Registered Disability Savings Plans (RDSPs)

Specimen plan approval process

Before marketing a disability savings plan, the CRA's Registered Plans Directorate must be provided with a specimen of the arrangement. The specimen plan is reviewed by the Registered Plans Directorate to ensure that all documentation complies with the requirements of the Income Tax Act as well as other related administrative requirements. The specimen plan will only be approved if an Issuer's Agreement has been signed and accepted by the Department of Human Resources and Skills Development Canada (HRSDC). The issuer may enter into a registered disability savings plan (an "RDSP") contract with a holder(s) only after receiving our approval of the specimen plan. After receiving approval, the issuer has to send us an official copy of the document being marketed to holders, for our review.

1. Required Specimen Plan Documentation

• the holder's application form for the disability savings plan, plus any addendum that forms part of the application;
• the declaration of trust that sets out the terms and conditions of the disability savings plan, including any schedules and riders that pertain to the contract;

2. Required Information for an RDSP Application Form

The holder's contract (application form) for a disability savings plan should be addressed to the issuer (i.e., the issuer's name should appear somewhere on the application form). When developing the application form, the issuer must include:

• A space for the number assigned to the plan (contract). If the issuer uses the term "account number" or other such wording, please tell us when submitting the documents for approval.
• A space to record the name, address, date of birth, gender, and social insurance number (SIN), or business number (BN) if applicable, of each holder under the plan.
• A space to record the name, address, date of birth, gender, and SIN of the beneficiary under the plan.
• A statement that the holder must notify the issuer when the beneficiary is not resident in Canada.
• A space to record the name, and SIN or BN of the person who is the primary caregiver of the beneficiary at the time the contract is signed.
• A space to record the date on which the holder enters into the plan with the issuer.
• A space for the date that contributions into the plan must end (before the end of the year in which the beneficiary turns 60 years of age).
• A warning to holders that holders are jointly liable with the beneficiary (or the beneficiary's estate) for taxes arising in connection with the deregistration of a non-compliant plan.
• A space where the holder can identify their relationship to the beneficiary by means of a) being the legal parent of the beneficiary b) being the legal guardian of the beneficiary or c) being a public institution that is legally authorized to represent the beneficiary.
• A space for the signature(s) of the holder(s), a space for the issuer's signature, and a space for the primary caregiver's signature.
• A statement to holders that information gathered on the application form will be shared with both HRSDC and the CRA for the purposes of administering the registered disability savings plan and for the validation of the beneficiary and holder information. Holders should be informed that all information collected and under control of the CRA will be administered in accordance will all applicable laws including the Privacy Act and the Income Tax Act. All information shared with and under the control of HRSDC will be administered in accordance with all applicable laws including the Canada Disability Savings Act, the Privacy Act and the Department of Social Development Act.
• A statement to holders that the information on the application form will be used by the CRA to validate the beneficiary's residency and disability tax credit eligibility and that these validations will be shared with the issuer.
• A statement to primary caregivers that the information they have provided on the application form will be used to validate the beneficiary's information and disability tax credit eligibility and that these validations will be shared with the issuer.

Note

The word "registered" cannot be used to refer to the name of the plan on the specimen application form or other specimen plan documents, since the specimen plan is not registered. Only individual contracts entered into using the approved application form can be registered.

3. Required Information to be Included in the Declaration of Trust

The text of a plan has to comply with subsection 146.4(4) of the Income Tax Act (the "ITA"). The plan must therefore provide for the conditions described in (a) to (p) below.

(a) The text will stipulate that:

• the registered disability savings plan will be operated exclusively for the benefit of the beneficiary under the plan,
• the designation of the beneficiary under the plan is irrevocable, and no right of the beneficiary to receive payments from the plan is capable, either in whole or in part, of surrender or assignment.

(b) An entity may only acquire rights as a successor or assignee of a holder of the plan if the entity is the beneficiary, the beneficiary's estate, a holder of the plan at the time the rights are acquired, a qualifying person in relation to the beneficiary at the time the rights are acquired, or an individual who is a legal parent of the beneficiary and was previously a holder of the plan.

(c) An entity (other than the legal parent of the beneficiary) must cease to be a holder of the plan at the time the entity ceases to be a qualifying person in relation to the beneficiary.

(d) There must be at least one holder of the plan at all times during the plan's existence. The plan may allow the beneficiary (or the beneficiary's estate, as the case may be) to automatically acquire rights as a successor or assignee of a holder to ensure compliance with this paragraph.

(e) If an entity becomes a holder of the plan after it is entered into, the entity may not exercise their rights as a holder of the plan until the entity has advised the issuer that they are the new holder of the plan and they have provided the issuer with their SIN or BN, as the case may be.

(f) Contributions cannot be made to the plan if at that time the beneficiary is not a DTC-eligible individual in respect of the particular taxation year, or the beneficiary died before that time.

(g) Contributions cannot be made to the plan (excluding contributions made to the plan as part of a transfer from another RDSP of the beneficiary) after the year in which the beneficiary has reached the age of 59, if the beneficiary is not resident in Canada at the time, or if at the time, the contribution when added to the total of all contributions that have previously been made to the plan or any other RDSP of the beneficiary (other than those contributions made as part of a transfer from another RDSP of the beneficiary), would exceed $200,000.

(h) Only the holder may make contributions to the plan, unless they have given written consent to allow other entities to make contributions into the plan.

(i) No payments may be made from the plan other than disability assistance payments, a transfer to another RDSP of the beneficiary, and repayments under the Canada Disability Savings Act.

(j) A disability assistance payment may not be made from the plan if after the payment were to be made, the fair market value of the property in the plan trust would be less than the assistance holdback amount in relation to the plan.

(k) Lifetime disability assistance payments must commence before the end of the calendar year in which the beneficiary turns 60 years of age. If the plan is established in or after the year the beneficiary turns 60 years of age, lifetime disability assistance payments must commence before the end of the calendar year following the calendar year in which the plan is opened.

(l) Lifetime disability assistance payments must not exceed the amount determined by the formula in paragraph 146.4(4)(l) of the ITA.

(m) The plan must state whether disability assistance payments that are not lifetime disability assistance payments can be made from the plan.

(n) If the total amount of Canada Disability Savings Grant and Canada Disability Savings Bond paid into any RDSP of the beneficiary before the beginning of the calendar year exceeds the amount of private contributions made to any RDSP of the beneficiary before the beginning of the calendar year then the plan will limit the amount of disability assistance payments that can be paid to the beneficiary in that calendar year as follows:

• If the calendar year is not a specified year (the particular calendar year in which a medical doctor who is licensed to practice under the laws of a province, or the place where the beneficiary resides, certifies in writing that in their professional opinion the beneficiary is not likely to live more than five years. Specified year also includes each of the five calendar years following the particular calendar year but does not include any calendar year that is prior to the calendar year in which the certification is provided to the issuer.), then the total amount of disability assistance payments made in the year may not exceed the amount determined by the calculation set out in paragraph 146.4(4)(l) of the Income Tax Act, except that, in calculating that total amount, any payment made from the plan following a transfer in the calendar year from the beneficiary's prior plan will be disregarded if:
  i) it is made in lieu of a payment that would otherwise have been permitted to be made from the prior plan in the calendar year had the transfer not occurred or
  ii) where the beneficiary attained the age of 59 years before the calendar year, the issuer of the plan undertakes to make one or more disability assistance payments from the plan in the year, the total of which is equal to the amount by which the total amount of all disability assistance payments that should have been paid from the prior plan in the calendar year had the transfer not occurred exceeds the actual amount of disability assistance payments that were paid from the prior plan in the calendar year.
• If the beneficiary attained the age of 27 years, but not the age of 59 years before the calendar year begins, then the beneficiary may direct that disability assistance payments be made to them during the year without the holder's consent. The total amount of both the beneficiary directed disability assistance payments and all other disability assistance payments that are made during the year must be limited using the same conditions as above.
• If the beneficiary attained the age of 59 years before the calendar year begins, then the total amount of disability assistance payments made in the year must be equal to the amount determined by the calculation set out in paragraph 146.4(4)(l) of the ITA, unless the amount of funds in the plan trust does not support this amount.

