Registered Disability Savings Plan

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.

Chapter 2-1: Registered Disability Savings Plan

The Registered Disability Savings Plan (RDSP) is a Disability Savings Plan (DSP) that is registered with the Canada Revenue Agency (CRA). It is a long-term savings plan designed to help Canadians with disabilities and their families save for the future. More specifically, it is an arrangement between the RDSP issuer and holder(s).

The holder makes or authorizes contributions to an RDSP. In return, the RDSP issuer agrees to use the accumulated funds to make Disability Assistance Payments (DAPs) to the beneficiary designated by the holder. RDSP earnings are not taxable until they are withdrawn from the RDSP.

1. Overview

An RDSP is a long-term savings plan intended to help Canadians with severe and prolonged disabilities and their families save for the future. The beneficiary named under an RDSP must be eligible to receive the Disability Tax Credit (DTC).

All funds in the plan are intended to be used solely for the beneficiary. When the plan holder names the beneficiary of the RDSP, that beneficiary remains as beneficiary for the duration of the plan.

An RDSP is a trust arrangement between a holder and a trust company in Canada. The RDSP contract includes terms and conditions that the holder must agree to, for the continued registration and operation of the plan, such as:

  • contribution eligibility and limit;
  • minimum withdrawal requirements and maximum withdrawal limits;
  • conditions for requesting elections in the RDSP; and
  • holder eligibility.

The RDSP contract may include terms that determine:

  • whether contributions will be intermittent or on a regular basis (at the discretion of the holder);
  • fees;
  • investment options; and
  • whether a DAP, which is not a Lifetime Disability Assistance Payment (LDAP) is allowed.

RDSPs are subject to rules that govern eligibility, contributions, payments, earnings, plan closure or continued registration and the transferring of monies. Compliance with these rules ensures the continued registered status of the RDSP.

With the written permission of the plan holder, anyone can contribute to an RDSP until the end of the calendar year in which the beneficiary turns 59 years of age. Contributions are not tax deductible; however, the earnings generated on contributions are tax-exempt while in the plan.

When DAPs or LDAPs are made from the plan, the portion representing contributions (that are not rollovers) are not included in the income of the beneficiary. However, the grant, the bond, payments from designated provincial programs, earnings in the plan and any retirement and education savings amounts that have been rolled over into the plan – including their earnings, will be included in the beneficiary’s income for tax purposes when paid out of the RDSP.

Note:

Retirement savings rollovers and education savings rollovers count as contributions when determining if an RDSP is a primarily government assisted plan or not. They also count towards reducing the $200,000 lifetime contribution limit.

On the request of the holder, the issuer invests the funds contributed. When the beneficiary is eligible to receive payments, all available amounts in the plan are used to make DAPs and/or LDAPs.

The main parties involved in the RDSP are:

  • the holder;
  • the beneficiary;
  • the issuer;
  • Employment and Social Development Canada (ESDC); and
  • CRA.

1.1 How it works

Application Process -  A holder must meet with a participating RDSP financial institution, open an RDSP, and name an eligible beneficiary.

Eligibility Criteria -  The holder and participating RDSP financial institution ensure that all eligibility criteria for the registration of the RDSP have been met.

RDSP Contributions -  The holder, or anyone with written permission from the plan holder, makes and authorizes contributions to the RDSP.

Grants and Bonds -  An application can be made by the holder to obtain matching grants and bonds.

Payments from an RDSP -  DAPs and LDAPs can only be made to the beneficiary, or to the beneficiary’s estate. The identity of the beneficiary appears in the plan documentation.

1.2 When Contributions Must Stop

Contributions can be made to an eligible beneficiary’s RDSP until the earliest of:

  • December 31 of the calendar year in which the beneficiary reaches 59 years of age;
  • the time when contributions to the plan (and any prior RDSP of the beneficiary) total $200,000; and
  • the beneficiary’s death.
1.2.1 When Contributions Must Stop Temporarily
  • Loss of DTC
  • Non-residency

Contributions can begin after the beneficiary regains their DTC and residency.

1.3 RDSP Lifespan

There is no specific time limit set out in legislation prescribing the date when an RDSP must be terminated. The Income Tax Act (ITA) sets out the circumstances when an RDSP must be closed. They include: loss of prolonged mental or physical impairment; RDSP non-compliance; beneficiary’s death; transfer; or voluntary RDSP termination.

2. Key Elements of an RDSP

2.1 Eligibility

An RDSP can be established if:

  • the beneficiary has a valid Social Insurance Number (SIN);
  • the holder has either a valid SIN or Business Number(BN);
  • the beneficiary is eligible for the DTC;
  • the beneficiary is resident in Canada; and
  • the beneficiary is 59 years of age or less at the end of the calendar year that the RDSP is opened. This age limit is not applicable when a beneficiary’s RDSP is opened as a result of a transfer of an RDSP from a previous issuer to a new issuer.

For an RDSP to be registered by CRA, the following steps must be completed:

  • the financial institution must provide ESDC with accurate and complete information;
  • the Social Insurance Registry must validate the SINs of the beneficiary and the holder (or if the holder is an organization, its BN); and
  • CRA must confirm and successfully validate the beneficiary’s DTC eligibility and residency.

2.2. Process to Open an RDSP

There are three steps that a holder needs to follow to open an RDSP.

2.2.1. Step 1: Choose a Financial Institution

The holder chooses a financial institution that offers the RDSP. A list of the financial institutions offering RDSPs can be found on the ESDC website.

2.2.2. Step 2: Provide the Required Information

The holder must provide the financial institution with all relevant information concerning themselves, along with the required information on the beneficiary of the RDSP.

2.2.3. Step 3: Make a Contribution (Optional)

The holder, or anyone with written permission from the RDSP holder, may contribute to an RDSP. Contributions are made in trust to the issuer and will be invested, used or applied by the issuer to make funds available for use by the beneficiary. Contributions are not required to attract the bond.

3. Beneficiary

The beneficiary of an RDSP is the individual who receives money from the plan in the future. To be named the beneficiary of an RDSP, an individual must:

  • have a valid SIN;
  • be resident in Canada at the time the RDSP is opened Footnote 1 ;
  • be eligible for the DTC ; and
  • be 59 years of age or lesson December 31 of the calendar year the plan is opened Footnote 2 .

Once the holder has named the beneficiary for the RDSP, the beneficiary will remain for the duration of the RDSP. The decision is irrevocable. A beneficiary can have only one RDSP at any given time. However, in the case of a transfer, two RDSPs may be opened for a limited period of time.

3.1. Contractual Competency

Common Law presumes that a person is competent to enter into a contract once he or she has attained the age of majority. It can be difficult to determine whether a person lacks the capacity to enter into a contract as there may be medical and/or legal considerations. Also the standards for capacity and competence are not the same in all provinces. When doubt exists, legal and/or medical advice should be sought.

Under current rules, when an RDSP is established for a beneficiary who is of age of majority, the plan holder must be either the beneficiary or, if the beneficiary lacks the capacity to enter into a contract, the beneficiary’s guardian or other legal representative.

However, a number of adults with disabilities have experienced difficulties in establishing a plan because their capacity to enter into a contract is in doubt. Questions of appropriate legal representation in these cases are a matter of provincial and territorial responsibility. In many provinces and territories, the only way that an RDSP can be opened in these cases is for the individual to be declared legally incompetent by a court or tribunal and have someone named as their legal guardian – a process that can involve a considerable amount of time and expense and may have significant repercussions for the individual.

In 2012, the federal government introduced a temporary measure to allow qualifying family members (spouses, common-law partners or parents) to become plan holders of the RDSP for an adult who might not be able to otherwise enter into a contract. The Qualifying Family Member measure seeks to ensure that individuals who might not be contractually competent and who do not have a legal representative can still benefit from RDSPs.

3.2. Death of the Beneficiary

In the event of the beneficiary’s death, the RDSP must be closed no later than December 31 of the following calendar year.

4. Holder

The holder of the RDSP is the person or organization that opens and manages the RDSP and makes or authorizes contributions to the RDSP. To be a holder, an individual or organization must have a valid SIN or BN. The holder does not need to be a resident of Canada.

The table below illustrates who can be the holder in light of provincial legislation setting out the age of majority, the general law on competency to enter into contracts, and federal legislation governing the establishment of RDSPs.

Who can be the holder when an RDSP is opened? Beneficiary Legal Parent Qualifying Family Member Legal Representative
For a beneficiary under the age of majority No - Some exceptions may apply. Yes No Yes
For an adult beneficiary who is not contractually competent No No No Yes
who is contractually competent Yes No - Exception when transferred. No No
whose contractual competency is in doubt No No
(Yes as QFM)
Yes No Footnote 3

The holder must provide the issuer with:

  • Their SIN;
  • full name, date of birth and gender;
  • the beneficiary’s full name, address, date of birth, gender and SIN; and
  • if the holder is a public department, agency or institution, it must provide the issuer with its BN.

Budget announced that certain family members may become the holder of an RDSP for an adult individual who might not be contractually competent to enter into an RDSP.

This temporary measure came into force on June 29, 2012 and will expire on December 31, 2018. An individual who becomes a holder of an RDSP under these rules will generally be able to remain the holder of the RDSP after 2018. After 2019, a qualifying family member will only be able to open a disability savings plan, because he/she is transferring an existing plan for which he/she is the holder.

4.1. Beneficiary Reaches the Age of Majority

When the beneficiary of an RDSP reaches the age of majority in the province/territory where he or she resides:

  • If the RDSP holder is the legal parent, the beneficiary may be added to the RDSP as a joint holder if he or she so wishes and the specimen plan of the issuer permits this. In all other cases, the beneficiary is the only one who can be a holder of the plan once he or she has reached the age of majority and is legally able to enter into a contract.
  • If the RDSP holder is someone other than the legal parent, that person or body must be removed as the holder of the plan. In such a case, the beneficiary must be added as the holder. If the beneficiary is not contractually competent, then the legal representative of the beneficiary, such as a court appointed guardian, can be the holder.
Who can be the holder now that the beneficiary (who was under the age of majority when the RDSP was opened) has now reached the age of majority? Beneficiary Legal Parent Legal Representative
The beneficiary is contractually competent. Yes The legal parent may remain the holder or one of the holders if he/she was already the plan’s holder before the beneficiary has reached the age of majority. No
The beneficiary is not contractually competent. No Yes

Joint holders are also possible as in the case where two legal parents wish to enter into the contractual agreement with the issuer or it can be a single entity. A holder can also be an entity who attains rights under the RDSP as a successor or assignee of a plan holder.

4.2. Qualifying Family Member

For an adult who might not be contractually competent to enter into an RDSP, qualifying family members (QFM) may become the holder of an RDSP if:

  • the beneficiary has attained the age of majority and is not a beneficiary under another disability savings plan;
  • there is no entity that is legally authorized to represent the beneficiary; and
  • after reasonable inquiry, the issuer is of the opinion that the beneficiary’s contractual competence to enter into a disability savings plan contract is in doubt.
4.2.1. Who Can Be a QFM
  • a legal parent of the beneficiary;
  • a spouse or common-law partner of the beneficiary who is not living apart and separate from the beneficiary because of a breakdown of their marriage or common-law partnership.

A QFM ceases to be the holder of the plan and is replaced by either the beneficiary or a qualifying person (A qualifying person as defined in the Income Tax Act, section 146.4) when:

  • the beneficiary is determined to be contractually competent or, in the issuer’s opinion, after reasonable inquiry, the beneficiary’s contractual competence to enter into a RDSP is no longer in doubt. The beneficiary notifies the issuer that he/she chooses to become the holder of the plan; or
  • an entity is legally authorized to act on behalf of the beneficiary. The qualifying person must notify the issuer of its appointment. The qualifying family member ceases to be holder and the qualifying person becomes the new holder.

4.3. Holder Replacement

Over the lifetime of an RDSP and under certain conditions, the holder can change. If at any time the plan holder (other than a QFM) ceases to be an eligible holder, they must be replaced with someone who is eligible to be a holder. There must always be at least one holder at all times. For example, if the beneficiary’s mother is the plan holder and she dies, the beneficiary or the beneficiary's subsequent legal guardian will need to replace the deceased parent as the new plan holder.

A new grant/bond application form is needed if grant and bond are requested by the new holder. If the new holder is not requesting grant and bond, there is no need to complete a form.

For further informationon contract law and legal representation, contact the government of the respective province or territory.

For further information on who can be a holder, contact the Registered Plans Directorate, CRA:

Toll free in Canada

  • For service in English 1-800-267-3100
  • For service in French 1-800-267-5565

TTYusers can call 1-800-665-0354 for bilingual assistance during regular business hours.

4.4. Issuer Responsibility

If there is a dispute regarding the issuer’s acceptance of a qualifying family member as a plan holder, the holder is required to avoid actions that would reduce the fair market value of the plan’s property.

No action lies against an issuer if after entering into a disability savings plan with a qualifying family member, it is determined that the RDSP beneficiary is contractually competent.

5. Legal Representative

A legal representative is an individual or institution that is legally authorized to act on behalf of the beneficiary. Provincial and territorial laws as well as Common Law govern who can be a legal representative. Generally, a legal representative can be:

  • a legal parent of the beneficiary who has not reached the age of majority;
  • a legal guardian, tutor, curator or an individual who is legally authorized to act on behalf of the beneficiary;
  • a public department, agency or organization that is legally authorized to act on behalf of the beneficiary.

5.1. Contractual Competency

Where a beneficiary has reached the age of majority and is not contractually competent, as determined by a medical doctor, the beneficiary’s legal representative will be required to assume and carry out their contractual obligations.

Parental authority does not automatically provide the right to be a legal representative of a beneficiary who has reached the age of majority. This remains true whether the adult beneficiary is contractually competent or not.

As previously mentioned, a temporary measure in which a QFM may become the holder for an adult beneficiary who is not contractually competent was announced. This measure will apply until December 31, 2018.

6. Primary Caregiver

For a beneficiary who has not yet reached the age of majority (and for beneficiaries celebrating their 18th birthday in the current year), ESDC validates certain information against the CRA Canada Child Tax Benefit (CCTB) database.

6.1. Primary Caregiver(s)

The primary caregiver is:

  • the individual who is eligible for the CCTB and whose name appears on the CCTB payment; or
  • the Department, Agency or Institution that receives the allowance payable under the Children’s Special Allowances Act .

The information on the primary caregiver is:

  • used to verify eligibility for the DTC as well as residency;
  • used to verify family income;
  • required for contract registration purposes;
  • required for each grant and bond request submitted to ESDC; and
  • required until the end of the calendar year the beneficiary turns 18.

6.2. Shared Custody

Parents that share the custody of a child are able to receive and share CCTB and credits for children throughout the year.

