The RDSP: December 31 Deadline Extended

Evelyn Jacks

The RDSP (Registered Disability Savings Plan) is an excellent savings vehicle to build future pension assets for disabled people, all with generous government matching support.  An important deadline was approaching on December 31, 2023 regarding the status of Qualifying Family Members (QFMs).  Thanks to the March 2023 budget, however, this has now been extended.  Here are the details.

What is an RDSP?  A new registered saving plan was introduced late in 2008, the Registered Disability Savings Plan (RDSP) and it was designed to accumulate capital and tax deferred income for the benefit of a disabled person in retirement.  It works in much the same manner as the RESP or Registered Education Savings Plan. In particular, there are also some interesting and lucrative government matching programs associated with the RDSP.

Who qualifies?  Any person eligible to claim the Disability Amount can be the plan holder and beneficiary of an RDSP.  The plan can be established by them or by an authorized representative.  

Who can open an RDSP?  Since 2012, a “qualifying family member” can open and be the planholder of an RDSP for mentally disabled adults.  This QFM included a parent, spouse, or common‑law partner if the disabled person did not otherwise have a legal representative.

What Deadline has Changed? This expanded measure was to expire on December 31, 2015 but then was twice extended until December 31, 2018 and again until December 31, 2023.  However, the March 28, 2023 federal budget announced a further extension to December 31, 2026 and also expanded the definition of a QFM.  This will now include adult siblings of the beneficiary of the plan. This sibling can act as the holder of the account when the disabled person doesn’t have a legal representative.

Who can contribute to the RDSP?  Anyone can contribute to an RDSP; they need not be a family member. This fact has prompted many philanthropists to open accounts for the vulnerable, especially because of the wonderful opportunity to leverage individual contributions with government matches, discussed later.

When is the contribution deadline?  The contribution year for RDSP ends on December 31 each year.

Are contributions deductible?  No, they are not tax deductible. 

Is there a time limit for making contributions?  Yes,  contributions can only be made until the end of the year in which the beneficiary turns 59.  

When can you contribute?  Contributions are permitted until the end of the year in which the disabled beneficiary turns 59. There is no annual limit on contributions but lifetime contributions cannot exceed $200,000.  For these reasons, an inheritance or other windfall tucked away into an RDSP may seem like a good idea, but it is generally not, because of the generous government matching provisions, explained below. 

The CDSG and CDSB.  As mentioned, there is a powerful opportunity to leverage individual ­contributions to the RDSP and make the investment even more meaningful to the recipients. A contribution to an RDSP generates two forms of direct financial assistance from government, the Canada Disability Saving Grant and the Canada Disability Saving Bond.  Family income is calculated in the same manner as it is for Canada Education Savings.

Canada Disability Saving Grant:  If the family net income is below the threshold for the 22% federal tax bracket, the CDSG

• 300% of the first $500 plus
• 200% of the next $1,000

If the family net income is above the threshold for the 22% federal tax bracket, the CDSG is 100% of the first $1,000 contributed.

Family income is calculated in the same manner as it is for Canada Education Savings Grant purposes except that in years after the beneficiary turns 18 family income is the income of the beneficiary and their spouse or common law partner.

There is a lifetime maximum of $70,000 that will be funded under the CDSG and an RDSP will not qualify to receive a CDSG from the year in which the beneficiary turns 49.

Canada Disability Savings Bond.  Unlike the CDSG, there is no requirement that a contribution be made to a RDSP before a savings bond contribution is available. The maximum annual CDSB entitlement is $1,000 and is earned where family income does not exceed the amounts below.

There is a lifetime maximum of $20,000 for CDSBs.  Like the CDSG, CDSBs will not be paid after the beneficiary of the RDSP turns 49.

Next Time:  Learn more RDSP Withdrawals

How to Make a Difference.  The RDSP is a truly generous gesture for the disabled people in your community.  When you open one for a beneficiary, the government generously contributes.  But most important,  you make it possible for a vulnerable person to supplement pension income available in retirement to boost supports that otherwise may be at a poverty income level.