Registered Disability Savings Plan provider user guide – Registered disability savings plans

1.1 How it works

Application process - A holder must meet with a participating RDSP issuer, open an RDSP, and name an eligible beneficiary.

Eligibility criteria - The holder and participating RDSP issuer 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.

1.3 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.

2.1 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 issuer 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.

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.

4.1. 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, one of the following two situations will apply to the holder:

• 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.

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.

4.3. 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.

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.

5.1. 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.

6.1. Primary caregiver(s)

The primary caregiver is:

• the individual who is eligible to receive the CCB and whose name appears on the CCB 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 CCB 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.

7.1. 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.

8.1. 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.

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. Issuers 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.

11.1. Investments

ESDC does not regulate the investment strategies and business practices of the issuers 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 issuers. 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 issuer 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, then contributions and finally 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.

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 issuer.

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.

If the beneficiary is 60 years of age 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 years of age (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. 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 in 2014:

3.1 Payments during specified years

When a medical doctor or nurse practitioner certifies, in writing, that the beneficiary’s state of health is such that he/she has a life expectancy of 5 years or less, the beneficiary is considered to have a shortened life expectancy for the purpose of the RDSP.

A specified year starts when the issuer receives the written attestation. However, the specified year duration starts on the date of the attestation.

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

• keep the plan as an RDSP in a specified year; or
• designate the plan as an SDSP.

4.1 Repayment order

The issuer 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.

4.2 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 or if 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.

7.1 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 8.2);
• grant portion of DAP/LDAP formula result (see 8.3);
• bond portion of DAP/LDAP formula result (see 8.4);
• earnings portion of DAP/LDAP formula result (see 8.5)
• specified maximum amount (see 8.6).

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.

7.2. 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 8.1);
• non-taxable portion of DAP/LDAP formula result (see 8.2);
• grant portion of DAP/LDAP formula result (see 8.3);
• bond portion of DAP/LDAP formula result (see 8.4);
• earnings portion of DAP/LDAP formula result (see 8.5).

These results will be used for reporting and/or to determine the correct minimum and maximum payment requirements. See section 3 for additional information on payment requirements.

8.1. 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” is the FMV of the property held in the plan on January 1st of the calendar year (excluding the value of locked-in 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 a locked-in 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.

8.2. Non-taxable portion of a DAP/LDAP

To calculate the non-taxable portion of a DAP/LDAP, the LDAP legislative formula result must already have been determined (see 8.1) 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

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 8.1).

“B” is the contributions made to the RDSP that have not already been used to determine the non-taxable portion of previous DAPs/LDAPs. (Do not include variable “D” when determining the non-taxable portion of previous DAPs/LDAPs).

“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.

“D” is the amount of advantage tax that the RDSP holder pays in respect of the plan or in respect of a prior RDSP for the beneficiary that was held by the holder.

8.3. The grant portion of a DAP/LDAP

To calculate the grant portion:

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 8.1).

“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.

8.4. The bond portion of a DAP/LDAP

To calculate the bond portion:

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 8.1).

“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.

8.5. The earnings portion of a 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” is the amount of the DAP/LDAP request.

“Non-taxable portion” is the amount calculated in section 8.2 - Non-taxable part of a DAP/LDAP.

“Grant portion” is the amount calculated in section 8.3 - The grant portion of a DAP/LDAP.

“Bond portion” is the amount calculated in section 8.4 - The bond portion of a DAP/LDAP.

8.6. Specified maximum amount

The specified maximum amount is the greater of either the LDAP legislated formula result (see 8.1) and 10% of the FMV (the FMV amount excludes locked-in annuity payments) plus the total of all periodic payments paid to the trust from a locked-in 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.

“LDAP formula result” is the amount calculated in section 8.1 - LDAP legislated formula.

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

9.1. 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

9.2. 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 1, 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

Calculations:

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

1. The LDAP formula result:

   A ÷ (B + 3 - C) + D

   $75,260 ÷ (80 + 3 − 12) + $0

   $75,260 ÷ 71 = $1,060

2. FMV as of January 1^st 2020

   A X 10 % + D

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

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

Where:

“A” is the FMV on Jan. 1 less any locked-in 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 locked-in annuities amount

Note:

For detailed definitions, see section 8.1

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 + D

$2,000 x $19,500 ÷ $37,260 + $0 = $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 the FMV minus the AHA ($75,260 – $38,000). If negative, no payment
“D” is the advantage tax that the holder pays

Note:

For detailed definitions, see section 8.2

The grant portion of the DAP payment is:

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 the FMV minus the AHA ($75,260 – $38,000). If negative, no payment

Note:

For detailed definitions, see section 8.3

The bond portion of the DAP payment is:

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 the FMV minus the AHA ($75,260 – $38,000). If negative, no payment

Note:

For detailed definitions, see section 8.4

The earnings portion of the DAP payment is:

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 8.5

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

9.3. 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

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

9.4. 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

10.1. 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 5 required formula results to be calculated? Those from section 7.1 or 7.2?

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 minus the 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 the bond amounts that are older than 10 years (not part of the AHA)?

• Grant: $____________________
• Bond: $ ___________________

9. Begin the calculations

10.2. Calculation template

See section 11 to calculate the following.

LDAP formula (8.1): A ÷ (B + 3 - C) + D = ____
Non-taxable portion of the DAP/LDAP (8.2): A X B ÷ C = ____
Grant portion of the DAP/LDAP (8.3): A X B ÷ C = ____
Bond portion of the DAP/LDAP (8.4): A X B ÷ C = ____
Earnings portion of the DAP/LDAP (8.5): 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 (8.6) ((if applicable): Greater of either the: (LDAP formula result) __________ and (10% of FMV on Jan. 1 (excludes locked-in annuity payments) + any locked-in annuity payments) __________

10.3. Formula and min and max reference table

1.1. Death of the beneficiary

In both cases, in the event of the beneficiary’s death, any Canada Disability Savings Grant (CDSG) or Canada Disability Savings Bond (CDSB) paid into the plan over the previous 10 years preceding the time of death will have to be repaid to the Government of Canada.