There could be two different income levels for a beneficiary aged 18 or under (one for each primary caregiver) for each month in the year. The Canada Disability Savings Program (CDSP) system will choose the income level that is the most advantageous for the beneficiary to determine the grant entitlements.

See Chapter 3-1, Section 2.5 and Chapter 3-2, Section 2.5 for more information on shared custody.

7. Social Insurance Number/Business Number

A person’s SIN or an organization’s BN is a key piece of information used to establish and maintain an RDSP. SINs and BNs are also key elements used by the CDSP system for the grant and the bond.

To establish and register a DSP, a SIN is also needed for the beneficiary and either a SIN or a BN is needed for the holder(s).

The grant and the bond require SIN information for the primary caregiver. Therefore, when applying for grant or bond, verify SIN requirements outlined in Section 3 – Grant and Bond.

The SIN/BN is used to:

  • register the DSP;
  • apply for the grant and/or the bond;
  • ensure that accurate RDSP records are maintained;
  • track contributions to the RDSP;
  • verify eligibility for the grant and bond;
  • track grant and/or bond payments to the RDSP;
  • track repayment of the Assistance Holdback Amount (AHA) or proportional repayment amount when withdrawals are made from the RDSP; and
  • track DAPs and LDAPs.

7.1. Applying for a SIN

Visit the Social Insurance Number webpage or call 1-800-206-7218 (option 3) for more information, or visit a Service Canada office with your original proof of identity documents to apply.

8. DTC

The DTC, also known as the Disability Amount, is a non-refundable tax credit that reduces the amount of income tax that an individual with a severe and prolonged disability may have to pay. Families, who care for a child under age 18 and are eligible for the CCTB, will receive the Child Disability Benefit (CDB) if the child is also eligible for the DTC.

An individual must be eligible for the DTC in order to be the beneficiary of an RDSP and for that RDSP to receive grant and bond.

To qualify for the DTC, a qualified practitioner must certify on CRA Form T2201- Disability Tax Credit Certificate that the person with the impairment meets the criteria established under the ITA, and the CRA must approve the application.

8.1. Loss of DTC eligibility

Should a beneficiary no longer be eligible for the DTC, the RDSP must be closed no later than December 31 of the calendar year following the first full calendar year that the beneficiary is no longer eligible for the DTC and the beneficiary remains DTC-ineligible in this second year.

However, in the case where a beneficiary becomes DTC-ineligible and might, due to the nature of their condition, be eligible for the DTC once more at a later date, the period for which an RDSP may remain open may be extended if the holder elects to do so. See Chapter 2-6: Closing an RDSP for more information.

For further information on the Disability Amount (DTC), financial institutions can contact CRA:

  • For service in English: 1-800-959-8281
  • For service in French: 1-800-959-7383
  • TTY: 1-800-665-0354

Web site: http://www.cra.gc.ca/disability

9. Residency

A person is considered resident in Canada for RDSP purposes if that person is also considered a resident for income tax purposes.

The beneficiary of an RDSP must be resident in Canada for the following purposes:

  • RDSP contract registration (unless the RDSP is being established by way of a transfer from an existing RDSP);
  • contributions to be made to the RDSP;
  • immediately before the bond is paid into the RDSP; and
  • rollover of Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Registered Pension Plan (RPP), Pooled registered Pension Plan (PRPP), Specified Pension Plan (SPP), or Registered Education Savings Plan (RESP) proceeds into the RDSP.

Residency is not required for the following purposes:

  • for the holder to open an RDSP;
  • for the beneficiary to receive payments (DAP/LDAP) from the RDSP.

For further information on Canadian residency, contact International Tax Services Office, CRA at 1-855-284-5942 (toll free in Canada and the United States), or 613-940-8495 (for service in English), or 613-940-8496 (for service in French).

10. Contributions

10.1. What Is a Contribution?

Contributions are deposits made into an RDSP that become the property of its beneficiary. At the time the contribution is made, the beneficiary must be:

  • resident in Canada;
  • eligible for the DTC ; and
  • 59 years of age or under as of December 31 of the year the contribution is made.

Contributions to an RDSP can be made by:

  • the holder(s);
  • any entity with the written permission of the holder of the plan.

No contribution is permitted if the beneficiary has died.

Contributions to RDSPs cannot be deducted from taxable income of the individual making the contribution. Contributions that are withdrawn (other than retirement savings rollovers and education savings rollovers) are not to be included as income of the beneficiary when paid out of an RDSP.

10.2. Contribution Limits

While there are no annual limits on the amount of contributions that can be made in respect of a beneficiary, the total amount of all contributions made into any RDSP for the beneficiary must not exceed the lifetime limit of $200,000.

10.3. What Is Not Considered a Contribution

  • the grant
  • the bond
  • payments made by a designated provincial program
  • amounts transferred from another plan
  • earnings within the RDSP
  • retirement savings rollovers Footnote 4
  • investment income from an education savings rollover Footnote 4

10.4. Over-Contributions

When the total amount of contributions deposited into an RDSP exceeds the lifetime limit, an over-contribution occurs. Financial institutions are required to ensure that contributions to an RDSP do not exceed this limit. An RDSP is considered non-compliant when contributions have exceeded the lifetime limit. Should this happen, it could result in the termination of the RDSP.

11. Investments, Fees, Losses and Bankruptcy

11.1. Investments

ESDC does not regulate the investment strategies and business practices of the financial institutions offering RDSPs. Consumers are encouraged to review all pertinent information before signing a contract.

Many of the institutions marketing RDSPs are regulated by provincial securities commissions. These commissions are responsible for administering securities laws and policies, and protecting investors from improper investment practices or violations of securities law. At the federal level, the Financial Consumer Agency of Canada (FCAC) provides Canadians with information about their rights and responsibilities when dealing with financial institutions. The FCAC also ensures compliance with the federal consumer protection laws that apply to banks and federally incorporated trust, loan and insurance companies.

Investments held in an RDSP must be qualified investments as per the ITA.

11.2. Fees

The financial institution may charge fees for acting as an administrator and trustee of a plan. However, if fees are charged against funds within the plan, they must not be deducted from the AHA of the RDSP. See Chapter 3-6 for more information on the AHA.

11.3. Losses

The fair market value (FMV) of the RDSP is equal to the total of:

  • accumulated earnings;
  • contributions;
  • rollovers from RRSP, RPP, RRIF, PRPP, SPP, RESP proceeds;
  • payments made by a designated provincial program;
  • the grant and bond amounts in the RDSP.

Where the FMV is lower than the total of all these amounts, there is an investment loss. All investment losses are first attributed to accumulated earnings and contributions, and then to retirement savings or education savings rollovers. When losses have reduced these amounts to nil, then the remaining losses – if any – are divided proportionally between the grant account, the bond account and amounts that represent payments from a designated provincial program to the RDSP.

11.4. Bankruptcy

In the case of the bankruptcy of a beneficiary, consult the Bankruptcy and Insolvency Act.

Chapter 2-2: Payments

Two types of payments can be made from Registered Disability Savings Plans (RDSPs): Disability Assistance Payments (DAPs) and Lifetime Disability Assistance Payments (LDAPs). This chapter explains the general conditions and limits of both types of payments as well as how to apply the DAP/LDAP formulas.

1. Overview

The following terms and acronyms are used throughout this chapter.

annuity
A contract in which an entity agrees to make a number of payments over a set period of time.
assistance holdback amount (AHA)
The AHA is made up of all the Canada Disability Savings Grant (grant) and Canada Disability Savings Bond (bond) that have been paid into the RDSP within a 10 calendar year period for a beneficiary by the Government of Canada (less any amounts previously repaid).
disability assistance payment (DAP)
Any payment from an RDSP to the beneficiary or the beneficiary's estate.
fair market value (FMV)
The value of the funds in the RDSP.
lifetime disability assistance payment (LDAP)
Payments which, once started, are payable at least annually until either the plan is terminated or the beneficiary dies.
non-primarily government assisted plan (Non-PGAP)
When the total amount of private contributions are greater than or equal to the total amount of government contributions at the beginning of a calendar year. (This includes amounts that may have been withdrawn, repaid or lost due to a market fluctuation).
primarily government assisted plan (PGAP)
When the total amount of government contributions are greater than the total amount of private contributions at the beginning of a calendar year. (This includes amounts that may have been withdrawn, repaid or lost due to a market fluctuation).
specified maximum amount

The greater of either:

  • the LDAP formula result, or
  • 10% of the FMV (the FMV amount excludes annuity payments) plus the total of all periodic payments paid to the trust from an annuity during the year, or if the trust disposed of the right to such annuity payments it is an estimate of the payments that the trust would have paid in the year.
specified year
The calendar year plus the five years following the year in which a medical doctor attests that the beneficiary is not likely to live more than five years. (If the holder elects to designate the RDSP as a Specified Disability Savings Plan (SDSP), then every subsequent year is a specified year until the plan ceases to be an SDSP.) A specified year will exclude any calendar year prior to the one in which a medical certification affirming the beneficiary’s shortened life expectancy is provided to the issuer.

2. Types of payment

RDSPs may offer two types of payments:

Image description
  • DAPs – if the specimen plan allows
  • LDAPs – which must be available in all RDSPs

2.1 Disability assistance payment

DAPs are discretionary payments from the RDSP that can normally be made at any time to a beneficiary or a beneficiary’s estate.

It must be stipulated in the specimen plan if DAPs are permitted by the financial institution.

2.2 Lifetime disability assistance payment

LDAPs are payments which, once started, are payable at least annually until either the plan is terminated or the beneficiary dies.

LDAPs must begin no later than the end of the calendar year in which the beneficiary turns 60.

Example: John turns 60 years old on August 4, 2034. LDAPs must begin no later than December 31, 2034.

If the beneficiary is 60 years old or older in the year the plan is established as a result of an RDSP transfer, the new issuer must honour the payment commitments of the prior plan. The new issuer must determine how much (if any) LDAP was paid in the year from the prior plan. The issuer must ensure that any payments that should have been made from the prior plan are paid to the beneficiary under the new plan. The issuer must also ensure that the total of payments made from the prior plan plus the payments from the new plan meet the minimum and maximum payment rules for the year.

2.3 Who can request a DAP or an LDAP

A holder can request a DAP or an LDAP at any time within the maximum limits. However, in a year where the plan is considered to be a PGAP, a beneficiary who is 27 to 58 (inclusive) can request DAPs and LDAPs without the holder’s consent, up to the specified maximum amount. At any other time, holder consent is required.

3. Current payment rules

A payment cannot be made from a plan if the FMV of the plan, after the payment, will be less than the AHA.

The following table shows annual minimum and maximum payment rules starting 2014.

RDSP in a regular year
PGAP Non-PGAP
DAP LDAP DAP+ LDAP DAP LDAP DAP+ LDAP
Before the end of the calendar year in which the beneficiary turns 59 Max Amount Specified Maximum Amount Footnote 6 Formula result Footnote 5 Specified Maximum Amount Footnote 6 No Max Amount Formula Result Footnote 5 No Max Amount
Min Amount No Min Amount $1.00 $1.00 No Min Amount $1.00 $1.00
Beginning the year the beneficiary turns 60 Max Amount Always Combined with LDAP Formula Footnote 5 result Specified Maximum Amount Footnote 6 No Max Amount Formula Result Footnote 5 No Max Amount
Min Amount Formula Result Footnote 5 Always Combined with LDAP Formula Result Footnote 5
RDSP in a specified year
DAP LDAP DAP+LDAP
Before the end of the calendar year in which the beneficiary turns 59 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 Footnote 5
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 Footnote 5

3.1 Payments during specified years

When a medical doctor certifies, in writing, that the beneficiary’s state of health is such that he/she has a life expectancy of five years or less, the beneficiary is considered to have a shortened life expectancy for the purposes of the RDSP.

A specified year starts when the financial institution receives the written certification.

In this case, the RDSP holder can choose one of the following options:

  • keep the RDSP as is;

or

  • designate the RDSP as an SDSP.
3.1.1 Payment from an RDSP

If the holder chooses to keep the plan as is, the beneficiary can receive a payment of any amount. For example, he or she can receive all the funds in the RDSP in a lump sum, or the funds may be spread over the remaining specified year period. There is no yearly maximum limit for payments, but the AHA still applies.

3.1.2 Payment from an SDSP

If the holder chooses to designate the RDSP as an SDSP on account of a shortened life expectancy, he or she can withdraw a portion of the plan’s assets without having to repay the AHA or the proportional repayment amount.

Payments start no later than the year after the year the RDSP is designated as an SDSP.

Example: An RDSP is designated as an SDSP on March 25, 2021. Payments must begin no later than December 31, 2022.

The total yearly amount of payments from an SDSP must be at least equal to the legislated formula Footnote 5 result. This requirement does not apply if it is the first year of the SDSP’s existence. Normally the maximum amount that the beneficiary can receive in the year is $10,000 in taxable amounts. However, if the legislative formula results in a taxable amount that is greater than $10,000, there is no maximum payment amount in that year.

In addition, the holder will not have to repay the AHA or the proportional repayment amount.

4. Old payment rules

The following table shows the annual minimum and maximum payment rules that were in effect from 2008 to 2013.

RDSP, Regular year
PGAP Non-PGAP
DAP LDAP DAP+LDAP DAP LDAP DAP+LDAP
Before the end of the calendar year in which the beneficiary turns 59 Max Amount Formula result Footnote 5 No Max Amount Formula Result Footnote 5 No Max Amount
Min Amount No Min Amount $1.00 $1.00 No Min Amount $1.00 $1.00
Beginning the year the beneficiary turns 60 Max Amount Always combined with LDAP Formula Result Footnote 5 No Max Amount Formula Result Footnote 5 No Max Amount
Min Amount No Min Amount $1.00 $1.00
RDSP, Specified year
PGAP Non-PGAP
DAP LDAP DAP+LDAP DAP LDAP DAP+LDAP
Before the end of the calendar year in which the beneficiary turns 59 Max Amount No Maximum No Maximum
Min Amount No Minimum $1.00 $1.00 No Minimum $1.00 $1.00
Beginning the year the beneficiary turns 60 Max Amount No Maximum No Maximum
Min Amount Always Combined with LDAP LDAP Formula Result Footnote 5 No Minimum $1.00 $1.00
SDSP, Specified year
PGAP Non-PGAP
DAP LDAP DAP+LDAP DAP LDAP DAP+LDAP
Beneficiary Any Age Max Amount Always Combined with LDAP $10,000 in taxable amount or the Formula Result Footnote 5 if that result in taxable amount is greater than $10,000. Always combined with LDAP $10,000 in taxable amount
Min Amount Formula Result Footnote 5 Always combined with LDAP $1.00

5. Proportional repayment rule

When a payment is requested, the financial institution repays to the Government of Canada, the lesser of the following amounts:

  • $3 for every $1 that is withdrawn;

or

  • the assistance holdback amount.

