RDSP Bulletin No. 3R2
This bulletin cancels and replaces RDSP Bulletin No. 3R1, dated May 23, 2018.
This bulletin is updated to describe changes to the qualifying family member rules under subsection 146.4(1) of the Act. The qualifying family member measure now applies to the end of 2023. This bulletin is also 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). These changes also limit the timeframe in which a holder can make a retirement savings rollover to an RDSP when the beneficiary is not DTC-eligible.
Amending the specimen plan - specified RDSP payment (retirement savings rollover)
The retirement savings rollover measure is optional. Specimen plans may need amending if issuers want to offer this rollover measure to their clients. The specimen plan text must allow the RDSP to accept these payments. It must also specify that these payments are only considered RDSP contributions for the purposes of paragraphs 146.4(4)(f) to (h) and (n) of the Act. These paragraphs apply as follows:
- The RDSP must not receive a retirement savings rollover if the RDSP beneficiary:
- is not DTC-eligible at the time of the rollover (unless the rollover is made by the end of the fourth year after the year in which the beneficiary lost their DTC eligibility),
- died before the rollover is made,
- is 60 years old or older sometime in the year that the rollover is made, or
- is not resident in Canada.
- The retirement savings rollover counts as a contribution for determining the beneficiary's remaining lifetime contribution room.
- The RDSP holder must agree to have the RDSP receive the rollover.
- The retirement savings rollover counts as a contribution when determining whether the RDSP is a primarily government assisted plan.
To record the rollover, the issuer may use form RC4625, Rollover to a Registered Disability Savings Plan (RDSP) under paragraph 60(m) or they may create their own rollover form.
Disability savings plan
The definition of disability savings plan has been amended to allow the transfer of a beneficiary’s RDSP to another RDSP for the beneficiary when the beneficiary is not eligible for the DTC.
The definition of disability savings plan allows a qualifying family member to enter into a disability savings plan arrangement with an RDSP issuer. A qualifying family member who meets the definition of qualifying person can enter into a disability savings plan arrangement with an RDSP issuer before January 1, 2024. If a qualifying family member, after entering into an arrangement with an RDSP issuer, wishes to transfer the RDSP to a new plan for the beneficiary, the disability savings plan definition allows the individual to transfer plan assets into another RDSP.
Qualifying family member
This definition considers a legal parentFootnote 1 to be a qualifying family member. A spouse or common-law partner can be a qualifying family member if they are not living apart from the beneficiary due to a breakdown in their marriage or common-law partnership.
The definition of qualifying person considers a qualifying family member to be a qualifying person. A qualifying family member is a qualifying person if, at the time the RDSP is opened, the following conditions are met:
- the beneficiary is over the age of majority,
- the beneficiary is not the beneficiary of another RDSP,
- no entity with legal authorization to act on behalf of the beneficiary exists, and
- after reasonable enquiry, the issuer considers that the beneficiary is unable to enter into an arrangement with the issuer.
Issuer's responsibility to notify the beneficiary of an RDSP
If a qualifying family member opens an RDSP and becomes the plan holder, the issuer must promptly notify the beneficiary of this fact in writing. The notice must include the information detailed under the following section entitled Replacing a holder who is a qualifying family member.
The legislation requires the issuer to request that the qualifying family member provide them with all of the beneficiary's personal information that is needed for the administration and operation of the beneficiary's RDSP. This could include information such as the beneficiary's name, address, and social insurance number.
Replacing a holder who is a qualifying family member
A beneficiary may notify the issuer of their intent to become plan holder of their RDSP. If a competent tribunal, an authority under provincial law, or, after reasonable inquiry, the issuer determines the beneficiary to be contractually competent, the qualifying family member will cease to be a holder of the RDSP and the beneficiary will become the new plan holder.
If an entity becomes legally authorized to act on behalf of the beneficiary, the entity must notify the issuer of this fact as soon as possible. Once the issuer is notified, the authorized entity replaces the qualifying family member as plan holder.
Handling disputes when a qualifying family member is holder
If a qualifying family member is the holder of an RDSP and there is a dispute regarding their right to be the plan holder, they are required to avoid actions that would reduce the fair market value of the plan's property. (This does not include reasonable payments from the plan that are necessary to ensure the beneficiary's care and well-being). This requirement will last until the earlier of the dispute having ended or until a new entity is named as plan holder.
Eliminating the issuer's liability for entering into a plan with a qualifying family member
If, the issuer makes a reasonable enquiry into the beneficiary's contractual competence before opening a disability savings plan arrangement with a qualifying family member and it is the issuer's opinion that the beneficiary's ability to enter into a contract is in doubt, the issuer will not be held liable for opening the arrangement with the qualifying family member.
Amending the specimen plan - qualifying family member
The qualifying family member measure is optional. Specimen plans may need amending if an issuer wants to allow qualifying family members to enter into disability savings plan arrangements with them. To offer this measure an issuer must amend the specimen plan text to:
- define qualifying family member,
- list the conditions that allow a qualifying family member to be a qualifying person and stipulate that a qualifying family member can only enter into a disability savings plan arrangement before January 1, 2024,
- allow the qualifying family member (who is the plan holder) to transfer plan assets to another RDSP for the beneficiary,
- require the issuer to notify the beneficiary that a new plan is opened for them,
- require the issuer to request the qualifying family member provide them with the beneficiary's personal information,
- detail the process for replacing the qualifying family member, as plan holder, with the beneficiary or a qualifying person,
- detail the qualifying family member's obligations when their right to be holder is under dispute, and
- provide a statement that removes the issuer's liability from entering into a disability savings plan arrangement with a qualifying family member when at the time the arrangement was entered into, the issuer had made a reasonable enquiry into the beneficiary's contractual competence and it was the issuer's opinion that the beneficiary's contractual competence was in doubt.
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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