Video: Registered Disability Savings Plan payment calculations

Information needed for calculations

Here is an overview of the steps required to calculate a DAP or an LDAP.

Step 1

Identify the plan type under normal RDSP rules.

Step 2

If the plan falls under normal RDSP rules, you need to determine if the plan is a primarily government assisted plan (PGAP) or non-PGAP.

Step 3

Identify the required formulas.

Step 4

Find the applicable minimum and maximum payment rules. For guidance on minimum and maximum payment rules refer to InfoCapsule 14: Payment rules and limits on the Canada.ca website.

Step 5

Find the fair market value of the property held in the plan on January 1 and on the date just prior to the payment.

Step 6

Determine the age of the beneficiary on January 1 and December 31 of the current year.

Step 7

Determine the grant and bond amounts that are greater than 10 years old.

Step 8

Determine the assistance holdback amount.

Step 9

Begin the calculations.

LDAP formula

To calculate the minimum and maximum payment requirements, the following formula is applied:

A ÷ (B + 3 - C) + D

• "A" is the fair market value of the plan on January 1 of the calendar year (excluding locked-in annuities)
• "B" is the greater of 80 and the age of the beneficiary on January 1 of the calendar year
• "C" is the age of the beneficiary on January 1 of the calendar year
• "D" is the total of all payments paid to the trust from a locked-in annuity during the calendar year

Non-taxable portion of the DAP/LDAP

The non-taxable portion is the lesser of the DAP/LDAP amount and the formula.

To calculate the non-taxable portion of the DAP/LDAP formula, the following formula is applied:

A X B ÷ C + D

• "A" is the amount of the DAP/LDAP request
• "B" is the contributions made to the RDSP that have not already been used to determine the non-taxable portion of previous DAPs/LDAPs
• "C" is the result of the assistance holdback amount being subtracted from the fair market value at the time immediately before the payment and
• "D" is the advantage tax paid by the holder in respect of the plan or a prior RDSP for the beneficiary ("D" is $0 if the tax has been waived, cancelled, or refunded or if the tax amount was included in a previous non-taxable portion calculation)

Grant portion of the DAP/LDAP

To calculate the grant portion of the DAP/LDAP formula, the following formula is applied:

A X B ÷ C

• "A" is the amount of the DAP/LDAP request
• "B" is the amount of grant in the RDSP that is over 10 years old
• "C" is the result of the assistance holdback amount being subtracted from the fair market value at the time immediately before the payment

The bond portion of the LDAP uses the same formula as the grant portion except value "B" uses bonds instead of grants.

Earnings portion of the DAP/LDAP

To calculate the earnings portion, simply subtract the grant, the bond and the non-taxable portions previously calculated from the DAP/LDAP amount requested.

Specified maximum amount

The specified maximum amount is the greater of the LDAP formula result or 10% of the RDSP's fair market value at the beginning of the year (excluding annuities) plus any annuity payments that will be made in the year.

Scenario 1 - LDAP from a regular RDSP

A 59-year-old requests a first LDAP payment from the RDSP. The plan contains $200,000 in contributions, $16,000 in grant and $45,448 in earnings. The fair market value of the RDSP on January 1, 2034, is $261,448.

Given this is a non-PGAP RDSP in a regular year for a 59-year-old beneficiary, the formula result will be the amount taken out of the plan.

LDAP formula breakdown for scenario 1

A ÷ (B + 3 - C) + D

• "A" is the fair market value of the plan, so $261,448
• "B" is the greater of 80 and the age of the beneficiary, which is 59, so 80
• plus 3
• "C" is the beneficiary's age on January 1, so 59, and
• "D" is the locked-in annuities amount, so $0

Once all these amounts are factored in, the result is an LDAP of $10,893.67.

Non-taxable portion of the LDAP

Once the LDAP amount is calculated, it must be broken down for reporting purposes.

The non-taxable portion of the LDAP is:

A X B ÷ C + D

• "A" is the LDAP amount, so $10,893.67
• "B" is the contributions not previously used, so $200,000
• "C" is the fair market value minus the assistance holdback amount, so $261,448, and
• "D" is the advantage tax that the holder paid, so $0

The result is a non-taxable portion amount of $8,333.34 since it is less than the LDAP request.

Grant portion of the LDAP

The grant portion of the LDAP payment is:

A X B ÷ C

• "A" is the LDAP amount, so $10,893.67
• "B" is the grant in the RDSP minus all the grant that is part of the assistance holdback amount at that time, so $16,000, and
• "C" is the fair market value minus the assistance holdback amount, so $261,448

The result is a grant portion amount of $666.67.

The bond portion of the LDAP uses the same formula as the grant portion except value "B" uses bonds instead of grants.

Earnings portion of the LDAP

The earnings portion of the LDAP payment is:

A - B - C - D

• "A" is the LDAP amount, so $10,893.67
• "B" is the contribution portion or the non-taxable portion, so $8,333.34
• "C" is the grant portion, so $666.67, and
• "D" is the bond portion, so $0

The result is an earnings portion amount of $1,893.66.

To summarize, the LDAP will be made up of $8,333.34 in contributions, $666.67 in grant and $1,893.66 in earnings.

Automated calculations

DAP and LDAP calculations are quite complex.

Normally, these calculations are automatically calculated in your financial computer system.

Knowledge check

Time for a knowledge check.

In the formula for lifetime disability assistance payments (LDAP), the variable "A" (fair market value of the plan) represents which date?

1. The day of the payment
2. The first day of the month in which the payment is requested
3. January 1 of the calendar year

Thank you.

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