Subsection 146.4(4)
Paragraph 146.4(4)(j)
Administrative Policy
17 June 2025 STEP Roundtable Q. 5, 2025-1061551C6 - RDSP Financial Hardship Withdrawals
For a registered disability savings plan (“RDSP”) that is a primarily government assisted plan (“PGAP”), i.e., government contributions exceed plan holder contributions, annual withdrawals are limited to 10% of the value in the RDSP at the beginning of the year – except that CRA has indicated that it may permit withdrawal requests above that limit in circumstances of financial hardship where it is just and equitable to do so.
(a) Could CRA set out its guidelines in this regard?
CRA referred to three of its guidelines.
- Whether the RDSP beneficiary would suffer significant hardship, loss or disadvantage from a refused waiver, e.g., failure to meet the basic necessities of life, or harm to health.
- Whether the granting of the waiver would negatively impact the financial viability of the trust, e.g., referencing impact on family members or caregivers who rely on the trust’s integrity for planning and support.
- Whether the granting of the waiver is consistent with the legislative intent; for example, the RDSP program is not intended to help anyone other than the beneficiary.
CRA is working on creating a form for RDSP waiver requests for issuers to fill out and is anticipating having this form posted to its website in 2026.
(b) What is the reason for the CRA requirement that the plan holder must also be the plan beneficiary?
Currently, most waiver requests received, where the holder and beneficiary are not the same individual, are clearly requests to help plan holders who are having financial hardship issues themselves, and not the RDSP beneficiary.
However, where the holder and the beneficiary are not the same individual, and the RDSP issuer nonetheless is of the view that the beneficiary is experiencing financial hardship and that a waiver is in the beneficiary's best interests, the issuer is welcome to send a waiver request to CRA explaining why the request warrants an exception to this guideline.
Subsection 146.4(6)
Administrative Policy
25 February 2021 Internal T.I. 2020-0865641I7 - Settlement Payments to Registered Plans
After noting that it is CRA’s policy to consider that a settlement payment made to an RRSP or RRIF respecting an actionable loss suffered by it will not be treated as a contribution to the plan, nor as such a contribution or a taxable benefit to the annuitant if the damages are paid to the annuitant but are paid over to the plan by the later of the year end and six months after receipt, the Directorate confirmed that there also will be no adverse tax consequences where a settlement payment is made to a an RDSP, or indirectly by the beneficiary returning the payment to the plan within the timeframe applicable to the RRSP policy (it will not be treated as a contribution).
If the payment is received and retained by the beneficiary of the plan, the payment would be a disability assistance payment (DAP) and would be included in the beneficiary’s income under s. 146.4(6). If the settlement payment is made to an RDSP holder who is not the beneficiary, the payment would be a registered plan strip (as defined in s. 207.01(1)) and therefore an advantage under para. (d) of the advantage definition (because the exclusion from the registered plan strip definition for TFSAs and for amounts included in income would be inapplicable).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(8) | damages payment received by annuitant is not a benefit if paid over to the RRSP by year end | 253 |
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Unused TFSA Contribution Room - Paragraph (b) - Element D | damages payments made to a TFSA are not treated as a contribution | 143 |
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Registered Plan Strip | advantage if RDSP damages are received by a holder who is not a beneficiary | 220 |
| Tax Topics - Income Tax Act - Section 146.1 - Subsection 146.1(7.1) | RESP damages received and retained by the subscriber would be included under s. 146.1(7.1) | 174 |