Don’t forget: After the payment, if the FMV is less than the AHA then… No payment.

Example: John is the beneficiary of an RDSP that has been in existence for 13 years. The AHA for his RDSP is $7,000. He withdraws an amount of $3,000. Based on the proportional repayment rule, how much is John required to repay?

Solution: $7,000 since the AHA ($7,000) is less than the proportional repayment amount of $9,000 ($3,000 X 3).

5.1 Repayment order

The financial institution must repay grants and bonds in the order in which they were paid into the plan, from the oldest to the newest, during the AHA period preceding the payment.

Example: Peter opened an RDSP in 2008. In 2014, he withdraws $2,500. He must repay an amount of $7,500, which represents a proportional repayment of $3 for each $1 withdrawn.

Repayment of $2,500 x 3 = $7,500

Based on the payment order, the amounts paid from 2008 to 2011 have to be fully repaid, plus an amount of $1,000 paid in 2012, for a total of $7,500.

Year Contribution Grants and bonds Repayment Balance of grants and bonds
2008 $500 $1,500 $1,500 $0
2009 $1,500 $3,500 $3,500 $0
2010 $500 $1,500 $1,500 $0
2011 $0 $0 $0 $0
2012 $1,000 $2,500 $1,000 $1,500
2013 $100 $300 $0 $300
2014 $500 $1,500 $0 $1,500
Total $4,100 $10,800 $7,500 $3,300

5.2 Overlapping proportional repayment and AHA

On occasion, an AHA trigger event (a payment is made, the RDSP is terminated, the RDSP is no longer compliant with the ITA, the beneficiary ceases to be DTC-eligible, the beneficiary dies) may occur that includes a period in which a proportional repayment amount has already been repaid to the Government of Canada. The following example shows how the AHA will be calculated considering this previous grant and bond repayment.

Since she opened her RDSP in 2008, Annette has received the maximum grant and bond payable every year. In 2019, she requests a DAP in the amount of $2,500. Since the 3 for 1 proportional repayment amount ($7,500) is less than the AHA ($45,000), $7,500 is repaid to the Government of Canada.

Upon the beneficiary’s death in 2020, the AHA must be repaid to the government. Given that this new AHA overlaps the previous repayment amount, that repayment amount will have to be subtracted from the new AHA period total. You cannot repay an amount that has already been repaid.

$45,000 – (repaid grant & bond of $3,000) = $42,000

Therefore, the AHA to be repaid to the Government of Canada upon the beneficiary’s death will be $42,000.

6. Taxation

RDSP contributions are not tax deductible when they are deposited into an RDSP and they are not taxed when taken out of the RDSP. Note that while retirement savings plan and education savings plan rollovers are not taxable when they are rolled into the RDSP, these amounts are taxable when withdrawn from the RDSP. The investment income earned in the RDSP accumulates tax free within the plan.

However, grants, bonds, payments from designated provincial programs and the investment income earned within the plan are included for tax purposes in the beneficiary’s income in the year in which a payment is made.

DAPs and LDAPs include:

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  • education savings rollovers
  • contributions
  • earnings
  • grant
  • bond
  • retirement savings rollovers
  • payments from designated provincial programs

In any DAP or LDAP, there are taxable and non-taxable portions.

Taxable portion

  • grants
  • bonds
  • earnings
  • payments from designated provincial programs
  • rollover of retirement savings proceeds
  • rollover of education savings

Non-taxable portion

  • contributions
Note:

In the case of a significant plan loss, grant and bond will count as non-taxable amounts.

If a payment is made after the beneficiary’s death, the taxable portion of the payment must be included in the income of the beneficiary’s estate in the year in which the payment was made.

7. How to calculate a DAP/LDAP

Here is an overview of the steps needed to calculate a DAP/LDAP. Templates have been added at the end of this chapter to assist in calculations.

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Step 1: Identify the plan type. Determine whether the plan is an RDSP in a regular year, an RDSP in a specified year or an SDSP.

Step 2: Determine if PGAP of non-PGAP. At the beginning of the calendar year, determine whether, during its lifetime, the plan contained more private contributions or more government contributions.

Step 3: Identify the required formulas. Find which formulas are needed. If the plan is a PGAP RDSP in a regular year, go to 8.1; for all other plans, go to 8.2.

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Step 4: Min and Max Rules. Find the applicable minimum and maximum payment rules in section 5.

Step 5: Find the FMVs. Find the FMV of the property held in the plan on January 1 of the current year, and on the date just prior to the DAP.

Step 6: Beneficiary’s age on January 1 and December 31. Determine the age of the beneficiary on January 1 and December 31 of the current year.

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Step 7: Grant and Bond. Determine the grant and bond amounts that are older than 10 years (are not part of the AHA).

Step 8: Determine the AHA. Determine the assistance holdback amount as of the current date.

Step 9: Begin the calculations. Begin calculating the required formula results needed for a payment.

8. Plans

8.1 RDSP in a regular year – PGAP

If the plan is:

  • an RDSP in a regular year – PGAP

You must calculate the following formula results:

  • non-taxable portion of DAP/LDAP formula result (see 9.2);
  • grant portion of DAP/LDAP formula result (see 9.3);
  • bond portion of DAP/LDAP formula result (see 9.4);
  • earnings portion of DAP/LDAP formula result (see 9.5)
  • specified maximum amount (see 9.6).

These results will be used for reporting and/or to determine the correct minimum and maximum payment requirements. See section 5.0 for additional information on payment requirements.

8.2. All other plans

If the plan is:

  • an RDSP in a regular year - non-PGAP

or

  • an RDSP in a specified year

or

  • an SDSP

You must calculate the following formula results:

  • LDAP formula result (see 9.1);
  • non-taxable portion of DAP/LDAP formula result (see 9.2);
  • grant portion of DAP/LDAP formula result (see 9.3);
  • bond portion of DAP/LDAP formula result (see 9.4);
  • earnings portion of DAP/LDAP formula result (see 9.5).

These results will be used for reporting and/or to determine the correct minimum and maximum payment requirements. See section 3.0 for additional information on payment requirements.

9. Formulas

9.1. LDAP legislated formula

To calculate the minimum and maximum payment requirements, the following formula is applied (see paragraph 146.4(4)(l) of the ITA).

A ÷ (B + 3 - C) + D

“A” is the FMV of the property held in the plan on January 1st of the calendar year (excluding the value of annuity contracts held by the plan trust).

“B” is the greater of 80 and the age of the beneficiary on January 1st of the calendar year.

“C” is the age of the beneficiary on January 1st of the calendar year.

“D” is the total of all periodic payments paid to the trust from an annuity during the calendar year, or if the trust disposed of the right to such annuity payments it is an estimate of the payments that the trust would have paid in the calendar year.

The result of this formula is used to determine the minimum and maximum payment requirements for a calendar year.

This formula result only needs to be calculated once a year.

9.2. Non-taxable portion of the DAP/LDAP

To calculate the non-taxable portion of a DAP/LDAP, the LDAP legislative formula result must already have been determined (see 9.1) to ensure that the limits are not exceeded. It will not be used in the ensuing calculation unless the amount of the payment is equal to the result of the formula.

The non-taxable portion of a DAP/LDAP is the lesser of:

  • the DAP/LDAP; and
  • the amount determined by the formula

A X B ÷ C

If this is a:

  • DAP request, “A” is the amount of the DAP request.
  • LDAP request, “A” is always the amount of the LDAP request (see section 9.1).

“B” is the contributions made to the RDSP that have not already been used to determine the non-taxable portion of previous DAPs/LDAPs; and

“C” is the result of the AHA being subtracted from the FMV (at the time immediately before the payment). If this amount is negative, no payment can be made.

9.3. The grant portion of the DAP/LDAP

To calculate the grant portion:

A X B ÷ C

If this is a:

  • DAP request, “A” is the amount of the DAP request.
  • LDAP request, “A” is always the amount of the LDAP request (see section 9.1).

“B” is the amount of grant in the RDSP that is over 10 years old, thus not part of the AHA.

“C” is the result of the AHA being subtracted from the FMV (at the time immediately before the payment). If this amount is negative, no payment can be made.

9.4. The bond portion of the DAP/LDAP

To calculate the bond portion:

A X B ÷ C

If this is a:

  • DAP request, “A” is the amount of the DAP request.
  • LDAP request, “A” is always the amount of the LDAP request (see section 9.1).

“B” is the amount of bond in the RDSP that is over 10 years old, thus not part of the AHA.

“C” is the result of the AHA being subtracted from the FMV (at the time immediately before the payment). If this amount is negative, no payment can be made.

9.5. The earnings portion of the DAP/LDAP

To calculate the earnings portion:

Subtract the formula results of the non-taxable (contributions), grant and bond portions from the amount of the DAP/LDAP request.

DAP/LDAP – non-taxable portion – grant portion – bond portion

“DAP/LDAP” is the amount of the DAP/LDAP request.

“Non-taxable portion” is the amount calculated in section 9.2 - Non-Taxable Part of the DAP/LDAP.

“Grant portion” is the amount calculated in section 9.3 - The Grant Portion of the DAP/LDAP.

“Bond portion” is the amount calculated in section 9.4 - The Bond Portion of the DAP/LDAP.

9.6. Specified maximum amount

The specified maximum amount is the greater of the LDAP legislated formula result (see 9.1) or 10% of the FMV (the FMV amount excludes annuity payments) plus the total of all periodic payments paid to the trust from an annuity during the year, or if the trust disposed of the right to such annuity payments it is an estimate of the payments that the trust would have paid in the year.

Greater of either: the LDAP formula result or 10% of the FMV (excludes annuity payments) plus any annuity payments

“LDAP formula result” is the amount calculated in section 9.1 - LDAP legislated formula.

“FMV” is the FMV of the property held in the plan on January 1 of the calendar year.

10. DAP/LDAP calculation examples

10.1. LDAP: RDSP regular year, non-PGAP, 60 or over

Scenario:

Linda is the sole provider for her spouse Paul, who was 40 years old in 2014. Starting in 2014, Linda contributes $10,000 annually to Paul's RDSP for the next 20 years. The grant matching rate has remained constant at 100% throughout the years. Paul is not eligible for the bond.

After 20 years, the fair market value (FMV) of the RDSP on January 1st, 2034 is $261,448. Paul will also turn 60 years old in 2034. No DAPs were made from the RDSP since it was set up.

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The account balance is as follows:

  • $200,000 in contributions (20 payments of $10,000 from 2014 to 2033 inclusively);
  • $16,000 in grant (16 payments of $1,000 from 2008 to 2023 inclusively);
  • no bond;
  • $45,448 in earnings;
  • $261,448 in FMV (as of January 1, 2034)
  • no AHA;
  • no annuities;
  • no previous DAP has been paid;
  • no previous AHA has been repaid.
Steps:

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Step 1: RDSP in a regular year

Step 2: Non-PGAP

Step 3: LDAP formula, non-taxable, grant, bond and earning parts of the LDAP

Step 4: Min and max = formula result

Step 5: FMV on January 1 is $261,448

Step 6: Age on December 31 is 60 or over and age on January 1 is 59 years old

Step 7: Grant is $16,000 and bond is $0

Step 8: No AHA

Step 9: Begin calculations

Rules:

Since Paul turns 60 in 2034, he must receive an LDAP amount that is equal to the LDAP formula result. A one-time yearly LDAP is requested on January 1, 2034. (See Section 5)

Calculations:

To determine the required amount that Paul must receive in 2034, you must calculate the LDAP formula result.

In 2034, the LDAP that Paul will receive is:

A ÷ (B + 3 - C) + D

$261,448 ÷ (80 + 3 − 59) + $0

$261,448 ÷ 24 = $10,893.67

Where:

“A” is FMV on Jan. 1 less any annuities
“B” is greater of 80 and the age of the beneficiary on Jan. 1
“C” is the beneficiary’s age on Jan. 1
“D” is the annuities amount

Note:

For detailed definitions, see section 9.1

The non-taxable portion of the LDAP is:

A X B ÷ C

$10,893.67 x $200,000 ÷ $261,448 = $8,333.34

Where:

“A” is the LDAP
“B” is the contributions not previously used to determine the non-taxable portions of previous DAPs/LDAPs
“C” is FMV minus AHA ($261,448 - $0); if negative, no payment

Note:

For detailed definitions, see section 9.2

The grant portion of the LDAP payment is:

A X B ÷ C

$10,893.67 x $16,000 ÷ $261,448 = $666.67

Where:

“A” is the LDAP
“B” is the grant in the RDSP minus all grant that is part of the AHA at that particular time
“C” is FMV minus AHA; if negative, no payment

Note:

For detailed definitions, see section 9.3

The earnings portion of the LDAP payment is:

A – B – C – D

$10,893.67 - $8,333.34 - $666.67 - $0 = $1,893.66

Where:

“A” is the LDAP
“B” is the contribution portion or the non-taxable portion
“C” is the grant portion
“D” is the bond portion

Note:

For detailed definitions, see section 9.5

10.2. Two DAPs: RDSP regular year, PGAP, 59 and under

This scenario will illustrate how a DAP will affect the notional balances of an RDSP, which in turn will impact any future DAP request.

It will also explain how to calculate the LDAP formula to first determine the maximum DAP request allowed for the year, as well as how to apply the formulas to determine the proportions applicable to the DAP.

Scenario:

Judy and Richard are the legal parents, and joint holders of their 12-year-old daughter Lisa’s RDSP. Every year since opening the RDSP in 2008, Judy and Richard contribute $1,500 to their daughter’s plan during the first week of January. The grant matching rate has remained constant at 300% and 200%. A $1,000 bond was also paid into Lisa’s RDSP from 2008 to 2013.

Lisa is 12 years of age as of January 1st 2020. A $2,000 DAP is requested in March 2020. A second DAP for the amount of $4,200 is requested in August 2020.

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The account balance as of March 2020 is as follows:

  • $45,500 in grant (13 payments of $3,500 from 2008 to 2020 inclusively);
  • $6,000 in bond (6 payments of $1,000 from 2008 to 2013 inclusively);
  • $19,500 in contributions (13 payments of $1,500 from 2008 to 2020 inclusively);
  • $75,260 in FMV (as of March 2020);
  • $4,260 in earnings;
  • $38,000 in AHA ($35,000 in grant and $3,000 in bond from 2011 to 2020 inclusively);
  • no annuities;
  • no previous DAP has been paid;
  • no previous AHA has been repaid.

