RDSP Bulletin No. 2

August 2, 2011

This bulletin is the second in a series published by the Registered Plans Directorate. It will discuss issues that arise from time to time regarding the administration of registered disability savings plans (RDSP) and the Income Tax Act. This publication is intended primarily for use by RDSP issuers.

This second bulletin describes changes to section 146.4 of the Act as introduced in Bill C-3 and provides information on administrative requirements for an RDSP to be designated a specified disability savings plan (SDSP).

Bill C-3

Bill C-3, which received Royal Assent on June 26, 2011, amended section 146.4 of the Act by modifying the definition of "specified year" and introducing a definition for SDSP. It also introduces rules and limitations for administering an SDSP. This legislation is applicable after June 25, 2011.

Specified year

The definition of "specified year" has been amended to include the time that an RDSP is designated an SDSP until the time that the SDSP designation is removed. For the purpose of an SDSP, a specified year will not include any calendar year prior to the calendar year in which a medical certification affirming the beneficiary's shortened life expectancy is provided to the RDSP issuer.

Specified disability savings plan

This new definition indicates that an RDSP is not considered an SDSP unless the following actions are completed:

• a medical doctor who is licensed to practice under provincial laws or who is licensed to practise under the laws where the beneficiary resides, certifies in writing that in their professional opinion the beneficiary will not live longer than five years;
• the holder of the RDSP provides the issuer with the medical certificate and an election containing prescribed information that designates the plan as an SDSP; and
• the issuer notifies the Minister of Human Resources and Skills Development (HRSD) of the SDSP election in accordance with the Minister's requirements.

The SDSP designation takes effect when the Minister of HRSD receives the issuer's notification.

Removal of the SDSP designation

An RDSP is no longer considered an SDSP at the earliest of the following times:

a) the time that the Minister of HRSD receives notification (in accordance with the Minister's requirements) from the issuer that the plan holder has elected to remove the SDSP designation from the plan;

b) immediately before the earliest time in a calendar year when the total taxable amount of all disability assistance payments made in that year when the plan was an SDSP, exceeds $10,000* [if paragraph (i) requires that a larger taxable amount be paid from the plan then the threshold amount for this paragraph will be the taxable amount that pertains to the calculation in paragraph (i)]

* If the issuer receives the required medical certificate before 2012: immediately before the earliest time in the 2012 calendar year when the total taxable amount of all disability assistance payments made when the plan was an SDSP exceeds $20,000 (this allows for the remainder of the 2011 withdrawal limit to be paid in 2012) [if paragraph (i) requires that a larger taxable amount be paid from the plan then the threshold amount for this paragraph will be the taxable amount that pertains to the calculation in paragraph (i)];

c) immediately before the time a contribution is made to the plan (note that for the purpose of an SDSP, a rollover is not considered a contribution);

d) immediately before the time a Canada disability savings grant, Canada disability savings bond, or designated provincial program payment is paid into the plan;

e) immediately before the time an amount is paid into the plan where the amount was paid because of or under a program whose purpose is similar to a designated provincial program and the amount was funded directly or indirectly by a province;

f) immediately before the plan is terminated;

g) immediately before the plan becomes non-compliant as a result of the application of paragraph 146.4(10)(a) of the Act;

h) if lifetime disability assistance payments have not begun to be paid before the end of the particular calendar year following the year in which the plan has last been designated an SDSP, immediately following the particular year; and

i) if the government contributions (grant and bond) that were paid to the beneficiary's plan (and all prior plans) are greater than private contributions that were made into the beneficiary's plan (and all prior plans) at the beginning of the calendar year and the total disability assistance payments made from the plan in the year do not equal the result of the legislated maximum formula in paragraph 146.4(4)(l) of the Act (or a lesser amount as supported by the property in the plan), immediately following the year.

Once a plan has ceased to be an SDSP the holder of the plan may not make another SDSP election until 24 months after the SDSP designation was last removed from the plan.

The Minister of National Revenue may waive the limitations noted in paragraphs a) to i) as well as the 24 month waiting period for re-election if the Minister feels it is just and equitable to do so. To request a waiver, the issuer must send a letter to the Minister of National Revenue by using the address or fax number noted under the heading "How to contact us". The letter should indicate which condition the issuer would like waived, the reason for the waiver request and any additional information that supports the request.

Administration

The RDSP issuer will not be required to amend their specimen plan(s) in order to accept an SDSP designation on an RDSP. If the issuer wishes to allow a holder to request an SDSP designation on a beneficiary's plan, the issuer must provide the holder with a document containing prescribed information for the holder to use as the SDSP election. The issuer is to treat the holder's election as an addendum to the beneficiary's plan and should attach the addendum to the beneficiary's file.

Questions regarding the Minister of HRSD's administrative requirements should be sent by email to rdsp-reei@hrsdc-rhdcc.gc.ca

Prescribed information for an SDSP election

The issuer must include the following information in the SDSP election document:

• a statement that the holder wishes to designate the beneficiary's plan as an SDSP with a space for the holder's signature and date;
• the list of actions, as identified under the heading, "Removal of the SDSP designation", that require removal of the SDSP designation from the plan;
• if "specified year" (or an equivalent term) is defined in the beneficiary's RDSP, a statement that the plan's definition of specified year must be read to include years in which the plan is an SDSP (see information under the heading, "Specified year"); and
• A statement informing the plan holder that once the plan has ceased to be an SDSP, the holder of the plan may not make another SDSP election until 24 months after the SDSP designation was last removed from the plan.

How to contact us

Contact us at the Registered Plans Directorate if you have any questions about this RDSP bulletin.

Our telephone enquiries service is available Monday to Friday from 8:00 a.m. to 5:00 p.m., Eastern Time (with a voice mailbox system to take messages outside those hours):

In the Ottawa area
For service in English: 613-954-0419
For service in French: 613-954-0930

Toll-free elsewhere in Canada
For service in English: 1-800-267-3100
For service in French: 1-800-267-5565

RDSP issuers who need guidance on specific registration issues can write to us at the Registered Plans Directorate, Canada Revenue Agency, Ottawa ON K1A 0L5, or fax us at 613-952-0199.

We welcome feedback on this bulletin. Email your comments to: rpd/dre@cra-arc.gc.ca

Date modified:

2011-08-02