Hot! Disability tax credit plan a too well-kept secret

NationalPost.com – financialpost.com/news
Oct. 26, 2011.    Garry Marr, Financial Post

It’s hard to criticize Ottawa, along with the major banks, when it comes to the generosity and promotion of the Registered Disability-Savings Plan.

The grants are generous enough that someone contributing $1,500 can receive $3,500 from the federal government every year to a maximum of $70,000. At the lowest income level, you can get up to $1,000 a year and maximum of $20,000 lifetime by just applying without putting up a cent of your own money.

And the banks? Some have been better at promoting RDSPs than others but the truth is the program is not profitable for them so their participation should be appreciated.

Yet, in the three years since the program was announced, just 48,000 accounts have been opened, serving only a fraction of those eligible.

So last week the Conservative government, to its credit again because it was the Tories that started this ball rolling, announced a review of the plan. The public has until Dec. 16 to comment.

“[The RDSP] has been a remarkable success,” said Jim Flaherty, the federal Finance Minister. “It has worked well and we want to make sure it is working as well as it should work. We are going to try make it even better than it is already is.”

Mr. Flaherty credits financial institutions for making people aware of RDSPs. “I have to tell you the financial institutions stepped up to the plate on this one because it’s not a money maker for them but in my view it was a matter of important social policy, enlightened social policy,” he said. “I won’t name the financial institutions but a couple of them totally stepped up to the plate.”

I can tell you one is the Bank of Montreal, a leader in the field from the beginning; it now controls about 50% of the market.

Mark Stewart, director of product development and management for BMO Investments Inc., says his bank’s submissions to Ottawa will focus on making it easier for Canadians to open RDSPs.

“There is a lack of awareness out there about RDSPs,” said Mr. Stewart, noting a BMO survey found only 5% cent of Canadians with disabilities hold RDSP accounts. Another 44% of those with disabilities had never heard about the plan.

Setting up the plan is not that difficult but it does require that you be eligible for the disability tax credit which can only be filled out by certain healthcare professionals and has to be approved by the Canada Revenue Agency. Health-care workers have complained about the complexity of the forms and Mr. Flaherty said changing that is under consideration.

The government will also consider rules covering guardianship of plans which have made it difficult to open accounts in some provinces. The 10year rule, which says you can’t withdraw cash from the plan until a decade after your last contribution or face repayment of the grant money, could change.

Another factor sighted in low participation is the rule that forces you to collapse the plan – and again pay back grants – if you become no longer disabled. People who some sort of episodic diminished capacity are impacted by this.

Jack Styan, managing director of RDSP Resource Centre at Ability Tax Group, said he’s still shocked how word just has not gotten out about the plan.

“I was talking to a group of lawyers last week and they hadn’t even known about it. If it hasn’t crossed their path, how is the average working Joe or someone with a disability supposed to know,” he says.

My owns two cents – I think informing those eligible for RDSP should occur on the front lines with health-care practitioners playing a key role. Think of the Registered Education Savings Plan. You can’t seem to step foot in a pediatrician’s office without spotting pamphlets for the RESP program.

Whatever the answer, the message needs to get out. The RDSP is a great program. Spread the word. Please.

< http://www.financialpost.com/news/Disability+credit+plan+well+kept+secret/5606493/story.html >

2 Comments

  1. Hailie Gagliardi

    I should say this program is well hidden! I myself have never even heard of it. It greatly excited me that I could perhaps be applicable for it, as I have a significant hearing loss. The first time I heard about this program was reading this article, which prompted me to find out more. When I had asked my bank, several of the employees had never heard of it either and seemed surprised. This seemed to further prove that this program is well under wraps and I couldn`t understand why other agencies pertaining to this with disabilities, are not referring clients applicable for this? It would be a great help in spreading the word for this oppurtunity if ODSP and the Canadian Mental Health Society told their clients about it. Furthermore, on researching RDSP, I found that the criteria for being applicable for it was tremendous. You must be markedly or substantially limited in your abilities to perform activities necessary for everyday living, and be applicable for a Disability Tax Credit. This means that for many people who have a permanent disability, but can function quite well are not applicable for this opportunity. This made me feel quite upset, as I realize the importance of saving for the future, but am limited in how to do so because of clawbacks that ODSP and OSAP will create, due to having a savings plan. This does not occur with an RDSP, so the question I have, is why are we depriving those who have a disability and are affected by these clawbacks in the form of savings, from this great opportunity? I may be able to function better than most people that are hard of hearing, but that was with great effort and independance. I am trying to contribute economically to my country,but I am really not getting much in return besides tremendous debt from post secondary education and limited help from ODSP. How can I get ahead for the future when being denied programs like this? I believe the criteria for this program definitely needs to be modified, in order to create more economically sustainable people that have a disability.

  2. The fact that only 5% of people with disabilities hold these accounts is quite shocking. This is out there and nothing is being done about it. People with disabilities have a hard enough time getting benefits as small or large as they may be and this being hidden from them does not make sense and would make anyone a little frustrated.
    This makes me wonder if the prevailing myth about Canadians being lazy and abusing the system is why they might be hiding something like this from everyone, if their main intention way to keep hush about it anyway.
    Another issue to me about RDSP is those individuals with severe disabilities and who are living off of ODSP or CCP do not have the finances to even start a savings plan. This is something that needs a lot of attention and people need to know about it so that they can start to put money away for this.
    The article suggests that the government is aware of the lack of attention this program is getting and that they plan to do something about it. I hope that this is successful because there are a lot of people with disabilities struggling every day and something as small as this can go a long way.

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