Steps:

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Step 1: RDSP in a regular year

Step 2: PGAP

Step 3: Specified maximum amount, non-taxable, grant, bond and earnings part of the DAP

Step 4: No minimum amount and the maximum amount is the specified maximum amount

Step 5: FMV on January 1 is $75,260 and the FMV on the DAP date is $75,260

Step 6: Age on January 1 is 12 years old and age on December 31 is 59 years and under

Step 7: Grant is $10,500 and bond is $3,000

Step 8: The AHA is $38,000

Step 9: Begin calculations

Rules:

Because of Lisa’s age, the maximum DAP amount that she can receive in the calendar year is limited to the specified maximum amount. There is no minimum amount regarding the DAP.

Calculations:

To determine the DAP maximum amount allowed, you must determine which is the greater amount: (a) the LDAP formula result or (b) 10% of the FMV + annuities (if applicable).

  1. The LDAP formula result:
  2. A ÷ (B + 3 - C) + D

    $75,260 ÷ (80 + 3 − 12) + $0

    $75,260 ÷ 71 = $1,060

  3. FMV as of January 1st 2020
  4. A X 10 % + D

    $75,260 X 10 % + 0 $ = $7,526

    The maximum DAP amount allowed in 2020 is $7,526.

Where:

“A” is FMV on Jan. 1 less any annuities
“B” is greater of 80 and the age of the beneficiary on Jan. 1
“C” is the beneficiary’s age on Jan. 1
“D” is the annuities amount

Note:

For detailed definitions, see section 9.1

Calculations for the first DAP request of $2,000 in March.

Since the DAP request is below the yearly maximum allowed of $7,526, it would therefore be authorized.

When calculating the non-taxable and taxable amount formulas, you must use the FMV amount immediately before the DAP. FMV for this plan as of March 2020 has remained stable at $75,260.

The non-taxable portion of the DAP is:

A X B ÷ C

$2,000 x $19,500 ÷ $37,260 = $1,046.70

Where:

“A” is the DAP request amount
“B” is the contributions not previously used to determine the non-taxable portion of previous DAPs/LDAPs
“C” is FMV minus AHA ($75,260 – $38,000). If negative, no payment

Note:

For detailed definitions, see section 9.2

The grant portion of the DAP paymentis:

A X B ÷ C

$2,000 x $10,500 ÷ $37,260 = $563.61

Where:

“A” is the DAP request amount
“B” is the grant in the RDSP minus all grant that is part of the AHA at that particular time ($45,500 - $35,000)
“C” is FMV minus AHA ($75,260 – $38,000). If negative, no payment

Note:

For detailed definitions, see section 9.3

The bond portion of the DAP paymentis:

A X B ÷ C

$2,000 x $3,000 ÷ $37,260 = $161.03

Where:

“A” is the DAP request amount
“B” is the bond in the RDSP minus all bond that is part of the AHA at that particular time ($6,000 - $3,000)
“C” is FMV minus AHA ($75,260 – $38,000). If negative, no payment

Note:

For detailed definitions, see section 9.4

The earnings portion of the DAP paymentis:

A – B - C - D

$2,000 - $1,046.70 - $563.61 - $161.03 = $228.66

Where:

“A” is the DAP request amount
“B” is the contribution portion or the non-taxable portion
“C” is the grant portion
“D” is the bond portion

Note:

For detailed definitions, see section 9.5

In March of 2020, Judy and Richard were allocated a DAP of $2,000. The proportional repayment rule was applied and $6,000 of AHA had to be repaid.

A second DAP is requested in August for $4,200.

Here is a snapshot of the notional account of the RDSP as of August 2020 after the first DAP:

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The account balance as of August 2020 is as follows:

  • $40,936.39 in grant ($45,500 minus the first DAP’s grant of $563.61 minus the first DAP’s AHA of $4,000);
  • $3,838.97 in bond ($6,000 minus the first DAP’s bond of $161.03 minus the first DAP’s AHA of $2,000);
  • $18,453.30 in contributions ($19,500 minus the first DAP’s contributions of $1,046.70);
  • $63,228.66 in FMV (FMV has dropped in the last few months);
  • no earnings (earnings were lost when FMV dropped);
  • $32,000 in AHA ($38,000 minus the first DAP’s proportional repayment of $6,000);
  • no annuities;
  • a previous DAP of $2,000 was paid in March 2020;
  • a previous AHA of $6,000 has been repaid.

As previously calculated, the maximum amount that may be withdrawn from the RDSP for 2020 is $7,526. Since an initial DAP of $2,000 was paid out in March, the total of any subsequent DAPs will be limited to $5,526 ($7,526-$2,000).

Steps:

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Step 1: RDSP in a regular year

Step 2: PGAP

Step 3: Specified maximum amount, non-taxable, grant, bond and earnings parts of the DAP

Step 4: No minimum amount and the maximum amount is the specified maximum amount

Step 5: FMV on January 1 is $75,260 and the FMV on the DAP date is $63,228.66

Step 6: Age on January 1 is 12 years old and age on December 31 is 59 years and under

Step 7: Grant is $9,936.39 and bond is $2,838.97

Step 8: The AHA is $32,000

Step 9: Begin calculations

Rules:

Because of Lisa’s age, the maximum DAP amount that she can receive in the calendar year is limited to the specified maximum amount.

There is no minimum amount regarding the DAP.

Calculations:

When calculating the non-taxable and taxable amount formulas, you must use the FMV amount immediately before the DAP. As of August 2020, the FMV has dropped to $63,228.66.

The non-taxable portion of the DAP is:

A X B ÷ C

$4,200 x $18,453.30 ÷ $31,228.66 = $2,481.82

Where:

“A” is the DAP request amount
“B” is the contributions not previously used to determine the non-taxable portion of previous DAPs/LDAPs
“C” is FMV minus AHA ($63,228.66 –$32,000). If negative, no payment

Note:

For detailed definitions, see section 9.2

The grant portion of the DAP payment is:

A X B ÷ C

$4,200 x $9,936.39 ÷ $31,228.66 = $1,336.36

Where:

“A” is the DAP request amount
“B” is the grant in the RDSP minus all grant that is part of the AHA at that particular time ($40,936.39 - $31,000)
“C” is FMV minus AHA ($63,228.66 –$32,000). If negative, no payment

Note:

For detailed definitions, see section 9.3

At the beginning of the year, there was $10,500 in grant that was excluded from the AHA period. $563.61 in grant was paid out in the first DAP, leaving a grant balance of $9,936.39.

The bond portion of the DAP payment is:

A X B ÷ C

$4,200 x $2,838.97 ÷ $31,228.66 = $381.82

Where:

“A” is the DAP request amount
“B” is the bond in the RDSP minus all bond that is part of the AHA at that particular time ($3,838.97 - $1,000)
“C” is FMV minus AHA ($63,228.66 –$32,000). If negative, no payment

Note:

For detailed definitions, see section 9.4

At the beginning of the year, there was $3,000 in bond that was excluded from the AHA period. $161.03 in bond was paid out in the first DAP, leaving a bond balance of $2,838.97.

The earnings portion of the DAP payment is:

A – B - C - D

$4,200 -$2,481.82 - $1,336.36 - $381.82 = $0

Where:

“A” is the DAP request amount
“B” is the contribution portion of the non-taxable portion
“C” is the grant portion
“D” is the bond portion

Note:

For detailed definitions, see section 9.5

In August of 2020, Judy and Richard were allocated a second DAP of $4,200. The proportional repayment rule was applied and $12,600 of AHA had to be repaid.

10.3. LDAP & DAP – RDSP regular year, non-PGAP, 59 or under

Scenario:

From 2008 to 2026 inclusively, Kevin contributed $4,000 a year to his RDSP. The grant matching rates remained constant at 300% and 200%. A $1,000 bond was also paid into Kevin’s RDSP from 2014 to 2017 inclusively as well as a one-time rollover of $12,000 in 2022.

On January 1, 2027, 47-year-old Kevin received an LDAP amount for the year.

Also, in July of that same year, Kevin requested a DAP of $12,000.

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The account balance as of January 1, 2027 is as follows:

  • $66,500 in grant (19 payments of $3,500 from 2008 to 2026 inclusively);
  • $4,000 in bond (4 payments of $1,000 from 2014 to 2017 inclusively);
  • $76,000 in contributions (19 payments of $4,000 from 2008 to 2026 inclusively);
  • $168,010 in FMV (on January 1, 2027);
  • $21,510 in earnings (includes a $12,000 rollover);
  • $36,000 in AHA ($35,000 in grant and $1,000 in bond from 2017 to 2026 inclusively);
  • no annuities;
  • no previous DAP has been paid;
  • no previous AHA has been repaid.
Steps:

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Step 1: RDSP in a regular year

Step 2: Non-PGAP

Step 3: LDAP formula, non-taxable, grant, bond and earnings portions of the LDAP

Step 4: Minimum amount $1 and the maximum amount is the LDAP formula result

Step 5: FMV on January 1 is $168,010

Step 6: Age on January 1 is 47 years old and age on December 31 is 59 years and under

Step 7: Grant is $31,500 and bond is $3,000

Step 8: The AHA is $36,000

Step 9: Begin calculations

Rules:

The maximum LDAP amount that Kevin can receive in the year is the result of the LDAP formula.

The minimum LDAP that Kevin must receive in the year is $1.

Calculations:

To determine the maximum LDAP amount allowed, you must apply the LDAP formula.

The LDAP Formula result:

A ÷ (B + 3 - C) + D

$168,010 ÷ (80 + 3 − 47) + $0

$168,010 ÷ 36 = $4,666.94

The maximum LDAP amount allowed in 2027 is $4,666.94.

Where:

“A” is FMV on Jan. 1 less any annuities
“B” is greater of 80 and the age of the beneficiary on Jan. 1
“C” is the beneficiary’s age on Jan. 1
“D” is the annuities amount

Note:

For detailed definitions, see section 9.1

Calculations to determine the proportions of the LDAP payment.

Use the January 1st FMV amount to calculate the taxable and non-taxable portion amounts. The FMV for Kevin’s plan as of January 1, 2027 is $168,010.

The non-taxable portion of the LDAP is:

A X B ÷ C

$4,666.94 x $76,000 ÷ $132,010 = $2,686.82

Where:

“A” is the LDAP
“B” is the contributions not previously used to determine the non-taxable portion of previous DAPs/LDAPs
“C” is FMV minus AHA ($168,010 –$36,000). If negative, no payment

Note:

For detailed definitions, see section 9.2

The grant portion of the LDAP paymentis:

A X B ÷ C

$4,666.94 x $31,500 ÷ $132,010 = $1,113.62

Where:

“A” is the LDAP
“B” is the grant in the RDSP minus all grant that is part of the AHA at that particular time ($66,500 - $35,000)
“C” is FMV minus AHA. If negative, no payment

Note:

For detailed definitions, see section 9.3

The bond portion of the LDAP paymentis:

A X B ÷ C

$4,666.94 x $3,000 ÷ $132,010 = $106.06

Where:

“A” is the LDAP
“B” is the bond in the RDSP minus all bond that is part of the AHA at that particular time ($4,000 - $1,000)
“C” is FMV minus AHA. If negative, no payment

Note:

For detailed definitions, see section 9.4

The earnings portion of the LDAP paymentis:

A – B – C – D

$4,666.94 - $2,686.82 - $1,113.62 - $106.06 = $760.44

Where:

“A” is the LDAP
“B” is the contribution portion or the non-taxable portion
“C” is the grant portion
“D” is the bond portion

Note:

For detailed definitions, see section 9.5

In January of 2027, Kevin receives an LDAP of $4,666.94. The proportional repayment rule was also applied and $14,000.82 ($4,666.94 X 3) in grant and bond was to be repaid to the Government of Canada.

Scenario:

On July 14, 2027, Kevin requested a DAP of $12,000.

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The account balance as of July 14, 2027 is as follows:

  • $52,385.55 in grant ($66,500 minus prior LDAP’s grant of $1,113.62 minus the prior LDAP’s AHA of $13,000.83);
  • $2,893.94 in bond ($4,000 minus prior LDAP’s bond of $106.06 minus prior LDAP’s AHA of $1,000);
  • $73,313.17 in contributions ($76,000 minus prior LDAP’s contributions of $2,686.82);
  • $149,000 in FMV (on July 14, 2027);
  • $20,407.34 in earnings ($149,000 minus $52,385.15 minus $2,893.94 minus $73,313.17);
  • $21,999.18 in AHA ($36,000 minus prior LDAP’s proportional repayment of $14,000.82);
  • no annuities;
  • $4,666.94 in previous DAP/LDAP has been paid;
  • $14,000.82 in previous AHA has been repaid.
Steps:

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Step 1: RDSP in a regular year

Step 2: Non-PGAP

Step 3: LDAP formula, non-taxable, grant, bond and earnings portions of the DAP

Step 4: Minimum amount is $1 and there is no maximum amount

Step 5: FMV on July 14, 2027 is $149,000

Step 6: Age on January 1 is 47 years old and age on December 31 is 59 years and under

Step 7: Grant is $30,386.38 and bond is $2,893.94

Step 8: The AHA is $21,999.18

Step 9: Begin calculations

Rules:

The minimum LDAP that Kevin must receive in the year is $1.

Kevin is not limited to a maximum DAP amount.

The minimum amount regarding the DAP is $1.

Calculations:

As per the table above, there is no limit to the amount of DAP that Kevin can receive in the calendar year.

Calculations to determine the proportions of the DAP payment.

When calculating the proportions of a DAP for the non-taxable and taxable amounts, you must use the FMV amount right before the DAP is made. The FMV for this plan on July 14th, 2027 is $149,000.00.

The non-taxable portion of the DAP is:

A X B ÷ C

$12,000 x $73,313.17 ÷ $127,000.83 = $6,927.18

Where:

“A” is the DAP request amount
“B” is the contributions not previously used to determine the non-taxable portion of previous DAPs/LDAPs
“C” is FMV minus AHA ($149,000.00 – $21,999.17). If negative, no payment

Note:

For detailed definitions, see section 9.2

The grant portion of the DAP paymentis:

A X B ÷ C

$12,000 x $30,386.38 ÷ $127,000.83 = $2,871.14

Where:

“A” is the DAP request amount
“B” is the grant in the RDSP minus all grant that is part of the AHA at that particular time ($52,385.55 - $21,999.17)**
“C” is FMV minus AHA ($149,000.00 – $21,999.17). If negative, no payment

Note:

For detailed definitions, see section 9.3

At the beginning of the year, there was $31,500 in grant that was excluded from the AHA period. $1,113.62 in grant was paid out in the LDAP, leaving a grant balance of $30,386.38.

