Chapter 7. RDSP Rollovers

7.1.1 Accumulated income payment (AIP)

An AIP is a lump sum distribution of investment income earned in a Registered Education Savings Plan (RESP) to the RESP subscriber or the RESP beneficiary's RDSP. Generally made in circumstances where the RESP beneficiary does not pursue postsecondary education, and the RESP is being terminated.

7.1.2 Decedent

The parent or grandparent of the RDSP beneficiary, who at the time of death was an annuitant of a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) or member of a Registered Pension Plan (RPP), Pooled Registered Pension Plan (PRPP) or Specified Pension Plan (SPP).

7.1.3 Eligible proceeds

Funds from an RRSP, RRIF, RPP, PRPP, SPP or an RESP that are eligible to be transferred to an RDSP.

7.1.4 Financially dependent

Child or grandchild who was a dependent of the decedent due to a mental or physical impairment and a beneficiary of an RDSP.

7.1.5 PRPP

Pension plan for employees and self-employed who do not have access to a workplace pension plan.

7.1.6 RESP

Registered plan that is intended to help to save for a beneficiary's post-secondary education.

7.1.7 RPP

An arrangement by an employer or a union to provide pensions to retired employees in the form of periodic payments.

7.1.8 RRIF

An arrangement between a carrier and an annuitant under which payments are made to the annuitant of a minimum amount each year.

7.1.9 RRSP

A contract or arrangement between an individual and an issuer under which contributions are made for the purpose of providing the individual a retirement income commencing at maturity.

7.1.10 Rollover amount

The amount that is transferred into the RDSP from RRSPs, RRIFs, RPPs, PRPPs, SPPs, or RESPs.

7.1.11 SPP

Prescribed provincial pension plan.

7.2.1 Family relationship

The only individual who may benefit from a retirement savings rollover is the beneficiary who was financially dependent on a decedent parent or grandparent.

For any questions on the definition of financially dependent, please contact the Canada Revenue Agency (CRA).

• English: 1‑800‑959‑8281
• French: 1‑800‑959‑7383

7.2.2 Eligibility and conditions

To rollover a retirement savings amount, the following conditions must be met:

• respect lifetime RDSP contribution limit of $200,000
• death of grandparents or parents who were annuitant of an RRSP/RRIF or member of an RPP, PRPP or SPP
• beneficiary is 59 years of age or less at the end of the calendar year
• beneficiary is Disability Tax Credit (DTC) approved
• beneficiary meets residency criteria
• beneficiary is alive at the time the rollover takes place
• holder gives permission to allow a rollover
• holder and beneficiary must provide the required information and sign a rollover form
• the RDSP beneficiary must be entitled to receive the retirement savings amount, either because they were designated as a direct beneficiary at the plan level, or because the proceeds were payable to the estate of the decedent
• the RDSP beneficiary was a beneficiary of the estate

The rollover of retirement savings proceeds will not attract the Canada Disability Savings Grant (CDSG) (grant). The rollover portion of a Disability Assistance Payment (DAP) will be taxable at the time the DAP is made.

During a period in which the beneficiary is no longer DTC approved and has elected to keep their RDSP open, retirement savings rollovers are permitted. However, there is a time limit. The rollover must happen by the end of the fourth year after the first full year in which the beneficiary is not DTC approved.

7.2.3 Specimen plan

The issuer must specify in their specimen plan if rollovers of retirement savings proceed into an RDSP are permitted. The Registered Plans Directorate (RPD) within the CRA must approve the specimen plan.

7.2.4. Roles and responsibilities

The responsibilities of an RDSP holder are as follows:

• contacts the financial institution and requests a rollover
• completes and signs a rollover form
• confirms and authorizes the amount to be rolled over into the beneficiary's RDSP

Note: The financial institution may have its own form for this purpose, but if not, then the CRA form RC4625 may be used.

The beneficiary signs to confirm that they have reached the age of majority and is able to enter into a contract.

The responsibilities of the financial institution are as follows:

• signs the rollover form to confirm they have received the funds
• submits the 401-08 transaction to the Canada Disability Savings Program (CDSP) system
• keeps the rollover form in the beneficiary's RDSP file

Employment and Social Development Canada (ESDC) forwards a report to the financial institution.

7.3.1 Eligibility and conditions

To be eligible to rollover the investment income from an RESP to an RDSP, the beneficiary must be:

• DTC approved at the time of the rollover
• 59 years old or less at the end of the calendar year that the rollover is made
• a resident in Canada

Moreover, one of the 3 following conditions must be met:

• the beneficiary has a severe and prolonged mental impairment that can reasonably be expected to prevent them from pursuing postsecondary education
• the RESP account has been in existence for at least 10 years and all the beneficiaries in the plan must be at least 21 years of age and are not pursuing post‑secondary education
• the RESP has been in existence for more than 35 years

When making a withdrawal, the education savings rollover portion of the payment should be treated as RDSP earnings and must be counted as a taxable amount.

Education savings rollovers are not permitted when the plan is a Specified Disability Savings Plan (SDSP).

7.3.2 Specimen plan

The RDSP issuer must specify in their specimen plan if rollovers of education savings into an RDSP are permitted. The specimen plan must be approved by the RPD at the CRA.

The RESP must also allow AIP in its specimen plan.

7.3.3 Roles and responsibilities

The holder agrees, in writing, to have the amount rolled over to the RDSP.

The RDSP financial institution submits the 401-30 transaction to the CDSP system.

The RESP subscriber and the RDSP holder must, in writing, jointly elect to have the education savings rollover take place.

The RESP promoter must:

• terminate the RESP by the end of February of the calendar year following the education savings rollover
• determine whether the AIP distribution/rollover can take place

7.6.1 Record types (RT)

There are 4 transactions involved in the rollover of proceeds.