Economic Action Plan 2012 proposes measures to ensure that Registered Disability Savings Plans continue to meet the needs of Canadians with severe disabilities and their families.
In July 2006, the Minister of Finance appointed the Expert Panel on Financial Security for Children with Severe Disabilities to consider how best to ensure the financial security of children with severe disabilities. The Panel submitted its report, A New Beginning, in December 2006.
The Government acted on the Panel’s recommendations by announcing the introduction of a new tax-assisted Registered Disability Savings Plan (RDSP) in Budget 2007, which became available in December 2008.
The RDSP is widely regarded as a major policy innovation and positive development in helping to ensure the long-term financial security of children with severe disabilities. Since becoming available in 2008, nearly 55,000 RDSPs have been opened. This is due in part to the considerable efforts of financial institutions to make these plans available to Canadians. RDSPs are offered by 11 different financial institutions across the country, all of which have made a significant investment to offer the program.
Beneficiaries, their families and others have contributed over $220 million to these plans, and the Government has provided approximately $450 million in support through Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs).
In Budget 2011, the Government announced that it would undertake a review of the RDSP program in 2011, consistent with the commitment in Budget 2008 to review the program in three years to ensure that RDSPs are meeting the needs of Canadians with severe disabilities and their families.
The RDSP review was launched in October 2011. As part of the review, a consultation paper was released, which included a number of questions on which Canadians were invited to provide feedback. In response, the Government received more than 280 submissions from individuals and organizations. In addition, consultations were held with representatives from disability groups, financial institutions, and provincial and territorial governments, including public guardians and trustees. The Government wishes to thank those who participated in the review for their thoughtful input and suggestions.
Based on the feedback received during the review, Economic Action Plan 2012 proposes a number of measures to improve the RDSP. These measures will:
- Provide greater access to RDSP savings for small withdrawals by replacing the requirement to repay any CDSGs and CDSBs paid into an RDSP within the 10 years preceding a withdrawal from the plan with a requirement to repay CDSGs and CDSBs at a fixed ratio to the amount withdrawn.
- Provide greater flexibility to make withdrawals from certain RDSPs by increasing the annual maximum withdrawal limit that applies to these RDSPs, and ensure that RDSP assets are used to support a beneficiary during their lifetime by requiring a minimum amount to be withdrawn from all RDSPs beginning the year a beneficiary attains 60 years of age.
- Provide greater flexibility for parents who save in Registered Education Savings Plans (RESPs) for children with disabilities by allowing investment income earned in an RESP to be transferred on a tax-free basis to an RESP beneficiary’s RDSP.
- Provide greater continuity for long-term saving by RDSP beneficiaries who cease to qualify for the Disability Tax Credit in certain circumstances by extending the period that their plans may remain open.
- Improve the administration of the RDSP for financial institutions and beneficiaries by amending certain RDSP administrative rules.
Establishing Plans and Legal Representation
The RDSP has been highly successful due in part to the cooperation of provinces and territories in ensuring that RDSP benefits are not clawed back by reductions in social assistance payments.
However, a number of adults with disabilities have experienced problems in establishing a plan because their capacity to enter into a contract is in doubt. Questions of appropriate legal representation in these cases are a matter of provincial and territorial responsibility. In many provinces and territories, the only way that an RDSP can be opened in these cases is for the individual to be declared legally incompetent and have someone named as their legal guardian—a process that can involve a considerable amount of time and expense on the part of concerned family members, and that may have significant repercussions for the individual.
Some provinces and territories have instituted more streamlined processes to allow for the appointment of a trusted person, such as a parent, other relative, or friend, to manage resources on behalf of an individual with a disability, or have otherwise indicated that their system already provides sufficient flexibility to address these concerns. The Government of Canada recognizes and appreciates the leadership shown by the Governments of British Columbia, Saskatchewan, Manitoba,Newfoundland and Labrador, and Yukon in this regard. In addition, the Government of Canada is pleased that the Government of Alberta has recently indicated that it will examine ways to simplify access to the RDSP program.
The Government of Canada continues to encourage the Governments of Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, the Northwest Territoriesand Nunavut to examine whether streamlined processes would be suitable for their jurisdiction.
Given the importance of this issue to the success of the RDSP program, the Government of Canada will work with provinces and territories to develop a standardized, streamlined process that provinces and territories could adopt in order to facilitate and simplify the process of opening RDSPs for beneficiaries who lack contractual competence.
In the interim, while these processes are being developed, Economic Action Plan 2012 proposes to temporarily expand the definition of who may be the plan holder of an RDSP. Specifically, a beneficiary’s spouse, common-law partner, or parent will be able to become the plan holder and open an RDSP on behalf of an adult who might not be able to open a plan due to concerns about their ability to enter into a contract. These rules will be in place until the end of 2016, to provide provinces and territories time to develop more appropriate, long‑term solutions to address RDSP legal representation issues.
The changes to the RDSP will cost $3 million in 2012–13 and $6 million in 2013–14.