The bond portion of the DAP paymentis:

A X B ÷ C

$12,000 x $2,893.94 ÷ $127,000.83 = $273.44

Where:

“A” is the DAP request amount
“B” is the bond in the RDSP minus all bond that is part of the AHA at that particular time ($2,893.94 - $0)
“C” is FMV minus AHA ($149,000.00 – $21,999.17). If negative, no payment

Note:

For detailed definitions, see section 9.4

At the beginning of the year, there was $3,000 in bond that was excluded from the AHA period. $106.06 in bond was paid out in the first 7 LDAPs, leaving a bond balance of $2,893.94.

The earnings portion of the DAP paymentis:

A – B – C – D

$12,000 - $6,927.18- $2,871.14 - $273.44 = $1,928.24

Where:

“A” is the DAP request amount
“B” is the contribution portion or the non-taxable portion
“C” is the grant portion
“D” is the bond portion

Note:

For detailed definitions, see section 9.5

Kevin was allocated a $12,000 DAP. The repayment rule was applied and Kevin had to repay the remaining balance of the AHA from his plan ($21,999.18) which represents the lesser of the proportional repayment rule ($12,000 X 3 = $36,000) and the full AHA repayment ($21,999.18).

10.4. LDAP: SDSP

Scenario:

From 2010 to 2029 inclusively, $3,500 in grant and $1,000 in bond have been deposited into Nancy’s RDSP each year.

In December 2035, 39-year-old Nancy had her RDSP designated as an SDSP so she may begin making withdrawals every two months starting January 1, 2036.

She wants to withdraw the maximum amount of funds possible from her SDSP.

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The account balance as of January 1, 2036 is as follows:

  • $70,000 in grant (20 payments of $3,500 from 2010 to 2029 inclusively);
  • $20,000 in bond (20 payments of $1,000 from 2010 to 2029 inclusively);
  • $30,000 in contributions (20 payments of $1,500 from 2010 to 2029 inclusively);
  • $136,800 in FMV (on January 1, 2036);
  • $16,800 in earnings;
  • no AHA (there is no AHA in an SDSP);
  • no annuities;
  • no previous DAP has been paid;
  • no previous AHA has been repaid.
Steps:

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Step 1: SDSP

Step 2: Not applicable in an SDSP

Step 3: LDAP formula, non-taxable, grant, bond and earnings portions of the LDAP

Step 4: Minimum amount is equal to the formula result and the maximum amount is $10,000 in taxable amount or no maximum if formula results in taxable amount greater than $10,000

Step 5: FMV on January 1, 2036 is $136,800

Step 6: Age on January 1 is 39 years old and age on December 31 is 59 years and under

Step 7: Grant is $70,000 and bond is $20,000

Step 8: No AHA

Step 9: Begin calculations

Rules:

The maximum amount will either be $10,000 in taxable amount, or if the formula results in a taxable amount that is greater than $10,000, there will be no maximum amount. The minimum is the formula result.

Calculations:

In 2036, the LDAP formula results:

A ÷ (B + 3 - C) + D

$136,800 ÷ (80 + 3 − 39) + $0

$136,800 ÷ 44 + $0 = $3,109.09

Where:

“A” is FMV on Jan. 1 less any annuities
“B” is greater of 80 and the age of the beneficiary on Jan. 1
“C” is the beneficiary’s age on Jan. 1
“D” is the annuities amount

Note:

For detailed definitions, see section 9.1

The non-taxable portion of the LDAP is:

A X B ÷ C

$3,109.09 X $30,000 ÷ $136,800 = $681,82

Where:

“A” is the LDAP
“B” is the contribution portion or the non-taxable portion
“C” is FMV minus AHA ($136,800 –$0). If negative, no payment

Note:

For detailed definitions, see section 9.2

The taxable portion of the LDAP is:

A – B

$3,109.09 - $681.82 = $2,427.27

Where:

“A” is the LDAP

“B” is the non-taxable portion of the LDAP

Since the taxable portion amount ($2,427.27) is less than $10,000, the Minimum LDAP for the year will be the result of the LDAP formula: $3,109.09.

To determine the maximum LDAP payable for the year, calculate the non-taxable amount knowing that the taxable amount is $10,000.

Maximum LDAP payable for the year

The non-taxable portion of the entire SDSP

A ÷ B X 100%

$30,000 ÷ $136,800 X 100% = 21.93%

Where:

“A” is the contributions not previously used to determine the non-taxable portion of previous DAPs/LDAPs

“B” is FMV minus AHA ($136,800 –$0). If negative, no payment

Note:

For detailed definitions, see section 9.3

The taxable portion of the entire SDSP

100% - A

100% - 21.93% = 78.07%

Where:

“A” is non-taxable portion of the entire SDSP previously calculated

Note:

For detailed definitions, see section 9.3

The non-taxable portion of the entire SDSP

A X B ÷ C

21.93 X $10,000 ÷ 78.07 = $2,809

Where:

“A” is non-taxable portion of the entire SDSP
“B” is $10,000 taxable amount
“C” is taxable portion of the entire SDSP

The maximum LDAP is $10,000 (taxable portion) + $2,809 (non-taxable portion) = $12,809.

Which means $2,134.83 ($12,809 ÷ 6) will be paid out every second month starting January 1, 2036.

On January 1, Nancy begins receiving LDAP payments of $2,134.83 to be paid out the first of every second month until the end of the year.

To report the first LDAP of January 1, the following amounts are needed.

The non-taxable portion of the LDAP is:

A X B ÷ C

$2,134.83 x $30,000 ÷ $136,800 = $468.16

Where:

“A” is the LDAP amount
“B” is the contributions not previously used to determine the non-taxable portion of previous DAPs/LDAPs
“C” is FMV minus AHA ($136,800 –$0). If negative, no payment

Note:

For detailed definitions, see section 9.2

Given that the grant portion of the entire LDAP payment (see 9.3) is:

A X B ÷ C

$2,134.83 x $70,000 ÷ $136,800 = $1,092.39

Where:

“A” is the LDAP amount
“B” is the grant in the RDSP minus all grant that is part of the AHA at that particular time ($70,000 - $0)
“C” is FMV minus AHA ($136,800 –$0). If negative, no payment

Note:

For detailed definitions, see section 9.3

Given that the bond portion of the entire LDAP payment (see 9.4) is:

A X B ÷ C

$2,134.83 x $20,000 ÷ $136,800 = $312.11

Where:

“A” is the LDAP amount
“B” is the bond in the RDSP minus all bond that is part of the AHA at that particular time ($20,000 - $0)
“C” is FMV minus AHA ($136,800 –$0). If negative, no payment

Note:

For detailed definitions, see section 9.4

Given that the earnings portion of the entire DAP payment (see 9.5) is:

A – B - C - D

$2,134.83 - $468.16 - $1,092.38 -$312.11 = $262.18

Where:

“A” is the LDAP amount
“B” is the non-taxable portion
“C” is the grant portion
“D” is the bond portion

Note:

For detailed definitions, see section 9.5

Please note: while the next LDAP amount will remain the same ($2,134.83), the grant, bond, earnings and non-taxable amounts will need to be recalculated as the proportions will have changed slightly. The above mentioned amounts will no longer be accurate for the March 1 LDAP.

11. Reference tools

11.1. Information template

Use this sheet to help determine the information needed to calculate the DAP or LDAP.

1. What is the plan type?

  • RDSP regular year
  • RDSP specified year
  • SDSP

2. Is it a PGAP or non-PGAP?

  • PGAP
  • Non-PGAP

3. What are the five required formula results to be calculated? Those from section 8.1 or 8.2?

a)

  • Specified max amount
  • LDAP formula

b) non-taxable portion of DAP/LDAP
c) grant portion of DAP/LDAP
d) bond portion of DAP/LDAP
e) earnings portion of DAP/LDAP (including rollovers)

4. What are the applicable minimum and maximum payment rules?

Min: _____________________
Max: _____________________

5. What is the FMV of the property held in the plan on January 1? On the date of the payment? What is the FMV-AHA amount?

(If negative result, no payment can be made!)
Jan. 1:_____________________
Payment date:_______________
FMV - AHA = $_________________(report this amount as variable “C” in the calculation of portions)

6. How old is the beneficiary on January 1 and December 31 of the current year?

Jan. 1: _____________________
Dec. 31:

  • 59 or under
  • 60 or over

7. What is the AHA as of the current date?

AHA:_______________________

8. What are the grant and bond amounts that are older than 10 years (not part of the AHA)?

  • Grant: $____________________
  • Bond: $ ___________________

9. Begin the calculations

11.2. Calculation Template

See section 11 to calculate the following.

LDAP formula (9.1): A ÷ (B + 3 - C) + D = ____
Non-taxable portion of the DAP/LDAP (9.2): A X B ÷ C = ____
Grant portion of the DAP/LDAP (9.3): A X B ÷ C = ____
Bond portion of the DAP/LDAP (9.4): A X B ÷ C = ____
Earnings portion of the DAP/LDAP (9.5): The amount of the DAP/LDAP request minus the result of the non-taxable portion of the DAP/LDAP minus the result of the grant portion of the DAP/LDAP minus the result of the bond portion of the DAP/LDAP = ____

Specified maximum amount (9.6) (if applicable): Greater of either the: (LDAP formula result) __________or the (10% of FMV (on Jan. 1) + annuities) __________

11.3. Formula and min and max reference table

Plan Year Type PGAP or non-PGAP Age Footnote 7 Withdrawal Type Maximum Minimum Max formula result Specified maximum amount Non-taxable Footnote 8 Grant Footnote 9 Bond Footnote 10 Earnings Footnote 11
RDSP Regular PGAP 59 or - DAP Specified max amt None no yes yes yes yes yes
RDSP Regular PGAP 59 or - LDAP Formula $1 no yes yes yes yes yes
RDSP Regular PGAP 59 or - DAP + LDAP Specified max amt $1 no yes yes yes yes yes
RDSP Regular PGAP 60 or + DAP Always with LDAP Always with LDAP no yes yes yes yes yes
RDSP Regular PGAP 60 or + LDAP Formula Formula no yes yes yes yes yes
RDSP Regular PGAP 60 or+ DAP + LDAP Specified max amt Formula no yes yes yes yes yes
RDSP Regular non-PGAP 59 or - DAP None None yes no yes yes yes yes
RDSP Regular non-PGAP 59 or - LDAP Formula $1 yes no yes yes yes yes
RDSP Regular non-PGAP 59 or - DAP + LDAP None $1 yes no yes yes yes yes
RDSP Regular non-PGAP 60 or + DAP None Always with LDAP yes no yes yes yes yes
RDSP Regular non-PGAP 60 or + LDAP Formula Formula yes no yes yes yes yes
RDSP Regular non-PGAP 60 or + DAP + LDAP None Formula yes no yes yes yes yes
RDSP Specified n/a 59 or - DAP None None yes no yes yes yes yes
RDSP Specified n/a 59 or - LDAP None $1 yes no yes yes yes yes
RDSP Specified n/a 59 or - DAP + LDAP None $1 yes no yes yes yes yes
RDSP Specified n/a 60 or + DAP None Always with LDAP yes no yes yes yes yes
RDSP Specified n/a 60 or + LDAP None Formula yes no yes yes yes yes
RDSP Specified n/a 60 or + DAP + LDAP None Formula yes no yes yes yes yes
SDSP Specified n/a n/a n/a $10,000 in taxable amount or no max if formula results in taxable amount more than $10,000 Formula yes no yes yes yes yes

Chapter 2-3: Specified Disability Savings Plan

For beneficiaries who have an expected life expectancy of five years or less (as certified by a medical doctor), options have been developed to offer greater flexibility to access savings from a Registered Disability Savings Plan (RDSP). During a specified year, holders may choose to keep the RDSP as is or to have it designated as a Specified Disability Savings Plan (SDSP).

This chapter focuses on these options.

1. Shortened Life Expectancy

When a medical doctor certifies, in writing, that the beneficiary’s state of health is such that he/she has a life expectancy of five years or less, the beneficiary is considered to have a shortened life expectancy for the purposes of the RDSP.

In this case, the RDSP holder can choose one of the following options:

  • keep the RDSP as is;
    OR
  • designate the RDSP as an SDSP.

Designating the RDSP as an SDSP allows the holder to withdraw plan assets without requiring the repayment of the Assistance Holdback Amount (AHA) or the proportional repayment amount.

1.1. Death of the Beneficiary

In both cases, in the event of the beneficiary’s death, any grants or bonds paid into the plan over the previous ten years preceding the time of death will have to be repaid to the Government of Canada.

2. SDSP

An SDSP provides beneficiaries who have a shortened life expectancy with greater flexibility to access their savings from an RDSP.

Withdrawals from an SDSP will not trigger a repayment of the AHA or the proportional repayment amount. However, once the election is made, no additional contributions can be made to the plan nor is the plan eligible for any new grants or bonds.

Furthermore, beneficiaries will not be eligible to carry forward any grant or bond for those years under the plan.

2.1. Conditions

An RDSP is designated as an SDSP when:

  • a medical doctor certifies, in writing, that the beneficiary’s state of health is such that he/she is not likely to live more than five years;
  • the plan holder makes an election in the prescribed form and submits the election with the medical certification to the financial institution;
  • the financial institution notifies Employment and Social Development Canada (ESDC) of the election.

3. Specified Year

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

  • each of the five following calendar years if the plan remains an RDSP*; and
  • each subsequent calendar year if the plan has been designated as an SDSP.

*The specified year period will be reduced if the financial institution receives the medical certificate in any year after it is issued. For example, if the certificate is issued in but it is not provided to the financial institution until , the plan will only be in a specified year for three years ( to inclusive).

3.1. SDSP Conditions

While a plan is an SDSP:

  • no further contributions are allowed;
  • no grant is paid;
  • no bond is paid;
  • payments from a designated provincial program are not allowed;
  • unused grant and bond entitlements will not be carried forward except for the calendar year in which the election is made;
  • education rollover is not allowed;
  • rolling over proceeds from a Registered Retirement Savings Plan (RRSP), a Registered Pension Plan (RPP), a Specified Pension Plan (SPP), a Pooled registered Pension Plan (PRPP) or a Registered Retirement Income Fund (RRIF) is allowed; and
  • in general, withdrawals of no more than $10,000 of the taxable amount are allowed.

3.2. Beneficiary Surviving More Than 5 Years

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

An SDSP is not affected by survival beyond the 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.

4. Holder Election

In a specified year, the holder can:

  • keep the plan as is; OR
  • designate the RDSP as an SDSP.

Electing to designate an RDSP as an SDSP allows the holder to withdraw RDSP assets without requiring the repayment of the AHA or the proportional repayment amount.

