Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 3 - Evidence - December 11, 2013
OTTAWA, Wednesday, December 11, 2013
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:17 p.m. to study the ability of individuals to establish a registered disability savings plan (RDSP), with particular emphasis on legal representation and the ability of individuals to enter into a contract.
Senator Irving Gerstein (Chair) in the chair.
[English]
The Chair: Good afternoon. Today the committee is holding its second meeting as part of its study on Registered Disability Savings Plans, RDSPs, with particular emphasis on legal representation and the ability of individuals to enter into a contract. Last week the committee heard from the Honourable Kevin Sorenson, P.C., M.P., Minister of State for Finance along with officials from the Department of Finance. This afternoon we will hear from Mr. Vangelis Nikias, Project Manager, Convention on the Rights of Persons with Disabilities, Council of Canadians with Disabilities; and Mr. Brendon Pooran, who also represents the council as well as the Canadian Association for Community Living. Joining us by video conference, and I trust you can hear and see us, are two representatives of the Planned Lifetime Advocacy Network, Mr. Tim Ames, Executive Director; and Mr. Joel Crocker, Director, Policy and Planning. Can you hear and see us all right?
Thank you all for being here today. We will begin with Mr. Nikias and Mr. Pooran, then we will hear from the Planned Lifetime Advocacy Network.
Mr. Nikias, the floor is yours, sir.
Vangelis Nikias, Project Manager, Convention on the Rights of Persons with Disabilities, Council of Canadians with Disabilities: Thank you, Mr. Chair. It's a pleasure to be here today. Let me say a few words about the Council of Canadians with Disabilities. The CCD is a national association of persons with disabilities that seeks to improve the status of persons with disabilities. The CCD's priorities are alleviating the poverty of Canadians with disabilities, making Canada's labour force more inclusive for persons with disabilities, and improving access to the goods and services of Canada for persons with disabilities.
The CCD was founded in 1976, is cross-disability in nature and seeks to make Canada more accessible and more inclusive. The CCD has nine provincial member organizations and seven other national associations as members, each with a seat on the national council.
The CCD's national coordinator was a member of the three-person expert panel appointed by Minister Flaherty to create the RDSP. The CCD has a long history of collaborating with governments and was directly involved in ensuring protection from discrimination on the basis of disability was included in the Canadian Charter of Rights and Freedoms. More recently our focus has been on the development, ratification and implementation of the United Nations Convention on the Rights of Persons with Disabilities, which Canada ratified three years ago. Thank you.
The Chair: Thank you very much, Mr. Nikias. Mr. Pooran is next.
Brendon D. Pooran, Lawyer, PooranLaw Professional Corporation, Council of Canadians with Disabilities and Canadian Association for Community Living: Thank you, Mr. Chair, and good afternoon, ladies and gentlemen. Thank you for inviting us here today to provide you with submissions on this important topic.
I'm an adviser to the Council of Canadians with Disabilities, CCD, and the CACL, Canadian Association for Community Living. I'm a family member of two siblings, both of whom were born with developmental disability, and a lawyer who specializes in disability law and policy. I also teach critical disability law at York University.
Founded in 1958, the CACL is a national federation of over 40,000 individual members, 400 local associations and 13 provincial and territorial associations for community living. The CACL is a national member of Inclusion International, the international federation of associations working to achieve the inclusion and human rights of people with intellectual disabilities and their families.
The impediment created by the contractual competence and legal authorization requirements for opening a Registered Disability Savings Plan has been frequently cited by individuals with intellectual disabilities, and their family members, as a barrier that prevents eligible beneficiaries from opening a plan. Many family members are caught between their desire to assure the future financial security of their relative and the stigma and restriction of basic rights to liberty, which they know comes with formally placing their relative under a substitute decision-making or guardianship order.
Amendments to the Income Tax Act in 2008 that created the RDSP appear to disqualify adults who have disabilities, and who are otherwise eligible to open their own RDSPs, from doing so if they are deemed to be contractually incompetent.
The legislation requires that an RDSP be opened for them by a ``qualifying person'' who is legally authorized to act on behalf of the beneficiary. This requirement does not reflect developments in law and policy in Canada, in particular Canada's ratification of the United Nations Convention on the Rights of Persons with Disabilities. The UN convention recognizes the stigmatizing impact of formally labelling people ``incapable,'' excluding them from employing whatever capabilities they have in the decision-making process, and officially designating other persons as substitute decision makers on their behalf. In many provincial and territorial jurisdictions, an individual would have to undergo a formal capacity assessment, be found incapable of managing property, give up all of their decision-making rights and be the subject of a guardianship order in order to benefit from an RDSP.
