Registered Disability Savings Plan, Canada Disability ...

Registered Disability Savings Plan, Canada Disability Savings Grant and Canada Disability Savings Bond InfoCapsules

May 31, 2018

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InfoCapsule RDSP, Grant and Bond

Table of Content

1 Registered Disability Savings Plan 2 Roles and responsibilities 3 Legislative Authorities 4 Life cycle of an RDSP 5 Holder 6 Primary caregiver 7 Beneficiary 8 Contributions and Rollover of Proceeds 9 Canada Disability Savings Grant 10 Canada Disability Savings Bond 11 Application forms for the grant and the bond 12 Carry forward of grant and bond entitlements 13 Disability Assistance Payment 14 Lifetime Disability Assistance Payment 15 Assistance Holdback Amount 16 Beneficiary with shortened life expectancies 17 Transfers 18 Administrative Activities 19 Errors and Refusal Reasons 20 Communications 21 Maximum and minimum Payments 22 Loss of DTC-Eligibility and DTC Election

Version Date

2017-12-07 2016-08-09 2013-09-05 2016-08-09 2015-07-15 2016-08-09 2015-07-15 2015-07-15 2017-12-07 2017-12-07 2016-10-31 2016-08-09 2016-08-09 2016-08-09 2017-12-07 2015-07-15 2016-08-09 2015-07-15 2015-07-15 2015-07-15 2016-08-09 2018-05-31

Disclaimer

Consult this page frequently for newer versions. The following laws and regulations take precedence over information contained in InfoCapsules in the event of discrepancies:

? Income Tax Act ? Canada Disability Savings Act ? Canada Disability Savings Regulations

May 31, 2018

1 ? Registered Disability Savings Plan

InfoCapsule RDSP, Grant and Bond

A Registered Disability Savings Plan (RDSP) is a long-term savings plan intended to help Canadians with severe and prolonged disabilities and their families save for the future. The Government of Canada provides the Canada Disability Savings Grant (grant) and the Canada Disability Savings Bond (bond) to eligible beneficiaries.

The RDSP is a contract between a plan holder and an issuer (financial institution). A beneficiary can only have one RDSP. All funds in the plan are intended to be used solely for the beneficiary.

To open an RDSP, the beneficiary must: ? be eligible for the Disability Tax Credit (disability amount); ? open a plan before the end of the calendar year in which he or she turns 59; and ? be a Canadian resident with a valid Social Insurance Number (SIN).

Canada Disability Savings Grant

The grant may be paid into the RDSP of an eligible beneficiary on or before the end of the calendar year in which he or she turns 49 years of age.

A 300% matching grant is paid on the first $500 in contributions made to an

RDSP and a 200% matching grant is paid on the next $1,000 in annual contributions, if the beneficiary's family income is $93,208* or below. A beneficiary under the age of 18 may also be eligible for the 300% and 200% matching rate, if he or she is under the care of a department, agency or institution and a payment under the Children's Special Allowances Act (CSAA) is made in at least one month in the particular year.

A 100% matching grant is paid on contributions, to a maximum of $1,000 per

year, if the beneficiary's family income is greater than $93,208* or if no income information is available from Canada Revenue Agency.

The total annual maximum grant a beneficiary can receive is $3,500.

There is a carry forward provision for unused grant entitlements accumulated

over the previous 10-year period (starting from 2008). The maximum grant carry forward amount is $10,500 per year.

The beneficiary's grant lifetime limit is $70,000.

*2018 Income Threshold (previous years)

An RDSP may include the following components:

Canada Disability Savings Bond

The bond may be paid into the RDSP of an eligible beneficiary on or before the end of the calendar year in which he or she turns 49 years of age.

Contributions are not required to receive the bond.

The maximum yearly bond available is $1,000, based on the beneficiary's family

income.

If the family income is $30,450* or less, the bond entitlement is $1,000. A

beneficiary under the age of 18 may also be eligible for the $1,000 bond, if he or she is under the care of a department, agency or institution and a payment under the CSAA is made in at least one month in the particular year.

If the family income is greater than $30,450 but less than $46,605*, the bond

amount is a portion of $1,000 according to a formula.

There is a carry forward provision for unused bond entitlements accumulated

over the previous 10-year period (starting in 2008). The maximum carry forward amount is $11,000 per year.

The beneficiary's lifetime limit on bond is $20,000.

*2018 income threshold (previous years)

December 7, 2017

2 ? Roles and responsibilities

InfoCapsule RDSP, Grant and Bond

The chart below reflects organizational responsibilities, based, in part, on governing legislation.

Canada Revenue Agency (CRA)

Registered Plans Directorate

Employment and Social Development Canada (ESDC)

Canada Education Savings Program

Administers and applies Registered Disability Savings Plan (RDSP) related provisions in the Income Tax Act (ITA) on:

contract registration and termination

specimen plan conditions

eligibility criteria for holders and beneficiaries

contributions, rollovers and transfers

disability assistance payments

Specified Disability Savings Plans

Disability Tax Credit (DTC) election

compliance reviews

obligations of the issuer

qualified investments

develops program policies and proposals for amendments

offers issuers and the public, support services on matters related to registration and administration of an RDSP:

1-800-267-3100

Benefit Program Directorate

verifies residency

verifies eligibility for the DTC

determines level of family income

applies ITA related to the DTC

Provides the delivery mechanism and necessary system supports for the effective administration of the grant and the bond in accordance with the Canada Disability Savings Act (CDSA) and the Canada Disability Savings Regulations (Regulations) for: beneficiary eligibility for grant and

bond assistance holdback amount and

repayment obligations carry forward rules and calculation

for grant and bond entitlements mail-out of annual Statement of

Entitlement to holders to communicate grant entitlements compliance reviews training and reference material transmittal of historical data to issuer when transfer issuer reports issuer enrolment offers support services:

issuers: 1-888-276-3632 clients : 1-866-204-0357

Office for Disability Issues

interprets the CDSA and the Regulations and develops proposals for amendments

undertakes promotion and communications activities

develops program policy and forms develops and updates issuer

agreements

Financial institutions

Issuer

Offers and administers RDSPs:

signs Issuer Agreement with ESDC

submits specimen plan to CRA for approval

ensures the accuracy of the information

requests CRA to confirm registration of the plan on behalf of the holder

submits application for grant and bond to ESDC and deposits funds into the RDSP

accepts and deposits contributions on behalf of a beneficiary

sends statement of account to the holder

transmits transactions electronically to ESDC

makes the withdrawals of disability assistance payments from RDSP accounts payable to the beneficiary

facilitates the administration of rollovers and RDSP transfers

has ultimate responsibility of the RDSPs

Agent

enters into an agreement with the issuer

administers the RDSPs according to the delegation of duties from the issuer

Individual Income Tax and Trust Enquiries

determines taxation for disability assistance payments

provides issuer/public support for tax related questions

Social Insurance Registration Office

validates Social Insurance Numbers

Service provider

transmits RDSP transactions records

establishes a system compliant with the Interface Transactions Standards

August 9, 2016

InfoCapsule RDSP, Grant and Bond

3 ? Legislative Authorities

Canada Disability Savings Act (CDSA)

The purpose of the CDSA is to encourage long term savings through Registered Disability Savings Plans (RDSPs) to help people with severe and prolonged disabilities and their families save for the future.

Canada Disability Savings Grant (grant)

Canada Disability Savings Bond (bond) Annual statement of entitlements

The grant is a limited matching grant paid into an RDSP by the Government of Canada. Depending on the beneficiary's family income and contribution level, the Government may contribute funds equivalent to 300%, 200% or 100% of contributions made into, and not withdrawn from, an RDSP in a year. The CDSA establishes the annual and lifetime limits the matching rate and the carry forward of grant entitlements.

The bond helps low-income families save for the long-term financial security of an eligible person with a disability. The CDSA establishes the annual and lifetime limits and the carry forward of bond entitlement

An eligibility statement, which sets out the amount of grant entitlements that may be paid for particular years on the basis of future contributions, is sent each year to the holder.

Canada Disability Savings Regulations (Regulations)

The Regulations establish the requirements and conditions for the payment of the grant and the bond.

Repayment Issuer

The repayment of the Assistance Holdback Amount (AHA) which is made up of all the grant and bond that have been paid into the RDSP within a 10 year period and the conditions for the calculation of a proportional repayment.

The terms and conditions of issuer agreements and the collection of information on the beneficiary, the holder, the organization responsible for the beneficiary and on the plan.

Income Tax Act (ITA)

Section 146.4 of the ITA allows for the creation of the RDSP for the investment of funds tax-free until those funds are withdrawn from the plan.

Key players

Contributions

Payments Income thresholds Specified Disability Savings Plan (SDSP) Obligations of issuer

? The holder is the person who opens and administers a plan and designates a beneficiary. If the holder is not the beneficiary, he or she must be a qualifying person.

