxable amount greater than $10,000, there is no maximum
No repayment of the AHA or the proportional repayment amount is required.
5.5 Reversal of an election
A plan holder can reverse the SDSP election at any time. The holder must provide a written notice to the issuer, who must then inform ESDC.
When an SDSP election is reversed, the plan becomes subject to the rules that apply to the RDSP categorization. The plan becomes either an RDSP in a specified year or an RDSP in a regular year. The categorization depends on how many of the 5 specified years, if any, are left from when the medical certificate was signed and given to the issuer.
Example: The medical certificate was signed and given to the issuer in 2015, and the plan became an SDSP in 2015.
- If the designation is removed in 2018, the plan would become an RDSP in a specified year until the end of 2020
- If the designation is removed in 2020, the plan would become an RDSP in a regular year
The CDSB or CDSG cannot be paid until the calendar year following the election reversal. The issuer must not request the CDSB or the CDSG until then.
The holder can make a subsequent election no sooner than 24 months after the previous election ceases. They do this by submitting a new shortened life expectancy medical certificate to the issuer.
5.5.1 Removal of an SDSP designation
A plan ceases to be an SDSP as soon as any of the following occurs:
- 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
- the beneficiary is no longer Disability Tax Credit (DTC) eligible
- the total of the taxable amount of payments made from the plan in the year while it was an SDSP exceeds $10,000:
- this is unless the legislative formula result requires a greater amount to be paid
- payments have not begun to be paid before the end of the calendar year following the year in which the plan became an SDSP
- the total amount of payments made from the plan to the beneficiary in the calendar year is less than the amount determined by the maximum legislative formula
- the plan is cancelled, or its registration is terminated for compliance reasons
When an SDSP designation is removed, the plan becomes subject to the applicable RDSP rules. These rules can be either the RDSP in regular year rules or the RDSP in a specified year rule. Depending on the categorization of the RDSP at that time, this change may also result in the repayment of the CDSB and the CDSG.
If the SDSP designation is removed and the plan returns to a regular RDSP, the plan does not have to be closed.
5.6 Administration
5.6.1 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
- add the addendum to the beneficiary's file
5.6.2 Form
The holder is required to elect in a form and submit the election to the issuer. There are no requirements regarding the format of the form, but it must contain the following items:
- a statement that the holder wishes to designate the beneficiary's plan as an SDSP
- the holders' signature and the date
- a statement indicating that the definition of the term "specified year" of the plan must be interpreted as including the years during which the plan is an SDSP
- the list of measures requiring removal of the SDSP designation
- a statement informing the holder that another election cannot be made within 24 months
A copy of the election form that will be used by holders must be sent to the Registered Plans Directorate, at the Canada Revenue Agency before issuers offer holders the ability to designate the plan as an SDSP.
5.6.3 Medical certificate
The holder must provide the issuer with a written attestation from a medical doctor or nurse practitioner licensed to practise under provincial laws. The practitioner may also be licensed to practise under the laws of the beneficiary's place of residence. The attestation must state that, in their professional opinion, the beneficiary is unlikely to live more than 5 years.
5.6.4 Effective date for an SDSP
An SDSP election becomes effective on the date ESDC receives the request through the Canada Disability Savings Program (CDSP) system.
5.6.5 Forwarding an SDSP election to ESDC
The holder must provide the issuer with the medical doctor or nurse practitioner attestation, along with a written request to designate the plan as an SDSP.
The issuer is expected, without delay, to notify ESDC of the election and not wait until the monthly production file to submit the 501-03 transaction. It is to be submitted as a separate, ad hoc electronic file, immediately after the holder makes the election.
5.6.5.1 Managed secure file transfer software (MSFT)
As soon as the required information is received, the issuer must send the SDSP election in a production file. This is done via the MSFT software.
Upon receipt of the production file containing the election transaction, the MSFT software returns a timestamped confirmation to the issuer. Although the 501-03 transaction submitted via MSFT will not be processed until the next scheduled production run. The RDSP is deemed to be an SDSP as of the date of the timestamp confirmation and the lump sum DAP can then be paid to the beneficiary.
Issuers are reminded that the RDSP becomes an SDSP after the CDSP system has been notified of the election. The transaction date on the lump sum DAP being paid under SDSP rules must be after the date of the timestamp that the issuer receives from the MSFT following the transmission of the 501-03 election transaction.
An early MSFT timestamp allows for the plan to become an SDSP sooner. This stops the issuers from having to wait until the start of the subsequent month. Which in turn allows the holder to almost immediately be able to request payments to be made to the beneficiary without the AHA repayment obligations.
5.6.5.2 Transaction 501-03
Since January 2014, the issuer may submit a 501-03 transaction (SDSP election) to designate a plan as an SDSP. There is no longer a requirement to send the information by email.
The start date of the election is recorded as of the date the election information is received by the CDSP system.
Example: The holder provided the SDSP documentation to the issuer on March 5, 2018. However, the issuer only sent the 501-03 transaction on April 1, 2018. This means that the start date of the SDSP is April 1, 2018.
5.6.5.3 Stop bond payment request
If there is an active bond request, the issuer must submit a 401-06 transaction (stop bond payment request). This will ensure that no further CDSB is automatically paid into the RDSP and therefore prevent the risk of breaking an SDSP condition resulting in the loss of SDSP status.
5.6.6 Removal of an SDSP designation
Should there be a request to remove the SDSP designation, the holder is not required to submit a new medical certificate.
The issuer must receive written documentation from the holder that they wish to remove the SDSP designation of the plan. The documentary evidence must be signed by all holders of the plan.
5.6.6.1 Submitting an SDSP reversal
Once the issuer receives the required documentation from the holder, it notifies ESDC of the holder's decision to reverse the SDSP. This notification is made by submitting a 501-04 transaction to the CDSP system.
There is no need to submit a 501-04 should the issuer be notified that the beneficiary is deceased.
5.6.6.2 Transaction 501-04
Since January 2014, the issuer may submit a 501-04 transaction (SDSP election reversal). This submission is to remove an SDSP designation from a plan. It can also be used to reverse an SDSP election that was sent in error. There is no longer a requirement to send the information by email.
The election reversal is recorded as the date the information is received by the CDSP system.
5.6.6.3 Resume bond payment request
Since no CDSB or CDSG can be paid until the calendar year following the election reversal, to resume the CDSB payments. Issuers must respect this delay before submitting a 401-05 transaction (bond payment request).
5.7 Transactions allowed in a Specified Disability Savings Plan
When the holder makes an SDSP election, only the following financial transactions are allowed:
- 401-06 transaction: Stop bond payment request if there is an active bond request
- 401-08 transaction: Retirement savings rollover
- 401-20 transaction: DAP
- 401-21 transaction: LDAP
For more information on rollovers, refer to Chapter 7. RDSP rollovers.