Long-term Savings Plans Currently in Limbo for Canadians with Disabilities
As Maclean\’s magazine reported on December 7th, many Canadians with disabilities who decided to save for their future are in limbo at the moment. This comes after changes to Disability Tax Credits (DTC) were introduced in May. Unfortunately, with the new changes to DTC, many individuals who formally qualified for DTC credits are now finding themselves in a situation where they can\’t access funds from the Registered Disabilities Savings Fund (RDSF) because they don\’t qualify for DTC credits anymore.
Between October 18th and November 29th, Autism Canada heard from 142 families who had run into challenges applying for or renewing their DTC. Meanwhile, Diabetes Canada estimates that 80-90% of applications from people with Type 1 diabetes—many of whom formerly qualified—have had their claims denied since May.
Earlier this week, the public learned the government had in fact changed the language for the DTC application forms, which critics say has contributed to the increase in rejections. On top of that, doctors have complained that the DTC application form, which is the same regardless of condition, doesn’t allow them to effectively illustrate the degree to which someone’s disability creates daily challenges. This is doubly frustrating for applicants and their advocates who see accountants at the CRA overriding a health experts’ diagnoses and advice.
On December 8th, following the initial publication of this article, the CRA announced it will go back to using the terminology on the disability tax credit applications that was used before the number of rejections spiked this past spring. Amid the public backlash, officials also said they will review applications that were rejected since May, 2017, and that, going forward, a new Disability Advisory Committee will inform sound policies and services for people with disabilities.
Being denied the credit itself is often a minor setback for applicants. The major issue is a DTC credit rejection in terms of long-term savings. In 2008, the Conservative party launched a savings program called the Registered Disability Savings Plan (RDSP). Loosely speaking, for every dollar a person puts into the fund, the government will match it. The idea is to give a group of people who are overwhelmingly underemployed or unemployed a nest egg—potentially hundreds of thousands of dollars—to help cover their living expenses which tend to be higher than average. When the Harper government rolled out the program, they decided people could start accessing their RDSP funds 10 years after opening it. As a result, the earliest contributors will start accessing their funds on January 1st, 2018.
However, in order to have an RDSP and access it, a person needs to qualify for the Disability Tax Credit. So, if you previously qualified for DTC but don\’t anymore due to the new rules, all of the government contribution will be gone when an individual is able to access it.
According to a CRA spokesperson, people who have had their DTC revoked can keep their RDSP open for a maximum of five years, in case they regain eligibility for the credit. During that five-year window, they can’t add to or take from their savings fund. If after the five years they still do not qualify for the DTC, their RDSP is shut down, and the government withdraws all of its contributions.
As it currently stands, this situation is a sad one for many in our community. As more and more complaints come in, it will be important to monitor if any further changes are made to enable individuals to access funds they so rightly believed they would be receiving.