4.1. Keep the RDSP as is

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

  • request Disability Assistance Payments (DAP);
  • have the funds spread over the next five years; and/or
  • withdraw all funds from the RDSP in one lump sum.

The AHA or the proportional repayment amount must be repaid when a payment is paid.

4.2. Designating the RDSP as an SDSP

When a holder makes an SDSP election, they could:

  • immediately request a DAP ; and/or
  • withdraw an amount up to $10,000 of taxable amounts or no maximum if formula results in taxable amount are greater than $10,000.

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

5. Withdrawals

During a specified year, the holder can withdraw funds. The withdrawal amounts and frequency depends on the designation.

See Chapter 2-2: Payments for information regarding withdrawals from an SDSP.

6. Reversal of an Election

A plan holder can reverse the election at any time. The holder must provide a written notice to the financial institution, who must then inform ESDC.

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

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If an election is reversed on , grant and bond may only be requested once again starting 2016.

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

6.1. Removal of an SDSP Designation

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

  • 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;
  • LDAPs did not start before the end of the year after the year in which the plan became an SDSP (for or earlier);
  • the total taxable amount of a DAP exceeds $10,000 or the maximum allowed by the LDAP formula during a primarily government assisted plan (PGAP) year (for or earlier);
  • the amount of DAP paid in a specified year do not equal the amount of the LDAP formula during a PGAP year (for or earlier);
  • the total of the taxable amount of DAPs made from the plan in the year while it was an SDSP exceeds $10,000 unless the formula result requires a greater amount to be paid ( or later);
  • payments have not begun to be paid before the end of the particular calendar year following the year in which the plan last became an SDSP ( or later);
  • the total amount of DAPs made from the plan to the beneficiary in the calendar year is less than the amount determined by the maximum LDAP formula ( or later); and
  • the plan is cancelled or its registration is terminated for compliance reasons.

When an SDSP designation is removed, the plan becomes subject to the regular RDSP rules pertaining to RDSPs and may result in repayment of the grants and the bonds.

If the SDSP designation is removed and the plan returns to a regular RDSP, the plan does not have to be closed.

7. Administration

7.1. 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;
  • the addendum is added to the beneficiary’s file.

7.2. Form

The holder is required to elect in a form and submit the election to the financial institution. There are no requirements regarding the format of the form, but it must contain the following items: 

  • 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; and
  • 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, Canada Revenue Agency before issuers offer holders the ability to designate a plan as an SDSP.

7.3. Medical Attestation

The holder(s) must provide the financial institution with certification in writing 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 unlikely to live more than five years.

7.4. Effective Date for an SDSP

An SDSP election becomes effective on the date ESDC receives the request.

7.5. Forwarding an SDSP Designation

Once the financial institution receives the required documentation from the holder(s), it notifies ESDC of the SDSP election in one of two ways:

  • by sending documents by email via secured file transfer; or
  • by submitting a transaction type “501-03” through the Canada Disability Savings Program (CDSP) system.
7.5.1. Email Designation
7.5.1.1. Required Information

The following information must be sent in either a 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. This includes:

  • specimen plan number;
  • contract number of the designated RDSP;
  • beneficiary’s first and last names;
  • beneficiary’s Social Insurance Number (SIN); and
  • date of the medical attestation.

The following file naming standard must be applied when naming the file sent to the (CDSP) system with the appropriate extension.

CDSPP < Authorized Agent BN > < Date Sent > SDSP .file extension

7.5.1.2. Managed Secure File Transfer Software

As soon as the document or spreadsheet is complete, the financial institution sends it via the Managed Secure File Transfer (MSFT) software.

This can be done at any time however these requests will be processed in accordance with established production cycles. As per legislation, the effective date of the SDSP is the date the request is received by ESDC.

The individual that has sent the file will receive an automatic notification indicating that the file was submitted successfully in keeping with current practice.

After sending the file via the secure file exchange, the financial institution sends an email indicating that a request has been forwarded to establish an SDSP using the email address below:

rdsp-reei@hrsdc-rhdcc.gc.ca

7.5.2. Transaction Type 501-03

Since January 2014, the financial institution may submit a transaction type 501-03 (SDSP Election) to designate a plan as an SDSP. There is no longer a requirement to send the information by email.

The start of the election is recorded as the date the election information is received by the CDSP system.

7.5.3. Stop Bond Payment 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 the RDSP.

7.6. 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 attestation.

The financial institution must receive written documentation from the holder that they wish to stop the designation of the beneficiary's plan as a SDSP. The documentary evidence must be signed by all holders of the plan.

7.7. Submitting an SDSP Reversal

Once the financial institution receives the required documentation from the holder, it notifies ESDC of the holder’s decision to reverse the SDSP election in one of two ways:

  • by sending documents by email via secured file transfer; or
  • by submitting a transaction type 501-04 through the CDSP system.
7.7.1. Email Reversal
7.7.1.1 Required Information

The following information must be sent in either a 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. This includes:

  • specimen plan number;
  • contract number of the designated RDSP;
  • beneficiary’s first and last names; and
  • beneficiary’s SIN.

The following file naming standard must be applied when naming the file sent to the CDSP system with the appropriate extension.

CDSPP < Authorized Agent BN > < Date Sent > SDSP.file extension

7.7.1.2 Managed Secure File Transfer Software

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

This can be done at any time however these requests will be processed in accordance with established production cycles. As per legislation, the effective date of the SDSP is the date the request is received by ESDC.

The individual that has sent the file will receive an automatic notification indicating that the file was submitted successfully in keeping with current practice.

After sending the file via the secure file exchange, the financial institution sends an email to indicate that a request has been forwarded to stop an SDSP using the email address below:

rdsp-reei@hrsdc-rhdcc.gc.ca

7.7.2. Transaction Type 501-04

Since January 2014, the financial institution may submit a transaction type 501-04 (SDSP election reversal) to remove an SDSP designation from a plan or to reverse a SDSP election 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.

7.7.3. Resume Bond Payment Request

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

8. Transactions

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

  • transaction 401-06 – Stop Bond Payment Request, if there is an active bond request
  • transaction 401-08 – RDSP Rollover (Retirement Savings Rollover)
  • transaction 401-20 – DAP
  • transaction 401-21 – LDAP

For more information on rollovers, see Chapter 2-5: RDSP Rollovers.

Chapter 2-4: RDSP Transfers

The term “transfer” is used when the assets are moved from one Registered Disability Savings Plan (RDSP) to another.

This chapter outlines the roles and responsibilities of issuers and holders as well as the transfer procedures. It also includes the transactions that must be sent to the Canada Disability Savings Program (CDSP) system for a transfer to be deemed complete and successful. Issuers must share information and work together to successfully complete the transfer.

1. Transfer overview

The term “transfer” refers to the transactions that take place when all the funds from one RDSP are moved to a new RDSP for a same beneficiary.

While the holder(s) authorizes the transfer to take place, the RDSP transfer process involves the participation of the following:

  • the holder(s) of the RDSPs (prior and new plan);
  • the issuers (i.e. the relinquishing and receiving financial institutions); and
  • Employment and Social Development Canada (ESDC).

Each plays a critical role in facilitating the RDSP transfer process and confirming that it meets the conditions required to ensure that there are no gaps in the payments of the Canada Disability Savings Grant (grant) and the Canada Disability Savings Bond (bond) for the beneficiary if he/she is eligible.

Note:

The holder(s) of the new RDSP may be different from the holder(s) of the prior RDSP.

1.1. General conditions

All the funds in the RDSP may be transferred if the following conditions are met:

  • same beneficiary;
  • all funds must be transferred (no partial transfer is allowed);
  • the prior contract is closed;
  • the new contract is registered with CRA;
  • the relinquishing issuer must also transfer any relevant information that has not been provided by ESDC (i.e. medical attestation, etc.)

The beneficiary does not have to be a resident in Canada at the time of the transfer. A transfer may occur regardless of the age of the beneficiary.

If the beneficiary turns 59 or older during the calendar year, the receiving issuer must continue to process any lifetime disability assistance payments (LDAPs) that started in the prior plan. If no LDAPs were processed, the receiving issuer must start the LDAPs that would have begun in the prior plan had the transfer not occurred.

2. RDSP Transfer Form

When transferring an RDSP, issuers may use the RDSP Transfer form (EMP 5611) Note de bas de page * and the Holder Consent to an RDSP Transfer form (EMP 5612) Note de bas de page *

To download RDSP Transfer form and/or the Holder Consent to an RDSP Transfer form, click on the following link, and then choose the “Forms” tab on the Resources for RDSP grant and bond issuers web page.

The forms must be completed by the following:
RDSP transfer form:

  • plan holder of the new RDSP
  • receiving issuer (new RDSP)
  • relinquishing issuer (prior RDSP)

Holder consent form:

  • plan holder from the prior RDSP

The relinquishing issuer must provide the receiving issuer with all the information in its possession concerning the prior plan in order to comply with the requirements set out in the Income Tax Act (ITA), Canada Disability Savings Act (CDSA) and Canada Disability Savings Regulations (Regulations).

3. Responsibilities

3.1. Holder

The holder(s) of the new RDSP (who may be different from the holder of the prior RDSP):

  • chooses a new (receiving) issuer;
  • informs the receiving issuer that an RDSP is currently open at a prior (relinquishing) issuer;
  • opens a new RDSP;
  • completes a new application for the Canada Disability Savings Grant and Canada Disability Savings Bond and applicable Annexes with the receiving issuer;
    • To download the RDSP Grant and Bond form and annexes A and B, click on the following link, and then choose the “Forms” tab on the Resources for RDSP grant and bond issuers web page.
    • For more information on how to fill these forms, see Chapter 3-3 of the RDSP Provider User Guide.
  • informs the relinquishing issuer that he/she wants to transfer all of the assets of the RDSP to a new RDSP; and
  • completes sections 1 and 2 of the RDSP Transfer form; and
  • obtains Holder Consent to an RDSP Transfer form from the holder of the prior RDSP.
3.1.1. Section 1: Beneficiary information

The holder of the new RDSP must provide the following information on the beneficiary:

  • last name
  • first name
  • middle name (if applicable)
  • Social Insurance Number (SIN)

The information must be entered exactly as it appears on SIN documentation. Often, errors occur because legal name changes are not immediately reported to the Social Insurance Registry (SIR) (i.e. married names do not match maiden names).

3.1.2. Section 2: Holder information

If the holder is different from the beneficiary, the following information on the holder is required:

If the holder is an individual, he/she must provide:

  • last name, first name
  • middle name (if applicable)

If the holder is an agency, he/she must provide:

  • name of agency
  • name of agency representative

3.2. Receiving issuer (Transfer-in)

The receiving issuer:

  • completes section 3 of the RDSP Transfer form;
  • opens a new RDSP by submitting the registration package transactions to the CDSP system, making sure that the transfer indicator in position 175 is set to “Y”;
  • continues any LDAPs if they had started at the relinquishing issuer;
  • keeps a copy of the Holder Consent to an RDSP Transfer form; and
  • keeps the signed original of the RDSP Transfer form.
3.2.1. Section 3: Receiving issuer information

The Receiving RDSP Contract No. is the number assigned by the receiving issuer.

The Receiving Specimen Plan No. is the number assigned to the receiving issuer by CRA.

The Date Contract Opened is the signature date of the new contract. This date would be the same as reported on the record type (RT) 101 transaction.

3.2.2. Transaction to submit to ESDC
Transaction type Description Position Important fields
101-01 Contract information 36-42 Specimen plan number assigned by CRA for the new RDSP
46-60 New contract number
175 Input « Y »
184-198 Contract number of the prior RDSP (all contract digits must be provided including leading zeros)
199-205 Specimen plan number of the prior RDSP
101-02 Beneficiary information 36-113 All the pertinent information on the beneficiary.
101-03 Holder information 36-140 Information can be the same as the prior RDSP or different if a new holder opens the new RDSP.
401-05 Bond payment request 70-77 The date on which the bond was requested by the holder to the issuer.

3.3 Relinquishing issuer (Transfer-out)

The relinquishing issuer:

  • verifies that all pending grant and bond applications have been received;
  • stops all pre-authorized contributions or payments on the RDSP account;
  • completes sections 4 and 5 of the RDSP Transfer form;
  • keeps a copy of the RDSP Transfer form and returns the original to the receiving issuer;
  • keeps the signed original of the Holder Consent to an RDSP Transfer form;
  • sends a stop bond payment request (RT 401-06) to ESDC in accordance with the requirements of the Interface Transaction Standards (ITS);
  • closes the prior RDSP and submits RT 102-10 with closure reason “03” to ESDC in accordance with the requirements of the ITS;
  • sends all of the funds to the receiving issuer;
  • sends RT 701-02 to ESDC in accordance with the requirements of the ITS, to report the fair market value (FMV) amount and earnings of the RDSP being transferred; and
  • sends to the receiving issuer any relevant information that has not been provided by ESDC (i.e. medical attestations, etc.).
3.3.1. Section 4: Relinquishing Issuer Information

The Relinquishing RDSP Contract No. is the number assigned by the relinquishing issuer. Make sure that the number is inscribed exactly as it was reported to the CDSP system (i.e. including all leading zeros).

The Relinquishing Specimen Plan No. is the number assigned to the relinquishing issuer by CRA.

The Date Contract Opened is the date the contract was first opened with the relinquishing issuer. This date would be the same as reported on the RT 101 transaction.

3.3.2. Section 5: Notional Balances of the Relinquishing RDSP

The Balances as of is the date that the money is sent by the relinquishing issuer to the receiving issuer.

The Reports field is used to indicate all rollovers ever made to the RDSP, if any.

The Other field is used to indicate all provincial incentives ever made to the RDSP, if any.

The following information will be used by the receiving issuer to calculate new or continuing disability assistance payments (DAPs) or LDAPs.

Totals as at closing of business on December 31 of the prior calendar year

The amounts provided in this section will be used to determine if an RDSP is a primarily government assisted plan (PGAP) or not. It will also be used to calculate the amount of any payments that must be made in the year of the transfer.

All monies paid under the Canada Disability Savings Act includes all of the grants and bonds that have ever been paid into any RDSP for that particular beneficiary, regardless of if they have been taken out at a later date as part of a repayment or a DAP.

Example: The beneficiary had initially received $70,000 in grant. Even though $7,000 in grant has since been repaid to the Government of Canada and $3,000 in grant has since been paid to the beneficiary, the amount reported will still be the original $70,000 in grant, not the current balance of $60,000.

All contributions made to the RDSP includes all of the contributions, rollovers and provincial payments that have ever been paid into any RDSP for that particular beneficiary, regardless of any withdrawal.

