The Registered Disability Savings Plan and the Canada Disability Savings Grant and Bond

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1 1 The Registered Disability Savings Plan and the Canada Disability Savings Grant and Bond November 2016

2 2 What is a Registered Disability Savings Plan? The RDSP is a savings plan for Canadians with disabilities. It is a tax-deferred savings vehicle. It is for the sole benefit of the beneficiary. It assists parents and others in planning for the long-term financial security of a family member with a disability. It is exempt from income testing for Social Assistance benefits in all jurisdictions. It can contain private contributions and contributions from the Government of Canada in the form of Canada Disability Savings Grants and Bonds.

3 3 Who can set up an RDSP? An RDSP is a contract between a financial institution and a client, that is operated for the sole benefit of a named beneficiary Holder - establishes the RDSP and is responsible for its operation Beneficiary - is a Canadian resident who qualifies for the Disability Tax Credit Issuer Financial Institution that operates a Specimen Plan approved by the Canada Revenue Agency

4 4 Who qualifies for an RDSP? The beneficiary must be DTC eligible at the time the contract is entered into The beneficiary must be resident in Canada at the time the contract is entered into The beneficiary must be under age 60 (on or before December 31 of the year in which they turn 59) when the contract is opened There can only be one RDSP for a beneficiary at any given time.

5 5 Contribution limits for an RDSP $200,000 lifetime contribution limit There is no annual limit Contributions include: Regular contributions RRSP rollovers RESP rollovers Contributions are cumulative

6 6 Canada Disability Savings Grant and Bond The Grant is paid in matching amounts based on contributions A maximum eligibility of $3,500/year A lifetime limit of $70,000 The Canada Disability Savings Bond is an annual entitlement for disabled Canadians with a low or modest income It is income tested No contribution is required A maximum eligibility of $1,000/year A lifetime limit of $20,000

7 7 The Grant Entitlement is: $3500/year when income is less than or equal to the second threshold Matched at 300% on first $500 contributed Matched at 200% on next $1000 contributed Or $1000/year when income is greater than the second threshold Matched at 100% on first $1000 contributed The grant is paid on contributions made to the RDSP on or before December 31 of the year the beneficiary turns 49.

8 8 The Bond $1000/year when income is less than or equal to the phase-out income Based on the grind-down formula when income is greater than the phase-out income but less than the first threshold When income is greater than or equal to the first threshold no bond is paid.

9 9 Annual income levels since 2008 phase out income first threshold second threshold 2016 $26,364 $45,282 $90, $26,021 $44,701 $89, $25,584 $43,953 $87, $25,356 $43,561 $87, $24,863 $42,707 $85, $24,183 $41,544 $83, $23,855 $40,970 $81, $23,710 $40,726 $81, $21,287 $37,885 $75,769

10 10 Carry forward Announced in Budget 2010 Took effect on January 1, 2011 Grant The GoC pays the best benefit to the beneficiary from available entitlements from the current year and the ten previous years, starting from the oldest to the newest, to a maximum of $10,500 Bond The GoC pays all available Bond for the current year and the previous 10 years (maximum is $11,000)

11 11 Rollovers The GoC will allow the rollover of funds from certain other registered products on a tax-free basis. RRSP rollovers allow a deceased individual s RRSP or RRIF proceeds to be transferred, on a tax-free basis, to the RDSP of a financially dependent infirm child or grandchild. RESP rollover - allow investment income earned in an RESP to be transferred on a tax-free (or rollover ) basis to an RDSP if the plans share a common beneficiary.

12 12 Assistance Holdback Amount All grant and bond paid in the last 10 years from that particular time, that has not been repaid. The AHA must be repaid to the GoC when: The beneficiary dies The RDSP is closed The RDSP is de-registered The beneficiary is no longer DTC eligible* There is a 3 to 1 repayment amount required when there is a withdrawal of funds, up to a maximum of the AHA.

13 13 Special situations - SDSP - Loss of DTC election Specified Disability Savings Plan (SDSP) When a Medical Doctor attests that the beneficiary s life expectancy is less than 5 years Loss of DTC Should the period of a DTC run out and not be renewed, a beneficiary may elect for the RDSP to remain open for a period of up to 5 years if a medical doctor believes that the condition may caused the individual to again be DTC eligible at some time in the future

14 14 Payments Disability Assistance Payments Ad hoc payments if allowed by the Specimen Plan Limited by formula* Lifetime Disability Assistance Payments Must commence by the end of the year in which the beneficiary turns 60 Annual payments once started Limited by formula*

15 15 Payments Beneficiary under 60 years Beneficiary more than 59 years Maximum Amount Minimum Amount Maximum Amount Minimum Amount PGAP DAP LDAP DAP+ LDAP The greater of: a) Formula result* or b) 10% of the FMV* No minimum Always combined with LDAP $1.00 $1.00 The greater amount of: a) Formula result* or b) 10% of the FMV* Formula result* Non-PGAP DAP LDAP DAP+ LDAP No maximum No minimum No maximum Always combined with LDAP Formula result* No maximum $1.00 $1.00 Formula result* No maximum Formula result*

16 16 Payments The DAP/LDAP is made up of proportional amounts of money held in the RDSP at the time of payment. (Grant, bond, contributions, earnings, rollovers) The taxable portion of the DAP/LDAP is made up of grant, bond, earnings and rollovers. The portion of a DAP/LDAP made up of contributions is non-taxable

17 17 Primarily Government Assisted Plan At the start of the calendar year an RDSP is determined to have either more private monies (contributions and rollover amounts) or more government monies (grant and bond) This determines how the RDSP will operate for that calendar year This has an effect on the DAP/LDAP limits When the RDSP is PGAP (more government monies) a beneficiary between the ages of 27 and 59 can withdraw funds without the consent of the holder

18 18 Estate planning The RDSP is the property of the beneficiary. Upon death, the RDSP becomes part of the beneficiary s estate. The Assistance Holdback Amount determined as of the date of death is repaid to the Government of Canada.

19 19 Statistics Transactions reported as of December 31, 2015: o 123,020 plans registered o $810.1in private contributions made o $1.115 billion in grants paid into RDSPs o $487.4 million in bonds paid into RDSPs Total assets in RDSPs exceed $2.5 billion Program take-up is approximately 24% of those age 0-49 eligible to open an RDSP.

20 20 Qualified investments The RDSP Specimen Plan of each Financial Institution will identify the types of investments allowed Each Specimen Plan is different Qualified investments for RDSPs are generally the same as those for Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) and include cash, stocks, bonds, GICs, mutual funds and a variety of other investments. Please verify with the particular Specimen Plan

21 21 List of Financial Institutions BMO Investments Central 1 Credit Union Central 1 Trust Company CIBC Securities Fédération des caisses Desjardins Société de gérance des fonds FMOQ inc. Global Growth Assets Mackenzie Financial Corporation Scotia Securities The Bank of Nova Scotia TD Waterhouse Royal Bank of Canada Investors Group Alberta Treasury Branch

22 22 Contact information For more information about the bond and grant: Visit: Call: O-Canada ( ) TTY: rdsp-reei@hrsdc-rhdcc.gc.ca For more information about the Registered Disability Savings Plan: Visit: Call: TTY: