Canada Consults On Disability Saving Plan Regulations

by Mike Godfrey, Tax-News.com, Washington

25 October 2011

The Canadian government is reviewing the Registered Disability Savings Plan (RDSP), designed to help ensure the long-term financial security of children with severe disabilities.

A consultation, linked to the review, was announced by the Finance Minister, Jim Flaherty. He said: “It is important for those who benefit from these plans to give their input, so that RDSPs continue to accurately reflect and address their true needs".

An RDSP may be established for an individual who is eligible for the Disability Tax Credit (DTC), with the DTC-eligible individual as the plan's beneficiary. The plan holder is the person who generally opens the RDSP and makes decisions regarding contributions, investments, and withdrawals. The plan holder can be the beneficiary, or, if the plan is opened for a minor child, a parent, and, in some cases, a legal representative of the beneficiary. In addition, the government provides up to CAD1,000 in Canada Disability Savings Bonds (CDSBs) annually to RDSPs established by low- and modest-income families, up to a lifetime limit of CAD20,000. Investment income earned in an RDSP is tax-free.

The RDSP was introduced in Budget 2007 and became available in 2008. It was announced in Budget 2008 that the programme would be reviewed three years after plans became operational, hence the launch of the current consultation. The review was confirmed by Flaherty in his most recent Budget, which stated, "while there is broad agreement on the RDSP’s overall structure and eligibility conditions, the review will provide an opportunity to seek input from individuals, families, groups representing Canadians with disabilities and financial institutions on specific features [of the RDSP].”

According to the government, the review will seek input on a number of important topics that are crucial to the success of the RDSP. These include issues related to establishing plans, accessing plan savings, plan termination, and the administration of the RDSP programme.

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