The implication of this gap in legislation means that a considerable proportion of the population the RDSP was meant to benefit is currently unable to do so. Since the RDSP's inception in 2008, individuals who face this barrier have lost out on $27,000 in federal government contributions. For those who have turned 49 years of age, these contributions are permanently gone. For every December 31 that goes by, eligible beneficiaries under the age of 49 forgo $16,500 in federal contributions. This is in addition to private contributions and growth on their investment.
I need to emphasize this point again: At the end of this month — 20 days from now — we'll have another cohort of eligible beneficiaries who will not benefit from government contributions because they will have ``aged out'' from receiving these benefits. Needless to say, this issue requires an urgent and immediate resolution.
The CACL, the CCD, PooranLaw and PLAN undertook extensive legal research to examine potential solutions and outlined a ``Canadian option'' that could be developed within the parameters of the legislation based on the principles of supported decision making.
This solution was presented to the Ministry of Finance in 2011. To our disappointment, the solution was not adopted. It was suggested that a national solution, rather than one by each of the 13 provincial and territorial governments, may be constitutionally outside of federal jurisdiction. The concern is that ``property and civil rights in the province'' are assigned by section 92 of the British North America Act to the exclusive jurisdiction of the provincial legislatures and that no new statutory rules or definitions pertaining to legal capacity could be undertaken by the federal authority. Based on our legal analysis, it is our respectful submission that the ministry's interpretation of the jurisprudence and legal doctrine was incorrect. I'll address the jurisdiction issue in a few minutes.
What I would first like to do is provide you with an overview of what our Canadian solution looked like. The proposed solution involves a federal government form, authorized by Finance Canada and the Canada Revenue Agency, enabling the appointment of one or more qualifying persons, as defined in the Income Tax Act, who may act as joint RDSP account holders in their capacity as an adult's decision-making supporters.
The form provides for adults who may not be deemed to have contractual capacity to authorize one or more qualifying persons and enable persons who have special relationships to the beneficiary to be self-appointed as qualifying persons where a beneficiary may not be able to give direction.
The standard for capacity to make such an appointment has statutory presence in British Columbia, under the Representation Agreement Act, based on ``whether the adult has a relationship with the representative that is characterized by trust.''
We realize that it's important to be protective of the interests of people who are vulnerable by way of their intellectual disability while at the same time assuring their participation in affairs that are relevant to them, and assuring their rights and dignity.
To that end, the form requires a third unrelated party to attest to the nature of the relationship between the adult and the qualifying person where the adult is unable to give direction. All signatures on the form must be witnessed.
Any decision-making supporters must subscribe to the principles of supported decision-making, must agree to assume fiduciary responsibility in their capacity as joint holders of plans, must attest that they are not in a conflict of interest and must agree to assume liability in the event of wrongdoing on their part.
It is important to note that financial institutions, provincial public guardian and trustee offices and NAPTAG were also involved in the process of developing the solution.
I'll allow my friends at PLAN to describe the solution in greater detail for you. I'm going to turn back now to the jurisdictional issue. It's not the most enlightening submission, but I do want to get this on the record because I think it's important.
In a paper authored by the CACL, we concluded that the issue of legal representation in the RDSP could be dealt with by measures within the power of either level of legislative authority in Canada, or by a combination of both. That conclusion was reached on the basis of an analysis by Professor Peter Hogg on the constitutional division of powers in Canada between federal and provincial governments and legislatures.
Professor Hogg analyzed a number of cases going back to 1970, where the Supreme Court of Canada had addressed the question of the extent to which it is permissible for the federal power to encroach on those matters that are assigned by the BNA Act to the provinces, or vice versa. The prevailing test permitting federal intrusion into areas of provincial jurisdiction has been whether there is a ``rational, functional connection'' between those elements of a federal statute that are clearly within the legislative authority of the Parliament of Canada and the ``impugned'' provision that would ordinarily be reserved for provincial or territorial action. This was established in the case of Multiple Access Ltd. v. McCutcheon.
