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May 22, 2012

What's Wrong with the Registered Disability Savings Plan?

Reuel S. Amdur

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The new Registered Disability Savings Plan (RDSP) is an important benefit for the disabled.

For those found eligible, the federal government will pay up to $1,000 a year into a disability savings bond. 

As well, the government will match contributions made to a savings grant, at a rate as high as three to one for the first $500 and two to one on the next $1,000.  Contributions may be made till the person turns 59.

Sounds pretty good, and it is, but there are serious problems.  People need to know about the fact that they must pay back if the amount is withdrawn before a ten-year period. 

If a person is no longer disabled there are also complications. 

In order to open a plan, a person needs to go through a bank, and branches are ill informed as to how to proceed. 

The federal government engaged a communications firm, Compas, to explain the program to the public and the helping community.  In one session, people were given phone numbers for specific contacts in the head offices of the banks.  They were told to make appointments with their local bank branch but to have the head office on the phone at the time because personnel in the local branch would in all likelihood not have a clue. 

And that is just to set up an RDSP. 

Ongoing support is yet another concern.  Additionally, it is important to recognize that the whole program is new and yet is already undergoing many substantial changes.

The basic problem is that the banks are ill equipped to deal with the intricacies of the program on an ongoing basis.

If the program is to be carried out effectively, help must be provided to those enrolled and those acting on behalf of disabled enrollees not capable of acting on their own. 

Participants in the program need to have ongoing support, through qualified people fully familiar and up to date on the program and its changes.

There should be a short course or series of seminars to prepare people to become familiar with the ins and outs of the RDSP, as well as the income tax provisions related to disability.  Those who complete the program should be certified and should receive regular updates from the government.

Such certification could be of interest to financial planners, trusts, social agencies, accountants, lawyers, and insurance agents.  Certificate holders need to follow their clients regularly, through all the various intricacies, to insure that they do not fall afoul of the requirements or make missteps that could be costly to them, at the same time maximizing their opportunities.

The first issue, clearly, is that, far from banks being the sole agents permitted, they are not even appropriate.  Only if bank employees in designated branches have the appropriate training and are prepared to provide the necessary ongoing client service should banks be involved at all.  They would need to treat these disabled clients with the same attention that they would give to a major developer.

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