? The qualifying person is a legal parent, tutor, curator, legal representative, public department, agency or institution that is authorized to act on behalf of the beneficiary. A qualifying family member is also a qualifying person if they meet certain conditions.

? The qualifying family member (QFM) is a legal parent or the spouse or common-law partner of the beneficiary who meets certain conditions. The QFM can become a plan holder in cases where the contractual competency of an adult beneficiary is in doubt.

? The beneficiary is the person who receives the funds from the plan. ? The Disability Tax Credit (DTC) eligible individual is the person who is eligible for the DTC (a

tax credit that reduces the person's income tax).

? The beneficiary has a valid Social Insurance Number, is resident in Canada at the time of the contribution, and is DTC eligible when the contribution is made on or before December 31 of the year the beneficiary turns 59 years of age.

? A contribution is eligible if the cumulative limit of $200,000 is not exceeded. ? A payment from a designated provincial program, a retirement savings and education savings

rollovers and a transfer of funds as a result of moving the RDSP from one issuer to a new issuer are not included as a contribution for the payment of a grant.

The ITA establishes the rules for Disability Assistance Payments and Lifetime Disability Assistance Payments, the calculation of the legislated formula and the taxable amount of the payment.

Income thresholds are used to determine the matching rate for the grant and the bond.

The ITA sets out the conditions where an RDSP can be designated as an SDSP and the conditions where a plan ceases to be an SDSP.

The issuers : ? notify the Minister if there is a change of holder and inform the Minister if a plan becomes non-

compliant; ? inform a beneficiary if a qualifying family member has become the holder of the RDSP; ? may not amend their RDSP's terms and then market it without written approval from the Canada

Revenue Agency; and ? must ensure they administer the plan in a way that minimizes the possibility that a plan holder will

pay Part XI tax under the ITA.

In order to protect an individual's privacy rights, RDSPs are also governed by:

? The Privacy Act ? The Personal Information Protection and Electronic Documents Act

September 5, 2013

4 ? Life cycle of an RDSP

Administrative activities completed during the Registered Disability Savings Plan (RDSP) life cycle.

InfoCapsule RDSP, Grant and Bond

Opening

Registration

Grants / bonds

Sharing of information

The issuer provides information to the holder on: ? eligibility criteria ? RDSP rules ? required information

Information transmission

ESDC transmits information to Canada Revenue Agency (CRA) on:

? the contract ? the holder ? the beneficiary

Application

The holder fills out an application form for the grant and the bond.

Application

The holder requests: ? disability assistance

payment (DAP) ? lifetime disability

assistance payment (LDAP)

Contract signature

The holder signs a contract with the issuer.

The issuer opens an RDSP.

Data verification

CRA verifies: ? beneficiary's Disability

Tax Credit (DTC) eligibility ? beneficiary's residency

Collection of personal information

The issuer collects personal information on: ? the beneficiary ? the holder ? the primary caregiver

Contract registration

CRA confirms the contract's registration and advises ESDC.

Information transmission

The issuer transmits information to Employment and Social Development Canada (ESDC) on: ? the beneficiary ? the holder ? the contract ? the primary caregiver

Registration status

ESDC advises the issuer of the contract's status.

ESDC verifies: ? beneficiary's Social

Insurance Number (SIN) ? holder's SIN or Business

Number (BN) Contribution The holder deposits contributions in order to attract the grant.

Payment The issuer remits a payment to the beneficiary.

Family income

Incentives

CRA verifies the

ESDC pays the

beneficiary's family income. grant and the bond to the

issuer.

The issuer deposits the grant and bond in the RDSPs.

Income tax statement

Issuers report the taxable part of the DAP on a T4A slip and sends two copies to the beneficiary or his/her legal representative.

Request

The holder requests a transfer to a new issuer.

Opening

The new issuer opens an RDSP.

Trigger events

Depending on the trigger event, for example the death of the beneficiary, the issuer may have to close the RDSP.

Repayment

Grants and bonds are repaid to ESDC (if the regulations regarding the assistance holdback amount apply).

Closure

The prior issuer transfers all the funds to the new issuer and closes the RDSP.

ESDC sends historical data of the RDSP to the new issuer.

Funds in the RDSP

The remaining funds are paid out to: ? the beneficiary, or ? the beneficiary's estate.

Application The holder fills out an application form for the grant and the bond with the new issuer.

Contract closure The issuer sends the transaction 102-10 to ESDC to close the contract.

Payment

Transfer

Closure

August 9, 2016

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