Example: An RDSP had initially received $30,000 in contributions, rollovers and provincial incentives. Even though $2,000 in rollovers and $5,000 in contributions have since been paid to the beneficiary, the amount reported will be the original $30,000 in contributions, rollovers and provincial incentives, not the current balance of $23,000.

Non-taxable portion of all DAPs/LDAPs processed prior to the current calendar year means all the contribution amounts that were included in any DAPs or LDAPs paid to the beneficiary prior to the current calendar year.

Taxable portion of all DAPs/LDAPs processed prior to the current calendar year means all the grant, bond, rollover, earnings and provincial payment amounts that were included in any DAPs or LDAPs paid to the beneficiary prior to the current calendar year.

Non-taxable portion of all DAPs/LDAPs processed this calendar year means all the contribution amounts that were included in any DAPs or LDAPs paid to the beneficiary this calendar year.

Taxable portion of all DAPs/LDAPs processed this calendar year means all the grant, bond, rollover, earnings and provincial payment amounts that were included in any DAPs or LDAPs paid to the beneficiary this calendar year.

3.3.3. Transactions to be submitted to ESDC
Transaction type Description Position Important fields
401-06 Stop bond request 70-77 Date the stop request was made by the holder.
Original issuer transaction number 93-107 Transaction number of the original bond request to be stopped.
102-10 Contract updates – Close a contract 61-62 Reason “3” Transfer
71-78 Date the contract was closed with the relinquishing issuer. It’s the date the notional account balances and the market value were calculated on the Transfer form.
701-02 Transfer reporting of FMV and earnings amounts 75-84 Fair market value of contract
85-94 Earnings are the difference between the total of the FMV and the notional account balance.

3.4. ESDC responsibilities

  • administers the grant and the bond according to the CDSA and Regulations;
  • advises issuers of unresolved transfers; and
  • sends the Transfer Information Extract file.
3.4.1. Transfer information Extract file (RT 971)

For the “resolved” RDSP transfers, ESDC will provide to the receiving issuer all historical financial transactional information in its possession from all previous contracts for a particular beneficiary. This historical record will be sent in a Transfer information extract file (RT 971) to the receiving issuer and include the following transaction types:

  • 971-01 Contribution/contribution correction information
  • 971-02 Bond request information
  • 971-03 Retirement savings rollover/retirement savings rollover reversal information
  • 971-04 Grant/bond repayment – grant/bond repayment reversal information
  • 971-05 DAP/DAP reversal information
  • 971-06 LDAP/LDAP reversal information
  • 971-07 Education savings rollover/education savings rollover reversal information

4. Transfer process

Here is a breakdown of the transfer process.

Image description

The table below identifies each player’s responsibilities to achieve a successful transfer.

  • The holder(s) of the new RDSP completes the tasks identified in section 1;
  • The receiving issuer completes the tasks identified in sections 2 and 6;
  • The relinquishing issuer completes the tasks identified in sections 3, 5 and 7;
  • The holder(s) of the prior RDSP completes the tasks identified in section 4;
  • ESDC completes the tasks identified in section 8.
  1. The holder(s) of the new RDSP must:
  • complete a new Application for the Canada Disability Savings Grant and Canada Disability Savings Bond and applicable Annexe(s) with the receiving issuer;
  • complete sections 1 (information about the beneficiary) and 2 (information about the holder) of the RDSP Transfer form(ESDC EMP5611); and
  • inform the relinquishing issuer of the intent to transfer all of the assets to a new RDSP.
  • The receiving issuer must:
    • complete section 3 (information about the receiving issuer) of the RDSP Transfer form; and
    • send the RDSP Transfer form to the relinquishing issuer.
  • The relinquishing issuer must:
    • verify that all pending grant and bond have been received;
    • stop all pre-authorized contributions or payments on the RDSP account;
    • send a stop bond payment request (RT 401-06) to ESDC in accordance with the requirements of the ITS;
    • complete sections 4 (information about the relinquishing issuer) and 5 (notional balances of the relinquishing RDSP) of the RDSP Transfer form and keeps a copy; and
    • send the signed original of the RDSP Transfer form back to the receiving issuer.
  • The holder(s) of the prior RDSP must:
    • complete the Holder Consent to an RDSP Transfer form (ESDC EMP5612) and keep a copy.
  • The relinquishing issuer must:
    • keep the signed original of the Holder Consent to an RDSP Transfer form and send a copy to the receiving issuer.
  • The receiving issuer must:
    • Keep a copy of the Holder Consent to an RDSP Transfer form;
    • Keep the completed and signed original RDSP Transfer form;
    • send transactions related to the contract registration package (RT 101-01, RT 101-02, RT 101-03) to the CDSP system to register the new RDSP; make sure that the transfer indicator is set to “Y” (see RT 101-01, position 175 in ITS) and that the relinquishing contract and specimen plan numbers are accurately referenced with leading zeros (see RT 101-01, positions 184-205 in ITS); and
    • continue any lifetime disability assistance payments (LDAPs), if they had started prior to the transfer.
  • The relinquishing issuer must:
    • transfers all of the assets to the receiving issuer;
    • provide the receiving issuer with all information that is not available through the CDSP system, for example medical certifications, elections and forms for retirement savings and/or education saving rollovers;
    • close the prior RDSP and send the transaction RT 102-10 close a contract to the CDSP system with closure reason “03” – transfer; and
    • send the transaction RT 701-02 transfer reporting of fair market value and earnings amounts to the CDSP system to report the FMV and earnings of the RDSP being transferred.
  • ESDC must:
    • provide the receiving issuer with RT 971 Transfer Extract file containing all successfully processed financial transactions for earlier contracts; and
    • advise issuer of unresolved transfers through monthly files.

    4.1. Determining if a transfer is complete

    A transfer is completed when:

    • the relinquishing issuer transfers all funds to the new RDSP at the receiving issuer and closes the prior RDSP;
    • the new RDSP is registered with the receiving issuer;
    • the CDSP system has processed all transactions (RT 101 and RT 102-10) and no error has occurred (if error, see section of this chapter for problem solving);
    • the relinquishing issuer sends any relevant information that ESDC does not have in its possession to the receiving issuer (i.e. medical attestation, etc.); and
    • ESDC sends the Transfer Extract file to the receiving issuer.

    The amount transferred from a prior RDSP to a new RDSP is not considered to be a contribution.

    5. Problem solving

    If the transfer is not successful, it could have a negative impact on the beneficiary. For example, the beneficiary may not receive any further grant and bond until the issue is resolved. Below, you will find the most common errors related to transfers, along with possible resolutions in order to help the issuers achieve a successful transfer.

    5.1. For the receiving issuer

    5.1.1.Error file – Error code 8102

    If in the monthly Error file (RT 801), the receiving issuer gets an error code 8102 – is not identified in the CDSP system – this could mean that the prior RDSP was never registered and is simply a disability savings plan (DSP). If this is not the case, this error could also mean that the contract number has been mistyped (see RT 101-01, positions 184-198 – other contract in the ITS), most likely it is missing leading zeros. In this case, the receiving issuer must resubmit the entire registration package (RT 101-01, RT 101-02, RT 101-03) making sure the relinquishing contract number is properly entered with leading zeros.

    5.1.2.Error file – Error code 8104

    If in the monthly Error file (RT 801), the receiving issuer gets an error code 8104 – data is missing from field – this could mean that the receiving issuer failed to indicate the relinquishing issuer’s contract number in the other contract field (see RT 101-01, positions 184-198 – other contract in the ITS). If this is the case, the receiving issuer must resubmit the entire registration package (RT 101-01, RT 101-02, RT 101-03), including the relinquishing issuer’s contract number to the CDSP system.

    5.1.3.Error file – Error code 8231

    If in the monthly Error file (RT 801), the receiving issuer gets an error code 8231 – the beneficiary must not already have a pending, registered or de-registered contract – this could mean the transfer indicator was not set to “Y” in the registration package (see RT 101-01, position 175 - transaction indicator in the ITS). If this is the case, the receiving issuer must resubmit the entire registration package (RT 101-01, RT 101-02, RT 101-03) with the transfer indicator set to “Y” (in the RT 101-01, position 175) to the CDSP system.

    5.1.4. Contract Status file – Pending status

    If in the monthly Contract Status file (RT 951), the receiving issuer gets a current contract status – “01” pending and a current transfer status – “1” awaiting transfer that could mean the relinquishing issuer has not yet sent the required close a contract transaction to the CDSP system. If that is the case, contact the relinquishing issuer to confirm that they have successfully sent the RT 102-10 - close a contract transaction.

    5.2. For the relinquishing issuer

    To close an RDSP, the relinquishing issuer must submit an RT 102-10 – close a contract transaction to the CDSP system, and indicate the closure reason “3” - transfer. The relinquishing issuer cannot simply close the account internally; this action must be reported to ESDC.

    If grant and/or bond is received after an RDSP has been transferred-out to the receiving issuer, the relinquishing issuer must send the funds to the receiving issuer.

    Chapter 2-5: RDSP Rollovers

    Certain retirement savings and education investment incomes may be rolled over into a Registered Disability Savings Plan (RDSP).

    RDSP issuers must specify in their specimen plan if rollovers are permitted.

    1. Overview of the Rollover Process

    Under certain conditions, two types of rollovers may be deposited into an RDSP:

    • retirement savings rollovers; and
    • education savings rollovers.

    1.1. Terms and Acronyms

    The following terms and acronyms are used throughout this chapter.

    accumulated income payment (AIP) Footnote 14
    An AIP is a lump-sum distribution of investment income earned in a Registered Educations Savings Plan ( RESP) to the RESP subscriber or the RESP beneficiary’s RDSP, generally made in circumstances where the RESP beneficiary does not pursue post-secondary education and the RESP is being terminated.
    decedent
    The parent or grandparent of the RDSP beneficiary, who at the time of death was an annuitant of an RRSP or RRIF or member of an RPP, PRPP or SPP.
    eligible proceeds
    Funds from an RRSP, RRIF, RPP, PRPP, SPP or RESP investment income are eligible to be transferred to an RDSP.
    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.
    Pooled Registered Pension Plan (PRPP)
    Pension plan for employees and self-employed who do not have access to a workplace pension plan.
    Registered Education Savings Plan (RESP)
    Registered plan that is intended to help to save for a beneficiary’s postsecondary education.
    Registered Pension Plan (RPP)
    An arrangement by an employer or a union to provide pensions to retired employees in the form of periodic payments.
    Registered Retirement Income Fund (RRIF)
    An arrangement between a carrier and an annuitant under which payments are made to the annuitant of a minimum amount each year.
    Registered Retirement Savings Plan (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.
    Rollover amount
    The amount that is transferred into the RDSP from RRSPs, RRIFs, RPPs, PRPPs, SPPs, or RESPs.
    Specified Pension Plan (SPP)
    Prescribed provincial pension plan

    2. Rollover of Retirement Savings

    Parents or grandparents of a financially dependent child or grandchild can arrange for some or all of their retirement savings to be transferred on a tax-deferred basis to their child or grandchild’s RDSP when they pass away.

    To be eligible for this measure, retirement savings must be in one of the following:

    • a RRSP
    • a RRIF
    • a RPP
    • a PRPP
    • a SPP

    The maximum transfer amount must not exceed the $200,000 RDSP lifetime contribution limit. For example, if there is already $50,000 in private contributions in an RDSP, the amount rolled over from an RRSP, RRIF, RPP, PRPP or SPP cannot exceed $150,000.

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

    • In English: 1-800-959-8281
    • In French: 1-800-959-7383

    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 ) eligible;
    • beneficiary meets residency criteria;
    • beneficiary is alive at the time the rollover takes place;
    • holder gives permission to allow a rollover;
    • holder and beneficiary have to provide the required information and sign a rollover form; and
    • the RDSP beneficiary must be entitled to receive the retirement savings amount, either because he or she was designated as direct beneficiary at the plan level, or because the proceeds were payable to the estate of the decedent, and the RDSP beneficiary was a beneficiary of the estate.

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

    During a period in which the beneficiary is no longer DTC eligible and has elected to keep his or her RDSP open, retirement savings rollovers are permitted.

    2.3. Specimen Plan

    The issuer must specify in their specimen plan if rollovers of retirement savings proceeds into an RDSP are permitted. The specimen plan must be approved by the Registered Plans Directorate, CRA.

    2.4. Roles and Responsibilities

    The RDSP holder:

    • contacts the financial institution and requests a rollover;
    • completes and signs a rollover form (Note: the financial institution may have its own form for this purpose, but if not, then CRA form RC4625 may be used.); and
    • confirms and authorizes the amount to be rolled over into the beneficiary’s RDSP.

    The beneficiary:

    • signs to confirm that he or she has reached the age of majority and is able to enter into a contract.

    The financial institution:

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

    Employment and Social Development Canada (ESDC):

    • forwards a report to the financial institution.

    3. Rollover of Education Savings

    Starting , rollovers can be made from an RESP to an RDSP. In general terms, a subscriber of an RESP that allows AIPs and a holder of an RDSP may elect to transfer an accumulated income payment under the RESP to the RDSP if, at the time of the election, the RESP beneficiary is also the beneficiary under the RDSP.

    When an RESP rollover occurs:

    • contributions in the RESP will be returned to the RESP subscriber on a tax-free basis;
    • the Canada Education Savings Grants and Canada Learning Bonds in the RESP will be repaid to ESDC;
    • provincial incentives will be repaid to the appropriate provinces; and
    • the RESP must be terminated by the end of February of the year after the calendar year during which the rollover is made.

    3.1. Eligibility and Conditions

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

    • be DTC-eligible Footnote 14 at the time of the rollover;
    • be 59 or less at the end of the calendar year that the rollover is made; and be a resident in Canada.

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

    • the beneficiary has a severe and prolonged mental impairment that can reasonably be expected to prevent him/her from pursuing post-secondary education;
      OR
    • the RESP account has been in existence for at least 10 years and all the beneficiaries in the plan have to be at least 21 years of age and are not pursuing post-secondary education;
      OR
    • 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).

    3.2. Specimen Plan

    The RDSP issuer must specify in their specimen plan if rollovers of education savings proceeds into an RDSP are permitted. The specimen plan must be approved by the Registered Plans Directorate, CRA.

    The RESP must also allow accumulated income payments in its specimen plan.

    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; and
    • must determine whether the AIP distribution/rollover can take place.

    3.4. Rollovers from RESP Family Plans

    When the rollover of education savings proceeds is from a family plan, three options are available.

    Option 1

    The first option involves the following:

    • Family RESP : A family plan with multiple beneficiaries can be split into one or several individual plans. The subscriber can request a partial transfer, in the same proportion, of contributions, earnings, Canada Education Savings Grant and provincial incentives from the family plan to the new individual plan.
    • Individual RESP : Once the transfer is complete, the RESP subscriber may then request to have the investment earnings amount rolled over into an RDSP from the new RESP is closed.
    • RDSP : Once the rollover to the RDSP is complete, the new RESP is closed.
    Note:

     For promoters who do not offer individual plans, they may open a family plan with only one beneficiary.

