Canada begins savings plan for financial future of people with disabilities

From Canwest News Service:

OTTAWA -- Imagine putting $1,500 into a savings account and having the government top that up with $4,500. And imagine that happening every year for several years.

Sound too good to be true? Not for Kalman and Julie Fejes (pictured with their daughter, Ildiko). They are parents of an adult daughter with Down syndrome who is expected to qualify for the maximum in federal grants and bonds for 11 years under a new program being rolled out this month as the latest addition to Canada's social safety net.

The program, dubbed the "peace of mind" plan by some, is designed to allow families and friends to build - with the help of some hefty government assistance - a financially secure future for severely disabled loved ones.

"Even if we aren't around, the rent still has to be paid," said Julie Fejes, referring to the reality her daughter faces if, as they hope, she outlives them and can no longer count on them to help her make ends meet.

The Ottawa couple is ready to slap down $1,500 to open a Registered Disability Savings Plan account before the end of December. The move will trigger a federal contribution of $3,500 in matching funds, as well as a $1,000 federal "bond," for a total investment of $6,000 this year.

Ildiko, 38, works about 17 hours a week as a library clerk for the CRTC. She qualifies for a maximum $1,000 government bond because her annual income is below $21,000.

She also qualifies for the maximum government savings grant of $3,500 because her family's annual income is less than $75,769. Under the system, the government provides $3 for every dollar on the first $500 invested, and $2 for every $1 contributed on the next $2,000 for a total of $3,500 a year.

For those whose family income is more than $75,769, the government puts in $1 dollar for each dollar contributed to a maximum of $1,000 a year.

The RDSP, which became a legal entity on Dec. 1, is an appealing option for those who face the prospect of outliving their severely disabled children, siblings or friends.

Ildiko's father, a retired computer specialist, says he hopes the money invested in the account will grow to a nest egg of about $100,000 by the time Ildiko turns 50. The government grants and bonds end at that time, but others can contribute to her RDSP until the beneficiary reaches age 59 or dies.

Currently surrounded by a solid network of family and friends, Ildiko, a former special Olympics athlete who is considered high functioning, has been living on her own in an apartment for about the last three years.

Her parents volunteer at Lifetime Networks Ottawa, a family-run organization that, among other things, works to provide safe, secure environments for loved ones with disabilities. It's affiliated with Planned Lifetime Advocacy Network, which developed and successfully sold the RDSP to the federal Conservative government.

Ted Kuntz of Vancouver says the plan promises to put to rest a fear that has haunted him since his son Joshua, who has the capabilities of a two-year-old, was born 24 years ago. Kuntz, 53, said he hopes Joshua's friends and family will be able to build the account to $200,000, the maximum allowed, in the years ahead.

Contributions to the RDSP would not be tax free, but the income earned on those contributions would not be taxed until the disabled person started to receive income from the plan.

BMO/Bank of Montreal plans to offer RDSPs, starting Dec. 22. Other banks and financial institutions are expected to follow within the next few weeks and months.

The government, which earmarked $115 million for the program this year, will get off light for now because there is so little time left for people to open accounts and qualify for the grants and bonds before Jan. 1. It has said it expects to spend about $200 million a year once the program is rolling.

Another important piece of the puzzle has been getting provinces and territories to commit to exempting RDSP assets and withdrawals from social assistance calculations.

Ontario signed on two weeks ago, removing the last hurdle to the Fejes' plan to open a registered account in their daughter's name before year's end. They had worried the Ontario government would claw back some of her monthly social assistance cheque to offset any RDSP assets and returns.

British Columbia, Alberta, Saskatchewan, Ontario and Newfoundland and Labrador had agreed earlier to exempt RDSP assets and income from social assistance, while Quebec has opted for a limited exemption.

Under the plan, anyone who qualifies for the federal Disability Tax Credit, is under the age of 60 and is a resident of Canada can establish an RDSP. If the person is a minor, the parent or legal representatives may establish and RDSP for them.