RDSP Bulletin No. 1

May 24, 2011

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

This first bulletin contains information on Bills C-9 and C-47 relating to changes in RDSP legislation that require issuers to amend their specimen plans and contracts.

Bill C-9

Bill C-9, which received Royal Assent on July 12, 2010, amended section 146.4 of the Act by modifying the definition of "contribution" and adding the definition of "designated provincial program". Other provisions in section 146.4 of the Act were amended as a result of these changes. These amendments apply to the 2009 and subsequent tax years.

RDSP contributions

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 Act or a prescribed payment. Now, contribution has been amended to eliminate the reference to a prescribed payment and is written as follows:

"contribution" to a disability savings plan does not include (other than for the purpose of paragraph (b) of the definition of "disability savings plan")

(a) an amount paid into the plan under or because of the Canada Disability Savings Act or a designated provincial program;
(b) an amount paid into the plan under or because of any other program that has a similar purpose to a designated provincial program and that is funded, directly or indirectly, by a province (other than an amount paid into the plan by an entity described in subparagraph (a)(iii) of the definition "qualifying person" in its capacity as holder of the plan); or
(c) an amount transferred to the plan in accordance with subsection 146.4(8).

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 new 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.

Bill C-47

Bill C-47, which received Royal Assent on December 15, 2010, amended the Act to allow the tax-deferred transfer ("rollover") to an RDSP of certain amounts received from a registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or registered pension plan (RPP) as a consequence of the death of the annuitant or RPP 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).

This amendment is applicable after June 2011.

Section 60.02 has been added to the Act (replacing the previous reference) to describe the conditions for a "specified RDSP payment". This new section is applicable after March 3, 2010.

The "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; and
(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.

A "specified RDSP payment" is an amount paid after June 2011 to an RDSP under which an eligible individual is the beneficiary and has been designated by the eligible individual and the holder as a "specified RDSP payment" at the time of payment.

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 beneficiary must be eligible for the disability tax credit; 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 registered retirement savings plan or a registered retirement income fund, or of a deceased member of a registered pension plan, 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.

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: