Reminder: if you are new to this blog and want a detailed description of the RDSP please click on the header under “RDSP FactSheet” or refer to the September post entitled “Review of the Registered Disability Savings Plan”.
One of our regular commentators on this blog asked a really good question that I am beginning to hear more and more. “In light of the global economic crisis and speculations of a possible recession in Canada, will there be an impact on the launch of the RDSP or on the RDSP itself?”
As I mentioned before, the answer to this question is no (but let me expand on this). The unique thing about the RDSP is that it requires a few major players to ensure its successful launch in December. These players are the Federal Government, Provincial Governments, Financial Institutions, and community organizations.
So what is each players role in this process and how does the financial crisis affect their involvement with the RDSP?
First, the federal government passed the Canada Disability Savings Act, amended the Income Tax Act, and prepared the Budget and Economic Statement Implementation Act, 2007, which will come into affect on December 1st, 2008. The Federal Government has also prepared agreements for Financial Institutions who are interested in issuing RDSPs. It looks like the Federal Government is on track to reach the December 1st launch date and that the economic crisis will not affect the Federal launch of the RDSP.
The provincial governments are an important piece of the puzzle because, for those receiving Disability Benefits from their province, it will be essential that their provincial government exempts the RDSP from affecting any income or assets tests. Currently, BC, Newfoundland, Yukon and Saskatchewan have all fully exempted the RDSP from affecting Disability Benefits. We have heard that most of the provinces will be announcing their treament of the RDSP on Disability Benefits before the December 1st launch, but it will be important for people to be aware of how their province treats the RDSP before they set one up (check this blog for updates). For most provinces to accomodate the RDSP simply requires a amendment/addition to the provincial income assistance/disability assistance regulations, and therefore we expect all the provinces to have announced their treatment of the RDSP by December of this year. Although the financial crisis might distract and delay a few provincial governments from making an announcement on the RDSP, we expect that most if not all provinces will make this accomodation to their regulations in time for the launch.
When it comes to financial institutions and the RDSP, the financial crisis should not be too much of a concern. We have heard that there are between 14-16 financial institutions across the country that expressed an interest in issuing the RDSP and that this number would grow in the first year. With the financial crisis creating uncertainty and the Tax-Free Savings Account becoming available in January, most financial institutions do have a lot on their agenda, but we have received indications that some financial institutions will be ready for the start date in December. As soon as this information becomes public we will be posting the list of financial institutions offering the plan, and provide comparisons for the types of plan that each is providing.
Community organizations are going to be important when it comes to communications and outreach around the RDSP. As the Tax-Free Savings Account will be taking up much of the outreach resources of financial institutions and we expect their to be limited communications to consumers, it will be extremely important for community groups and governments to spread the word and provide information for those who may be able to take advantage of the RDSP. The federal government will be doing some communications and outreach on the RDSP, but to reach everyone who is eligible will require the efforts of all those involved.
We will continue to keep you posted on what is happening with the financial institutions in preparation for the roll-out in December of this year. Make sure to regularly check our blog for these updates.