With the serious possibility of an election in the Fall many people are wondering whether this will impact the launch of the RDSP in December. There are a few reasons why the upcoming election should not concern people who are planning to set up an RDSP in December.
1) The RDSP received Royal Assent in December of last year and is solidified in the Income Tax Act and Canada Disability Savings Act. Unlike a Bill that is still in First or Second Reading in front of the House of Commons, the RDSP has already passed through the political system and has been entrenched in Canadian legislation.
2) The Federal Government, including the Department of Human Resources and Social Development, Finance Canada, and the Canadian Revenue Agency, are all in final preparations for the launch in December and are continuing to work with financial institutions to make sure it is available to Canadians before the end of this year.
3) All three parties have been supportive of the RDSP and have indicated that it is a powerful and important plan for Canadians facing the challenges of living with a disability.
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September 9, 2008 at 2:01 am
Ryan Maharaj
What would you suggest we do during or after the election to advocate for changes to the RDSP legislation/rules?
I am currently 37 years old and find it somewhat unfair that those of us in our 30’s or 40’s aren’t entitled to the maximum grant or bond because we aren’t able to contribute for the necessary 20 years prior to turning 50? Perhaps the government might consider allowing us an opportunity to retroactively contribute to our plans which would allow us to fully benefit from everything the RDSP intended.
Also, it seems as there is a 10 year limitation from withdrawing from the plan without penalties. Similar to RRSP’s, the goverment should allow withdrawls for purposes such as home purchases or for continuing education. Perhaps the government might allow such withdrawls without a penalty.
Finally, I had a question about the withdrawl penalty. Let us assume I put in a lump sum of $101,500 ($100,000 + $1 500) in year 1, and continued to contribute $1 500 each year afterward. If after let’s say 5 years, I needed the $100,000 to help me make a home purchase, would there be a penalty, and if so, approximately what might it be. In the alternative, if I waited 10 years, would there be a penalty if I need the $100,000.
Sincerely yours,
Ryan Maharaj
September 11, 2008 at 4:54 pm
Doug Brodhead
Hi Ryan,
Good question! If you are interested in advocating in your province there are a few key things that you can do.
1) Contact your local MPP and let them know that you want them to push for a complete exemption of the RDSP.
2) Contact the Provincial Ministry responsible for Disability Benefits and let them know that you want them to completely exempt the RDSP (see the Provincial Contact List on the homepage for contact information).
3) Talk to local non-profit Disability Organizations and encourage them to advocate for a complete exemption of the RDSP in the province. If they have questions or need information they can always contact PLAN.
4) Speak with people in your community who may be interested in the the RDSP and let them know about it. If you look on the HomePage of this blog you will see a quick two-page FactSheet that you can print out and distribute if you want. The more people talking about an issue, the more it gets noticed by decision-makers.
5) Most importantly, when you are speaking to officials in government (bureaucrats and politicians) make sure to be positive. Tell them that this is an important issue that will get them a lot of positive support if they exempt the RDSP and that it would mean a lot to you.
In terms of the inability of people in their late 30’s and 40’s not being able to receive the maximum grant and allowing individuals to receive it retroactively, currently the Government will not allow this to happen. But, they have committed to a 3 year review of the plan, and this would be a topic that could be brought up to be possibly amended. Again, with the 10 year limitation, this is another issue that we will want to bring up in the 3 year review.
For your scenario, if you began to withdraw money after 5 years you would be penalized any grant and bond you had received. Alternatively, if you waited 10 years you would still lose any grant and bond you had received. Any grant and bond received within the last ten years of a withdrawal will be clawed back to Government. This will not affect your own contributions to the plan or the interest that you have accumulated from all contributions (including government).
Great questions Ryan. A lot of the points that you have brought up are ones that we will continue to flag as issues for the Government.
September 12, 2008 at 4:26 pm
paulg
I have two boys ages 13 and 11. The younger one needs an extra hand and the RDSP will allow me to set some $ aside for him. The older one has plans to go to college and I have been setting money into an RESP for him. As we know, plans can change.
I am wondering if there would be support to allow unused RESP funds to be transfered to an RDSP? Has this issue been raised?
I’d appreciate your thoughts.
Thanks,
Paul
September 12, 2008 at 5:01 pm
Doug Brodhead
Hi Paul,
Very good point, and one that has come up often since the regulations were formalized. Unfortunately, at the moment their is no provision to be able to roll-over unused funds from a RESP into an RDSP and the Government has indicated that they will not be addressing this issue until the 3 year review.
We have raised the issue in discussions with Government but have not seen any movement around allowing this to happen. We will flag it as a concern for people setting up an RDSP.
Thanks for the feedback Paul.
September 12, 2008 at 5:52 pm
paulg
Thank you, Doug. I’ve spoken to my MP and complemented him and his government for the RDSP initiative. As well, I’ve made the suggestion around the rollover.
I think it would be helpful if others could also talk to their elected representatives.
Paul