RDSP Bulletin No. 1R1
This bulletin cancels and replaces RDSP Bulletin No. 1, dated May 24, 2011.
This bulletin is updated to describe changes to subsection 60.02(1) and section 146.4 of the Act as introduced in Bill C-30. These changes allow an RDSP to stay open indefinitely if the beneficiary becomes ineligible for the disability tax credit (DTC).
Originally, the definition of "contribution" excluded (except for the purpose of paragraph (b) of the definition of "disability savings plan") an amount paid under the Canada Disability Savings Actor a prescribed payment. Now, "contribution" has been amended to eliminate the reference to a prescribed payment.
Subparagraph (a)(iii) of the definition of "qualifying person" refers to a public department, agency, or institution that is legally authorized to act on behalf of the beneficiary. This means that amounts paid into the plan by government agencies that are authorized to act on behalf of RDSP beneficiaries (such as children's aid organizations) will be considered to be contributions. The definition of "contribution" was amended to exclude amounts transferred to the plan in accordance with subsection 146.4(8) of the Act. Therefore, references to this subsection have been removed in paragraphs 146.4(4)(g) and 146.4(4)(n) and subsection 146.4(7) of Act, as they are no longer required.
Designated provincial program
The definition of "designated provincial program" is written as follows:
"designated provincial program" means a program that is established under the laws of a province and that supports savings in registered disability savings plans.
This term is relevant for 1) deduction purposes under paragraph 60(z) of the Act, 2) expanding the definitions of "contribution" and "advantage" in subsections 146.4(1) and 205(1) of the Act respectively, and 3) allowing provincial repayments under paragraphs 146.4(4)(i) and 146.4(4)(p) of the Act.
Issuers should review their specimen plans to determine whether amendments are needed. The definition of "contribution" must indicate that payments into the plan from "designated provincial programs" (and direct or indirect payments from programs similar to "designated provincial programs") are not considered contributions for the purposes of section 146.4 of the Act.
The amendment to exclude transfers under subsection 146.4(8) from the definition of "contribution" is optional, since this exclusion already exists under paragraphs 146.4(4)(g) and 146.4(4)(n) and subsection 146.4(7) of the Act. However, issuers may amend their definition of "contribution" to exclude transfers under subsection 146.4(8). This would make the references to subsection 146.4(8) in paragraphs 146.4(4)(g) and 146.4(4)(n) and subsection 146.4(7) of the Act no longer necessary.
Specified RDSP payment
Issuers can amend disability savings plan specimen plans to allow a tax-deferred transfer ("rollover") to an RDSP of certain amounts received from a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF), a pooled registered pension plan (PRPP), a specified pension plan (SPP), or a registered pension plan (RPP) as a consequence of the death of the annuitant or plan member. In order to qualify for this rollover, the beneficiary of the RDSP must be a child or grandchild of the deceased, and have been financially dependent on the deceased by reason of infirmity.
As a result, paragraph (d) has been added to the definition of "contribution" in subsection 146.4(1) of the Act as follows:
(d) other than for the purposes of paragraphs 146.4(4)(f) to (h) and (n), a "specified RDSP payment" as defined in subsection 60.02(1).
Section 60.02 has been added to the Act (replacing the previous reference) to describe the conditions for a "specified RDSP payment".
The term "specified RDSP payment" under subsection 60.02(1) of the Act is defined as follows:
"specified RDSP payment" in respect of an eligible individual means a payment that
(a) is made to a registered disability savings plan under which the eligible individual is the beneficiary;
(b) complies with the conditions set out in paragraphs 146.4(4)(f) to (h);
(c) is made after June 2011;
(d) has been designated in prescribed form for a taxation year by the holder of the plan and the eligible individual at the time that the payment is made; and
(e) if the eligible individual is not DTC-eligible, the payment is made no later than the end of the fourth taxation year following the first taxation year throughout which the beneficiary is not DTC-eligible.
A "specified RDSP payment" is not eligible for any payment under the Canada Disability Savings Act; however, it must comply with the other required conditions for contributions to an RDSP (for example, the $200,000 lifetime contribution limit cannot be exceeded; and contributions can only be made by or with the consent of the RDSP holder).
The term "eligible individual" is defined under subsection 60.02(1) of the Act to be a child or grandchild of a deceased annuitant under a RRSP or a RRIF, or of a deceased member of a RPP, PRPP, or SPP who was financially dependent on the deceased for support, at the time of the deceased's death, by reason of mental or physical infirmity.
Issuers should review their specimen plans to determine whether amendments are needed. To allow for rollovers into an RDSP, the definition of "contribution" must make reference to a "specified RDSP payment" as defined in subsection 60.02(1) of the Act.
Where to get help
Registered Plans Directorate
You can find more information at Savings and pension plan administration.
Toll-free in Canada and the United States: 1-800-267-3100.
If you are calling from outside of Canada or the United States, call us collect at 613-221-3105. The Registered Plans Directorate accepts collect calls.
By mail and courier
Registered Plans Directorate
Canada Revenue Agency
875 Heron Rd
Ottawa ON K1A 0L5
We welcome feedback on this bulletin. Send comments by email to RPD.LPRA2@cra-arc.gc.ca.
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