Specimen plan approval process

Before you can market a disability savings plan (DSP), you must send us a specimen of the arrangement. We will review the specimen plan to make sure that all documents are in line with the rules of the Income Tax Act and other related administrative rules. We will only approve the specimen plan if the Issuer Enrollment Process has been completed and accepted by Employment and Social Development Canada (ESDC). You may enter into a registered disability savings plan (RDSP) contract with one or many holders only after receiving our approval of the specimen plan. Although you are not required to send us a final printed copy at this time, we may ask for it in the future.

Required specimen plan documents

• the holder's application form for the DSP;
• any addendum that forms part of the application (for example, Prescribed information for an SDSP election found in the RDSP Bulletin No. 2R2); and
• the declaration of trust that sets out the terms and conditions of the DSP, including any schedules and riders that pertain to the contract.

Required information for an RDSP application form

Your name, as issuer, should appear on the holder's contract (application form) for a DSP. When developing the application form, you must include all of these items:

• A space for the number assigned to the plan (contract). If you use the term "account number" or other similar wording instead of the term “contract”, please tell us when you send in the documents for our approval.
• A space to record the name, address, date of birth, gender, and social insurance number (SIN), or business number (BN) if it applies, 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 you when the beneficiary is not resident in Canada.
• A space to record the name, and SIN or BN of the person or entity 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.
• A space for the date that contributions into the plan must end (before the end of the year in which the beneficiary turns 59 years of age).
• A warning to holders that they are jointly liable with the beneficiary (or the beneficiary's estate) for taxes if the plan becomes non-compliant and is deregistered.
• A space where the holder can state their relationship to the beneficiary as a) the legal parent of the beneficiary, b) the legal guardian of the beneficiary, c) a public institution that is legally authorized to represent the beneficiary, or d) the spouse or common-law partner of the beneficiary (if the qualifying family member provision is offered).
• A space for the signature(s) of the holder(s), a space for your 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 ESDC and the Canada Revenue Agency (CRA) for administering the RDSP and for validating the beneficiary and holder’s information. Holders should be informed that all information collected and under control of the CRA will be administered in line with all laws that apply including the Privacy Act and the Income Tax Act. All information shared with and under the control of ESDC will be administered in line with all laws that apply 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 confirm the beneficiary's residency and disability tax credit (DTC) eligibility and that these validations will be shared with you.
• A statement to primary caregivers that the information they have given on the application form will be used to confirm the beneficiary's information and DTC eligibility and that these validations will be shared with you.

Required information in the declaration of trust

The declaration of trust (plan text) has to comply with subsection 146.4(4) of the Income Tax Act, and it must therefore include the mandatory conditions described in paragraphs (a) to (p) below. If you want to offer other optional provisions (for example: DTC elections), you can find more information in the Sample pro forma – Declaration of Trust.

(a) The plan text must state that:

• the RDSP will only be 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 become a successor or assignee of a holder of the plan if, at the time, the entity is i) the beneficiary, ii) the beneficiary's estate, iii) a holder of the plan, iv) a qualifying person in relation to the beneficiary, or v) 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 become a successor or assignee of a holder to comply with this condition;

(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 you that they are the new holder of the plan and they have given you 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 DTC-eligible for the particular tax year, or the beneficiary died before that time;

(g) Contributions cannot be made to the plan (except for the 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 already been made to the plan or any other RDSP of the beneficiary (other than the transferred contributions), 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 (DAPs), a transfer to another RDSP of the beneficiary, and repayments under the Canada Disability Savings Act or designated provincial program;

(j) A DAP may not be made from the plan if the payment would result in the fair market value of the property in the plan trust being less than the assistance holdback amount for the plan;

(k) Lifetime disability assistance payments (LDAPs) must start before the end of the calendar year in which the beneficiary turns 60 years of age. If the plan is opened in or after the year the beneficiary turns 60 years of age, LDAPs must start before the end of that calendar year;

(l) LDAPs cannot be more than the amount determined by the formula under paragraph 146.4(4)(l) of the Income Tax Act;

(m) The plan text must state whether DAPs that are not LDAPs 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 is more than the total amount of private contributions made to any RDSP of the beneficiary before the beginning of the calendar year, the plan will limit the amount of DAPs and LDAPs that can be paid to the beneficiary in that calendar year as follows:

• If the calendar year is not a specified year Footnote 1 the total amount of DAPs and LDAPs made in the year cannot be more than the amount determined by the calculation set out in the definition of specified maximum amount under subsection 146.4(1) of the Income Tax Act, except in calculating that total amount, any payment made from the plan after a transfer in the calendar year from the beneficiary's prior plan will be disregarded if:
  
  • i) where the beneficiary reaches the age of 59 years before the calendar year, the issuer of the new plan agrees to make one or more DAPs from the plan in the year equal to the amount by which the total amount of all DAPs that should have been paid from the prior plan in the calendar year, had the transfer not occurred, is more than the actual amount of DAPs that were paid from the prior plan in the calendar year, or
    
  • ii) it is made instead of a payment that would otherwise have been allowed under the prior plan in the calendar year had the transfer not occurred, and
    
• If the beneficiary reached the age of 27 years, but not the age of 59 years before the calendar year begins, the beneficiary may direct that DAPs be made to him or her during the year without the holder's consent. The total amount of both the beneficiary directed DAPs and all other DAPs that are made during the year must be limited using the same conditions as above;

(n.1) If the beneficiary reached the age of 59 years before the calendar year begins, then the total amount of DAPs made in the year will not be less than the amount determined by the calculation set out in paragraph 146.4(4)(l) of the Income Tax Act, unless the amount of funds in the plan trust do not support this amount;

(o) When asked by the holder(s), the issuer will transfer all property held by the plan trust to another RDSP of the beneficiary. (The text of the plan must also state that as soon as the property is transferred to the new RDSP, the plan will immediately end.) The issuer will also transfer all information pertaining to the RDSP that is considered necessary for the new plan to comply with both the Income Tax Act and the Canada Disability Savings Act; and

(p) The plan must close by the end of the calendar year after 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 Income Tax Act. After taking into consideration required repayments of the Canada disability savings grant and Canada disability savings bond, any amounts left in the plan must be paid to the beneficiary or his or her estate, as the case may be.

The plan text must state that a DSP is not considered registered unless it is based on an approved specimen plan and that you have received the following information; the beneficiary and holder(s) names and SINs (or the holder(s) BN(s) as the case may be). The plan text must also state that a DSP is not considered registered unless the beneficiary is a resident of Canada at the time a DSP is opened for him or her and that the beneficiary is eligible for the DTC for the tax year in which the plan is opened. The plan text must state that the DSP will not be considered registered if this information is not given to the Minister of ESD as soon as the holder entered into the contract with you.

The plan text must state that the beneficiary may not be a beneficiary under another RDSP unless the beneficiary is transferring to another plan and that the beneficiary's previous RDSP will be closed right after the transfer.

The plan text must also state that the issuer has the ultimate responsibility for the administration of the plan and the plan trust. The plan text must also list the obligations that you must follow as stated in subsection 146.4(13) of the Income Tax Act.

Trust arrangement

RDSP legislation allows for a one trust, one beneficiary arrangement. Subsection 146.4(1) of the Income Tax Act defines plan trust as the trust that is governed by the DSP. A one trust, one beneficiary arrangement is considered when the definition of plan trust is read together with other provisions of section 146.4 of the Act, in particular, the limit on LDAPs in paragraph 146.4(4)(l), the right to transfer to another RDSP in paragraph 146.4(4)(o), the deregistration of the RDSP in subsection 146.4(10), and the various taxes in Part XI of the Income Tax Act.

Third parties and the RDSP

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

Amending a specimen plan

When a specimen plan is amended, all RDSPs 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 us at the address given under the heading Contact information 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 state the date the amendment goes into effect and whether existing plans will be amended. We will let you know when the amendment is approved under section 146.4 of the Act.

Terminating a specimen plan

You must let us know when there are no other outstanding RDSPs that conform to the specimen plan and the specimen plan is no longer being marketed. We will then end the specimen plan and close all related files.

Contact information for specimen plan approval and amendments

Send the specimen DSP for approval or amendment to one of the following addresses:

Mail:

Registered Plans Directorate
Canada Revenue Agency
Ottawa ON K1A 0L5

Courier:

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

For more information on the RSDP program, see IC99-1R1.

Footnote 1 that is, 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 his or her professional opinion the beneficiary is not likely to live more than five years—including each of the five calendar years after the particular calendar year but not including any calendar year before the calendar year in which the certification is given to the issuer.

Date modified:

2016-02-08