    Advantages - The family plan with the remaining beneficiaries could remain open.

    Disadvantages - The subscriber would not be able to transfer only the earnings to the new RESP for the DTC-eligible beneficiary. Since only a portion of the property in the RESP is transferred, then the partial transfer rules outlined in subsection 16(2) of the Canada Education Savings Regulations would require the transferring RESP promoter to calculate and transfer the equal portion of the contributions, earnings, CESG and provincial incentives to the receiving plan.

    For more information on transferring funds from one RESP to another or to learn how to close an RESP, consult the RESP Provider User Guide on ESDC's website. http://www.esdc.gc.ca/eng/jobs/student/promoters/user_guide/index.shtml.

    Option 2

    The subscriber can wait until the other beneficiaries of the family plan are eligible for post-secondary education (PSE) or will not be pursuing PSE before rolling over the investment income from the family RESP to DTC eligible beneficiary’s RDSP.

    Advantages - It would no longer matter that any grant and bond remaining in the family RESP (including amounts paid in other beneficiaries’ names) would need to be repaid and that the plan would have to terminate by the end of February of the year after the education savings rollover occurred, because the other beneficiaries will have either used the funds necessary for their PSE or they will not be using the funds for PSE.

    Disadvantages - This could be a long time depending on the age of the other beneficiaries.

    Option 3

    The third option involves the following:

    • Close the family RESP and transfer the AIP to the beneficiary's RDSP.

    Advantages - All the investment earnings in the RESP could be transferred to the DTC-eligible beneficiary’s RDSP (including those accumulated for other beneficiaries).

    Disadvantages - All grant and bond remaining in the family RESP (including amounts paid in other beneficiaries’ names) would need to be repaid and the family RESP would be required to terminate by the end of February of the year after the rollover occurred.

    4. Determining PGAP or Non-PGAP

    For the purpose of determining Footnote 15 whether the RDSP is a primarily government-assisted plan (PGAP) or a non-primarily government assisted plan (non-PGAP), the investment income rolled over to an RDSP will be considered a private contribution. It will not attract grants. It will count towards the RDSP contribution lifetime limit of $200,000 and will reduce the available RDSP contribution room and be included in the taxable portion of RDSP withdrawals made to the beneficiary.

    The following illustrates how a previously PGAP RDSP, after an education or a retirement savings rollover, can become a non-PGAP RDSP. For example, when the private contributions ($10,000) are lower than the government contributions ($15,000), the plan is a PGAP. However, when an education or retirement savings rollover of $10,000 is deposited into the RDSP, the private contributions ($20,000) are now more than the government contributions ($15,000). Therefore, the RDSP is now a non-PGAP plan. A PGAP or a non-PGAP designation is valid for a full calendar year. A plan can only change from one designation to the other on January 1.

    *This is determined at the beginning of a calendar year, on January 1.

    5. Reporting Requirements

    5.1. Record Types

    There are four transactions involved in the rollover of proceeds.

    Information Record Types (RT)
    Retirement Savings Rollover 401-08
    Retirement Savings Rollover Reversal 401-09
    Education Savings Rollover 401-30
    Education Savings Rollover Reversal 401-31
    5.1.1. RT 401-08

    The RT 401-08 “Retirement Savings Rollover” includes information that must be reported by the financial institution.

    Description Important Information
    Issuer's Information Business Number
    Issuer Transaction Number
    Specimen Plan Must be designated by CRA to accept RDSP rollovers
    Beneficiary SIN
    Rollover Different dates are critical
    Amount
    Primary Caregiver or Agency SIN or BN
    5.1.2. RT 401-09

    The RT 401-09, “Retirement Savings Rollover Reversal” includes information that must be reported by the RDSP issuer.

    Description Important information
    Issuer’s Information Original Issuer Business Number
    Original Issuer Transaction Number
    Beneficiary SIN
    Rollover Reversal dates
    5.1.3. RT 401-30

    The RT 401-30, “Education Savings Rollover” includes information that must be reported by the RDSP issuer.

    Description Important information
    Issuer’s Information Business Number
    Issuer Transaction Number
    Specimen Plan Must be designated by CRA to accept RDSP rollovers
    Beneficiary SIN
    Rollover Different dates are critical
    Amount
    Primary Caregiver or Agency SIN or BN
    5.1.4. RT 401-31

    The RT 401-31, “Education Savings Rollover Reversal” includes information that must be reported by the RDSP issuer.

    Description Important information
    Issuers Information Original Issuer Business Number
    Original Issuer Transaction Number
    Beneficiary SIN
    Rollover Reversal dates

    For additional information, consult the Interface User Guide on ESDC’s website.

    6. Rollover Form

    Rollover forms can vary from one financial institution to another. CRA form RC4625 may be used for retirement savings rollovers; however, it is not mandatory.

    There is no specific rollover form for education savings rollovers. A proforma education savings rollover form will be made available on the CRA’s webpage shortly.

    Chapter 2-6: Closing an RDSP

    When certain events occur, Registered Disability Savings Plans (RDSP) need to be closed. This chapter provides information relating to these events, as well as the conditions and timelines in place for regulating RDSP closures.

    1. RDSP Closure

    An RDSP is closed when one of the following events occurs:

    • loss of eligibility for the Disability Tax Credit (DTC);
    • RDSP non-compliance*;
    • beneficiary’s death;
    • transfer of the RDSP to another issuer;
    • other.

    When an RDSP is closed, the beneficiary or the beneficiary's estate receives the invested contributions and all earnings in the RDSP. However, all grants and bonds that have been paid into the RDSP during the last ten years must be repaid to the Government of Canada.

    *Technically, the trust account doesn’t need to be closed when the RDSP is non-compliant. In this case, the law requires that a deemed Disability Assistance Payment (DAP) be made to the beneficiary or their estate. The money doesn’t have to be removed from the account.

    1.1. Loss of Eligibility for the DTC

    For a disability savings plan to qualify as an RDSP, the beneficiary must be a DTC-eligible individual for the year in which the plan is established. The beneficiary must also be DTC-eligible each year in order for the plan to remain an RDSP.

    DTC is in place for an entire calendar year (January 1 to December 31), regardless of when the beneficiary is informed of the credit being granted or rescinded.

    The holder must terminate the RDSP no later than December 31 of the year following the first full calendar year in which the beneficiary is no longer eligible for the DTC.

    • Dec. 31, 2014: Last day beneficiary is DTC-eligible.
    • 2015: First full calendar year where beneficiary is DTC-ineligible.
    • 2016: Second full calendar year where beneficiary is DTC-ineligible.
    • Dec. 31, 2016: Last day to close the RDSP.

    However, in the case where a beneficiary becomes DTC-ineligible but a medical doctor certifies that the beneficiary may, due to the nature of their condition, be eligible for the DTC once more at a later date, the period for which an RDSP may remain open may be extended if the holder elects to do so.

    1.1.1. DTC Election

    If the RDSP holder elects to keep the plan open, the RDSP can remain open for up to five calendar years if the following conditions are met:

    • a medical doctor certifies, in writing, that the beneficiary will likely become DTC-eligible at some point in the future;
    • the holder makes an election to keep the RDSP open by providing the medical certificate to the financial institution (the holder must make this election before the end of the year following the year the beneficiary is no longer DTC-eligible); and
    • the financial institution notifies Employment and Social Development Canada (ESDC) of the election through the Canada Disability Savings Program (CDSP) system by sending the appropriate transaction (RT 501) as prescribed in the Interface Transaction Standards (ITS) document.

    After an election is established it remains valid until the earlier of:

    • the beneficiary regaining their DTC-eligibility; or
    • the end of the fifth calendar year of continuous DTC-ineligibility.

    If the beneficiary does not regain DTC eligibility within the election period, the financial institution must close the RDSP by December 31 of the year following five years of continuous DTC ineligibility, even if the beneficiary becomes eligible for the DTC in the sixth year.

    If the beneficiary does regain DTC eligibility within the election period, when the Canada Revenue Agency (CRA) updates its files, it will trigger the CDSP system to set a new election end date that reflects the actual duration of the election period. The following examples explains this situation.

    Starting , the beneficiary is no longer DTC-eligible. However, the beneficiary’s medical doctor certifies that the beneficiary will likely be eligible for the DTC again within the next five years.

    The holder has until to make an election; however, on , the holder elects to have the RDSP remain open. Once the election is made, the RDSP will remain “dormant” until either the beneficiary becomes DTC eligible again, thus re-activating the RDSP or until , date at which the RDSP must be closed.

    The election starts the year the DTC-eligibility is lost ( ) and lasts for the subsequent four calendar years ( - ). If DTC eligibility is not regained, the RDSP must be closed by .

    If the beneficiary becomes DTC-eligible in , the RDSP will still need to be closed by as the election period ended on .

    1.1.2. DTC Election and DTC Non-Election

    The following table illustrates the latest possible date a RDSP must close when a holder elects to keep the RDSP open (election) or chooses to terminate the RDSP (no election) and the beneficiary does not regain his or her DTC eligibility within the prescribed timeframe.

    Year DTC - Election DTC - No Election
    Not DTC Eligible Not DTC Eligible
    Not DTC Eligible Not DTC Eligible
    Close by Dec. 31
    Not DTC Eligible
    Not DTC Eligible
    Not DTC Eligible
    Close by Dec. 31
    1.1.3. Results of a DTC Election

    When an election is made, the following rules apply commencing with the first full calendar year for which the beneficiary is DTC-ineligible:

    • no contributions to the RDSP or education savings rollovers will be permitted; however, a retirement savings rollover is permitted (see Chapter 2-5 for further details);
    • no new Canada Disability Savings Grant (grant) or Canada Disability Savings Bond (bond) will be paid into the RDSP; however, if there is an outstanding request when the beneficiary was DTC-eligible, grant or bond will be paid even if the payment is made during an election period;
    • if a beneficiary dies after an election has been made, the assistance holdback (AHA) amount will apply;
    • no new entitlements will be generated for the purpose of the carry-forward of grants and bonds for years for which the beneficiary is DTC-ineligible;
    • withdrawals from the RDSP will be permitted, and will be subject to the AHA (or the proportional repayment rule) and the maximum and minimum withdrawal rules as applicable.

    Neither the certification required for an election, nor the election itself, will have any bearing on the determination of an individual’s eligibility for the DTC. The sole purpose of the certification and election is to allow an RDSP to remain open for the five years under election.

    1.1.4. Cancellation of an Election

    If, at any time during this five-year election period, the beneficiary regains DTC eligibility, the election will be automatically cancelled when CRA updates the beneficiary’s information. The CDSP system will reconfigure the election dates to show that the election is no longer in effect and ESDC will notify the financial institution of the election cancellation. Any financial transactions such as payment of grant or bond impacted by the DTC update are also re-processed and paid if applicable.

    1.1.5. Episodic DTC election

    A provision has been added to extend the period the RDSP may remain open when medical conditions are such that a beneficiary who becomes DTC- ineligible might be eligible again in a later year. In order to take advantage of this provision, an episodic DTC election transaction must be submitted to the CDSP system.

    1.1.5.1. Forwarding an episodic DTC election

    Since January 2014, the financial institution may submit a transaction type 501-01 (Episodic DTC Election) to establish a record of episodic DTC elections in the CDSP system.

    The CDSP system validates that the election is submitted in a timely manner using the date that is time stamped during the secure file transfer.

    1.1.5.2. Reversal of an episodic DTC election

    Should the financial institution discover that a DTC election transaction was processed in error, ia transaction type 501-02 (Episodic DTC Election Reversal) must be submitted to the CDSP system.

    1.1.6. Temporary Measure

    A temporary measure was in place until , to allow RDSPs that should close in or because of the beneficiary’s DTC-ineligibility to stay open until without the holder having to make an election. To extend the RDSP life to , and , respectively, the holder have made an election by .

    The issuer must amend the termination section of their specimen plan to require that if a DTC election has been made, and the beneficiary does not regain their DTC-eligibility, the RDSP must close by the end of the sixth calendar year of continuous DTC-ineligibility.

    1.2. RDSP Non-Compliance

    An RDSP will be considered non-compliant and cease to be an RDSP if the following issues arise:

    • the RDSP fails to comply with a condition in subsection 146.4(4) of the Income Tax Act (ITA) Footnote 16;
    • the RDSP is not administered in accordance with its terms and conditions*; and/or Footnote 16
    • the Minister of ESDC notifies CRA that a RDSP is non-compliant should there be a failure to administer a condition or obligation under the Canada Disability Savings Act (CDSA)

    1.3. Beneficiary's Death

    Upon the death of the beneficiary, the sums remaining in the RDSP (considering first, any AHA to be repaid to the Government of Canada) must be paid to the beneficiary's estate, and that the RDSP must be terminated no later than the end of the calendar year following the year of the beneficiary's death.

    If by December 31 of the year following the beneficiary’s death, the RDSP has not been terminated, the RDSP will lose its registered status and become a Disability Savings Plan.

    1.4. Transfer

    It is possible to transfer funds between financial institutions. A new RDSP will need to be opened at the new financial institution and the prior RDSP will need to be terminated immediately after the transfer.

    If the holder has made an election to keep the RDSP open after the loss of DTC-eligibility, generally a new RDSP cannot be opened at a new financial institution.

    1.5 Other

    At the holder’s request, an RDSP can be closed in the following situations:

    • there is no property in the RDSP;
    • only the AHA is left in the RDSP (there are no earnings or private contributions in the plan); or
    • the holder requests a payment of all remaining funds in the RDSP to be made to the beneficiary and the payment is not more than the maximum amount for that year (applicable if the RDSP terms provide the holder with the ability to request a DAP).

    Before terminating an RDSP, issuers should ensure they consider any associated trust laws and requirements.

    2. Repayments

    Prior to terminating an RDSP, the financial institution is required to repay to the Government of Canada, in keeping with the conditions specified in the Issuer Agreement, any AHA in the RDSP.

    The conditions identified in the Issuer Agreement are:

    • the RDSP is terminated;
    • the RDSP ceases to be an RDSP;
    • the beneficiary ceases to be eligible for the DTC; or
    • the beneficiary has died.

    The financial institution must reimburse any part of an amount not rightfully paid under the terms of the CDSA or the Canada Disability Savings Regulations (Regulations) to an RDSP as a grant or a bond.

    Beneficiaries must repay any part of a DAP attributable to a grant or a bond to which they had no right under the terms of the CDSA or the Regulations.

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