(o) If the holder wishes, the issuer will transfer all property held by the plan trust to another RDSP of the beneficiary. (The text of the plan must also indicate that the plan will terminate immediately following the transfer to the new RDSP.)The issuer will also transfer all information pertaining to the RDSP that is considered necessary for the new plan to comply with the requirements, conditions, and obligations of both the Income Tax Act and the Canada Disability Savings Act.

(p) The plan must be terminated by the end of the calendar year following the earlier of the calendar year in which the beneficiary dies and the first calendar year throughout which the beneficiary has no severe and prolonged impairments as detailed in paragraph 118.3(1)(a.1) of the ITA. After taking into consideration required repayments of the Canada Disability Savings Grant and Canada Disability Savings Bond, any amounts remaining in the plan must be paid to the beneficiary or their estate, as the case may be.

The text of a plan must indicate that a disability savings plan is not considered registered unless it is based on an approved specimen plan and that the following information has been received by the issuer; the beneficiary and holder(s) names and social insurance numbers (or the holder(s) business number(s) as the case may be). The text of a plan must also indicate that a disability savings plan is not considered registered unless the beneficiary is a resident of Canada at the time a disability savings plan is opened for them and that the beneficiary is eligible for the disability tax credit in respect of the taxation year in which the plan is opened for them. The text of a plan must indicate that the plan will not be considered registered if this information is not provided to the Minister of HRSDC within 60 days from when the holder entered into the contract with the issuer

The text of a plan must indicate that the beneficiary may not be a beneficiary under another RDSP unless the beneficiary is transferring to another plan and that the beneficiary's RDSP must be closed within 120 days from opening the new plan.

The text of a plan must indicate that the issuer has the ultimate responsibility for the administration of the plan and the plan trust. The text of a plan must also list the obligations that an issuer must comply with as indicated in subsection 146.4(13) of the ITA.

4. Trust Arrangement

RDSP legislation permits a specimen plan to allow for a one trust, one beneficiary arrangement. Subsection 146.4(1) of the ITA defines plan trust as the trust that is governed by the RDSP. A one trust, one beneficiary arrangement is contemplated when the definition of plan trust is read in conjunction with other legislative items under section 146.4 of the ITA, in particular, the maximum limit on LDAPs in paragraph 146.4(4)(l) of the ITA, the right to transfer to another RDSP in paragraph 146.4(4)(o) of the ITA, the deregistration of the RDSP in subsection 146.4(10) of the ITA, and the various penalty taxes in PartX1.

5. Third Parties and the RDSP

The Income Tax Act does not prohibit an RDSP issuer from entering into a contract with a third party. However, the issuer should be aware that there are specific obligations written into the ITA that if not handled correctly, may result in monetary penalties to the issuer. These required obligations are listed in subsection 146.4(13) of the ITA. A breakdown of the calculation process on these penalties can be found in subsection 162(7) of the ITA.

6. Contact Information for Specimen Plan Approval

Send the specimen disability savings plan for approval to one of the following addresses:

If using regular mail, send it to:

Registered Plans Directorate
Canada Revenue Agency
Ottawa ON K1A 0L5

If using a courier service, send it to:

Information Holdings Operation Section - Pensions
Registered Plans Directorate
Canada Revenue Agency
875 Heron Road A-200
Ottawa ON K1A 1A2

7. Amending a Specimen Plan

When a specimen plan is amended, all registered disability savings plans conforming to that specimen plan must also be amended and a copy of the new plan or a letter with the changes must be sent to all holders.

All amendments or revisions to an approved specimen plan, including amendments required by legislative changes, should be sent to the address provided in point six for approval before the amendments are put into effect. We must also be informed if the issuer changes. The notice of change of issuer must indicate the date the amendment goes into effect and whether existing plans will be amended. We will tell the issuer when the amendment is approved under section 146.4 of the ITA. The issuer must then send us a copy of the commercially printed document or the document provided to the holder, if commercially printed copies are not made. We will compare this version to the documents we approved.

8. Terminating a Specimen Plan

The issuer must let us know when there are no longer any outstanding registered disability savings plans that conform to the specimen plan and the specimen plan is no longer being marketed. We will then terminate the specimen plan and close our files.