The RDSP ... Boom or Bust?

A Brief Post on Registered Disability Saving Plans

There has been a fair bit of excitement surrounding recent changes to the federal budget which will allow, for the first time ever, parents and others to invest funds tax-free in order to save for the long-term financial security of a child with a disability. The plan structure is similar to that of a Registered Education Savings Plan. Details of the Registered Disability Savings Plan (RDSP) can be found here.

But as much as this is a wonderful hard-fought-for step forward, I was reminded of the critical sticky point in this plan when I received my copy of the PLAN newsletter today. Which reminds me, if you're not familiar with PLAN, you really should check them out.

But back to RDSPs. We've been talking about the Department of Community Services' Services for Persons with Disabilities Program recently. You will recall that at least some of the programs available under the SPD program are intended to take away the stigma associated with receiving social assistance (which is now more properly called "Employment and Income Assistance") by providing one source of funding for adults with disabilities in the Province, for both basic and special needs. But eligibility for ALL such types of basic social assistance benefits is, of course, means-tested. Meaning that if the individual has access to virtually any other income or assets, they will not be eligible for even these basic benefits.

The problem with the new RDSP program is laid out at p. 2 of the latest PLAN newletter under the heading "Ripple Effects: Provincial Reforms":

Since owners of Disability Savings Plans will usually receive provincial disability benefits, reforms to provincial and territorial systems will be necessary. The two obvious areas that must be addressed are:

1. Asset limits – current rules would make RDSP holders ineligible for benefits
2. Treatment of income – clawing back revenue from RDSPs would defeat the purpose of saving.

In other words, unless and until the provinces (including Nova Scotia) change the way in which individuals with disabilities are means-tested for benefits (be it basic social assistance or other programs and services available under the SPD program), other than the potential income tax savings for the donors, there will be little to no benefit to be had for a person with a disability to have access to a RDSP. Because the government will simply insist that the individual with a disability use up the vast majority of the funds in a RDSP before they will be eligible for government programs and services.

PLAN suggests "Five actions to stay informed and get involved". I would seriously suggest that you check them out.

But I would also seriously suggest that you add a Sixth Action:

• Contact your local MLA and The Honourable Judy Streatch, Minister of Community Services, to let them know how important it is that the provincial government change its treatment of both assets and income so that individuals with disabilities, their friends and their families can take full advantage of the new RDSP program.

Update: I've noticed that, thanks to Google, a lot of people who search the words "Registered Disability Savings Plan" end up on this page. Which is a good thing except that there are a lot more up-to-date posts on the RSDP and its implementation on this blog that they are missing. So might I suggest you search this label to make sure you get full coverage on this issue.