Video: Registered Disability Savings Plan repayments

Transcript

Repayments

In certain events, the issuers of a Registered Disability Savings Plan (RDSP) may be required to reimburse the Government of Canada. This could be for either a full or a partial amount of the Canada Disability Savings Grant and the Canada Disability Savings Bond that had been previously deposited into the RDSP.

Depending on the event, the repayment amount will either be:

• the assistance holdback amount (AHA), or
• the proportional repayment amount

Beneficiaries who have a life expectancy of 5 years or less, as certified by a medical doctor, may qualify for certain benefits. Specifically, if the RDSP is designated as a Specified Disability Savings Plan (SDSP) for these beneficiaries, they will be granted greater flexibility in accessing funds. This means that individuals have more options and freedom when it comes to withdrawing funds from their RDSP. When an RDSP is designated as a Specified Disability Savings Plan (SDSP), withdrawals of funds will not result in the repayment of grant and bond to the Government of Canada.

Assistance holdback amount

The assistance holdback amount is calculated by adding up all grants and bonds paid by the Government of Canada into the RDSP over the past 10 years. It is then reduced by any grants and bonds that have already been repaid to the government within that same 10-year period.

Proportional repayment rule

The proportional repayment rule requires that a ratio of 3 to 1 be applied for the repayment of the grant and bond. This means that for every $1 withdrawn from an RDSP, $3 in grant and bond must be repaid to the Government of Canada, up to a maximum of the assistance holdback amount.

Within the 10-year period preceding a withdrawal, the grant and bond are repaid in the same order in which they were initially paid into the plan, from the oldest and ending with the newest.

Trigger events

The following events require the full repayment of the grant and bond, paid into an RDSP, within the last 10 years:

• the death of the beneficiary
• the non‑compliance of the RDSP with the Income Tax Act (ITA)
• the closure of an RDSP for a reason other than a transfer

The only events that will trigger the proportional repayment of the grant and bond are:

• a disability assistance payment (DAP), which is a payment made on request to a beneficiary, or
• a lifetime disability assistance payment (LDAP) which once started, is paid annually until either the plan is terminated, or the beneficiary passes away

Impact on limits

The Government of Canada cannot reinstate the amount that was repaid when the grant and bond are paid back.

If the Government of Canada is repaid $4,000 in bond, the maximum bond amount payable to the beneficiary after that repayment will be less than the lifetime maximum of $20,000.

For example: $20,000 minus $4,000 equals $16,000.

Repayment example

Peter withdraws $3,000 from his RDSP that has been opened for 16 years. The RDSP has a fair market value of $55,000 and a $35,000 assistance holdback amount. How much grant and bond should be repaid to the Government of Canada?

Considering the proportional repayment amount is $9,000 and the assistance holdback amount is $35,000, the lesser of the 2 must be repaid. In this situation, $9,000 in grant and bond will be returned to the Government of Canada.

Repayment periods / date of payment

Don’t forget that the grant and bond are repaid in the same order in which they were initially paid into the plan.

Therefore, when determining which grant and bond amount to include in a repayment period, the issuer must use the date of payment that the grant and bond were successfully processed by Employment and Social Development Canada (ESDC).

This date is provided to the issuer in the monthly Transaction Processing File.

Death of the beneficiary

When the beneficiary passes away, the plan holder must close the RDSP.

The plan holder must repay all grant and bond paid into the RDSP within the 10‑year period preceding the beneficiary's death to the Government of Canada.

Additionally, any grant and bond paid between the date of death and the current date must also be repaid.

[In addition to narrated text, screen shows an example of what to do when a beneficiary passes away: RDSP opened February 5, 2009. Death of the beneficiary January 3, 2021. 10-year period begins January 4, 2011. Current date January 30, 2021. Graphic showing date of payments that need to be repaid would be from January 4, 2011 to January 30, 2021.]

Non‑compliance of the RDSP

The Canada Revenue Agency will deregister an RDSP if it is not compliant with the Income Tax Act. This will result in the repayment of any grant and bond paid into the RDSP within the last 10 years. This includes any grant and bond paid during the period between the deregistration date and the current date, to the Government of Canada.

[In addition to narrated text, screen shows an example of a non-compliant RDSP: RDSP opened January 12, 2010. Non-compliant with ITA July 4, 2021. 10-year period begins July 5, 2011 to July 4, 2021. Current date November 11, 2021. Repayment period: July 5, 2011 to November 11, 2021.]

Closure of the RDSP

When an RDSP is closed for any reason other than a transfer, all grant and bond paid into the plan within the 10‑year period preceding the closure must be repaid to the government of Canada.

[In addition to narrated text, screen shows an example of the closure of an RDSP: RDSP opened March 2, 2011. RDSP closed September 12, 2025. 10-year period September 15, 2015 to September 12, 2025.]

Withdrawal of funds

A disability assistance payment (DAP) or a lifetime disability assistance payment (LDAP) may trigger the repayment of all, or a portion, of the grant and bond paid into an RDSP.

The issuer repays to the Government of Canada the lesser of the following amounts when paying a disability assistance payment (DAP) or a lifetime disability assistance payment (LDAP):

• $3 of grants and bond for every dollar withdrawn, or
• the assistance holdback amount before the payment

If the fair market value of the RDSP is less than the assistance holdback amount after the withdrawal, the client will not receive a payment. There must be enough funds in the RDSP to cover the assistance holdback amount.

Disability assistance payment repayment example

Daniel opened the RDSP in 2008 and received grant and bond amounts until 2013.

In 2014, Daniel withdrew $2,500, for which a proportional amount of $7,500 in grant and bond was repaid to the Government of Canada.

The 2008 and 2009 grant and bond were repaid first for an amount of $7,000. The grant and bond amounts must be repaid in the same order in which they were paid into the plan. Then, the remaining $500 was taken from the bond amount received in February 2010, bringing the total repayment amount to $7,500.

Death of beneficiary repayment example

An RDSP is opened in 2010 and receives grant and bond until 2020. The beneficiary dies on April 11, 2021, and the plan is closed on July 5, 2021.

The repayment period includes the assistance holdback amount period which starts 10 years prior to the beneficiary’s death. The assistance holdback amount period is from April 12, 2011, to April 11, 2021. It continues up to the current date of July 5, 2021.

Repayment periods overlap example

On occasion, there may be an overlap of 2 repayment periods. Since an amount cannot be repaid twice, it will be excluded from the new repayment period amount.

For example: In 2019, a $2,500 disability assistance payment (DAP) is requested. The proportional repayment rule applies with a ratio of 3 to 1, $7,500 must be repaid to the Government of Canada. Then, in 2020, the beneficiary is deceased. Therefore, the assistance holdback amount rule requires the full repayment of grant and bond within the 10‑year period preceding the death.

The repayment period associated to the beneficiary's death overlaps with the previous disability assistance payment (DAP) repayment period. Any amounts that were previously repaid within the new repayment period will be excluded from the total repayment amount.

Therefore, $45,000 minus the $3,000 that had previously been repaid means that upon the beneficiary’s death, $42,000 must be repaid to the Government of Canada.

Knowledge check

Time for a knowledge check.

John is the beneficiary of an RDSP that has been open for 13 years. The assistance holdback amount for the RDSP is $7,000. John withdraws a disability assistance payment (DAP) of $3,000. Based on the repayment rules, how much does John need to repay?

1. $3,000
2. $7,000
3. $9,000
4. $10,000

Answer

The answer is: b) $7,000 minus the proportional amount of $9,000 (3 times $3,000) is more than the AHA.

Thank you

[The final screen has the Canada wordmark.]