2.1. Conditions

An RDSP may be designated as an SDSP when:

• a medical doctor or nurse practitioner attests, in writing, that the beneficiary’s state of health is such that he or she has a life expectancy of 5 years or less;
• the plan holder makes an SDSP election in the prescribed form and submits the election with the medical certificate to the issuer;
• the issuer notifies Employment and Social Development Canada (ESDC) of the SDSP election.

3.1. SDSP conditions

While a plan is an SDSP:

• no contribution is allowed;
• no CDSB or CDSG is paid;
• no payment from a designated provincial program is paid;
• unused CDSB and CDSG entitlements will not be carried forward except for the calendar year in which the election is made;
• no education savings rollover is allowed;
• rolling over proceeds from a Registered Retirement Savings Plan (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;
• 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 an RDSP in a specified year and the beneficiary lives more than 5 years, it will be subject to regular RDSP payment rules.

An SDSP is not affected by survival beyond the 5 specified years; it remains an SDSP until the holder requests that the designation be removed or if one of the SDSP conditions is broken.

4.1. Keep the plan as an RDSP in a specified year

If a holder chooses to keep the plan as an RDSP during a specified year, there is no annual payment limit. The holder could:

• request payments (disability assistance payments (DAP) and lifetime disability assistance payments (LDAP);
• withdraw all funds from the RDSP in one lump sum; or
• have the funds spread over the next 5 years.

However, the AHA or the proportional repayment rule applies.

4.2. Designating the RDSP as an SDSP

When a holder makes an SDSP election, payments must start by December 31 of the calendar year following the year the plan is designated as an SDSP. The holder could:

• request a DAP or an LDAP;
• withdraw up to $10,000 in taxable amount and its associated contribution portion, or if the formula result in taxable amount is greater than $10,000, there is no maximum.

No repayment of the AHA or the proportional repayment amount is required.

5.1. 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 ;
• the beneficiary is no longer DTC eligible;
• the total of the taxable amount of payments made from the plan in the year while it was an SDSP exceeds $10,000 unless the legislative formula result requires a greater amount to be paid ;
• payments have not begun to be paid before the end of the calendar year following the year in which the plan became an SDSP ;
• the total amount of payments made from the plan to the beneficiary in the calendar year is less than the amount determined by the maximum legislative formula; 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 applicable RDSP rules (the RDSP in regular year rules or the RDSP in a specified year rules, depending on the categorization of the RDSP at that time) and may result in the repayment of the CDSB and the CDSG.

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

6.1. Specimen plan

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

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

6.2. Form

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

• a statement that the holder wishes to designate the beneficiary’s plan as an SDSP;
• the holders’ signature and the date;
• a statement indicating that the definition of the term “specified year” of the plan must be interpreted as including the years during which the plan is an SDSP;
• the list of measures requiring removal of the SDSP designation; 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, the Canada Revenue Agency before issuers offer holders the ability to designate the plan as an SDSP.

6.3. Medical certificate

The holder must provide the issuer with a written attestation from a medical doctor or nurse practitioner 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 5 years.

6.4. Effective date for an SDSP

An SDSP election becomes effective on the date ESDC receives the request through the Canada Disability Savings Program (CDSP) system.

6.5. Forwarding an SDSP election to ESDC

The holder must provide the issuer with the medical doctor or nurse practitioner attestation, along with a written request to designate the plan as an SDSP.

The issuer is expected, without delay, to notify ESDC of the election and not wait until the monthly production file to submit the 501-03 transaction. It is to be submitted as a separate, ad-hoc electronic file, immediately after the holder makes the election.

6.6. Removal of an SDSP designation

Should there be a request to remove the SDSP designation, the holder is not required to submit a new medical certificate.

The issuer must receive written documentation from the holder that they wish to remove the SDSP designation of the plan. The documentary evidence must be signed by all holders of the plan.

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.

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.

3.2. 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.

3.3 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.).

3.4. 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.

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.

5.1. For the receiving issuer

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.

1.1. Terms and Acronyms

The following terms and acronyms are used throughout this chapter.

accumulated income payment (AIP)^{Footnote 12}

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

2.1. 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.

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.

3.1. 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 13} 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.

5.1. Record Types

There are four transactions involved in the rollover of proceeds.

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 or a nurse practitioner 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 or a nurse practitioner must certify, in writing, that the beneficiary will likely become DTC-eligible in the foreseeable future;
• The holder must make an election to keep the plan open;
• The beneficiary must have been DTC-eligible in the year immediately before the two year period in which the holder can make the election; and
• the issuer 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 issuer 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 January 1, 2014 , 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 December 31, 2015 to make an election; however, on July 1, 2014 , 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 December 31, 2019 , date at which the RDSP must be closed.

The election starts the year the DTC-eligibility is lost ( 2014 ) and lasts for the subsequent four calendar years ( 2015 - 2018 ). If DTC eligibility is not regained, the RDSP must be closed by December 31, 2019 .

If the beneficiary becomes DTC-eligible in 2019 , the RDSP will still need to be closed by December 31, 2019 as the election period ended on December 31, 2018 .

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 15}
• 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 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 issuers. A new RDSP will need to be opened at the new issuer 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 issuer.

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 contributions in the RDSP); 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.