The multiple access precedent, as it's referred to, was followed in 1989 in General Motors of Canada Ltd. v. City National Leasing, with some fine tuning to distinguish between ``minor'' encroachments, where a simple rational connection was sufficient to justify exercising a power ordinarily reserved to the provinces, and ``major'' encroachments, where the federal exercise of a provincial power would have to be essential to the creation of an effective national legislative scheme. Where the federal statute intruded into a provincial area of jurisdiction only ``in a limited way,'' the issue of whether it was necessary to do so did not even have to be addressed.
Any revision of the rules governing contractual competence in the opening of an RDSP would, it is submitted, be a very limited incursion by the federal government into the realm of property and civil rights. Not only that, but it could be argued that it is in fact essential to remove disparities based on disability and province or territory of residence from a federal program such as the RDSP.
The issue of the development of ``a uniform national remedy'' that involves the federal government's direct action in dealing with matters that are ordinarily within the jurisdiction of the provinces and territories was also addressed and upheld by the Supreme Court in 2005 in a case referred to as Kirkbi v. Ritvik Holdings.
Most recently in a reference to a proposed national securities act in December 2011, the Supreme Court reaffirmed the reasoning in the General Motors case; however, it distinguished the proposed securities act, stating that its effect would be to duplicate and displace existing provincial and territorial securities regimes.
We submit that the proposed solution to the problem of contractual competence in the federal RDSP legislation is clearly intended to provide for consistency across the country without limiting in any way the authority of the provinces and territories to enact or maintain their own legislation relating to the status of ``qualifying persons'' for RDSP purposes, and would therefore not violate any constitutional division-of-powers principles as interpreted by the courts. Not only that, the federal solution to resolve the legal representation question would have relevance only in the RDSP context, which removes it even further from crossing the line beyond which federal interference in provincial or territorial jurisdiction would be legally unacceptable.
In conclusion, we believe that the federal government does have the legal authority to implement a national solution. This is much preferred when compared to a patchwork of legislative schemes among the provinces and territories intended to address this issue. A consistent policy and legislative framework would ensure that eligible Canadians with disabilities are able to access the benefits of the RDSP, regardless of the type or degree of their disability or their province or territory of residence.
From an implementation standpoint, I believe that a national solution would also be preferred by the financial institutions — rather than having to design and develop new process and systems enhancements to incorporate a myriad of legislative solutions that satisfy the requirements of each province and territory.
We're now approaching the end of year six of the RDSP. The gap in legislation has contributed to the uptake rate among potential beneficiaries of RDSPs being less than 15 per cent. Twenty days from now, another cohort of eligible beneficiaries will unfairly lose out on benefiting from this generous program.
This legal issue has garnered much attention from our respective organizations since the introduction of the RDSP in 2008. We would be more than willing to work with you in the coming months to make a national solution a reality for our communities.
The Chair: I will now turn to Mr. Tim Ames. Are you going to speak?
Tim Ames, Executive Director, Planned Lifetime Advocacy Network: I am. Thank you very much, Mr. Chair.
PLAN, Planned Lifetime Advocacy Network, is a 23-year-old family-led and inspired organization with affiliates across Canada. Our primary mission is to create social networks of support for our families, loved ones, sons and daughters, as well as to provide advocacy for those folks and to provide future planning and future proofing tools that will help those folks have a good life after their parents have gone.
PLAN was formed by an initial group of families who realized that, once all the institutions in British Columbia were closing, their loved ones would probably outlive them, and they were looking for some innovative solutions for what would happen after they had gone. PLAN was formed to create the social support networks that have a community connector, that go out into community and build strong networks of support for folks with disabilities. As well as that, there is the advocacy piece of ensuring that the rights of those individuals are sustained and maintained over their lifetime.
The other piece that we spend a lot of time and energy around is future planning tools such as the RDSP, wills, trusts and estates, to ensure that after the parents are gone, there is a strong, sustainable future for their sons and daughters.
Thank you very much for the opportunity to speak.
The Chair: Thank you very much.
Mr. Pooran, if I might start, as I understand it, the provincial legislation has been established in four provinces — B.C., Saskatchewan, Manitoba, Newfoundland and Labrador — and one of the territories. Is the RDSP working in those provinces today?
Mr. Pooran: I think I may defer that question to Mr. Ames or Mr. Crocker over at PLAN. They're in B.C. and B.C. has the Representation Agreement Act. The Representation Agreement Act predated the RDSP, so this issue of legal representation was never really an issue in B.C.
The Chair: Perhaps I erred. Mr. Crocker, I believe you also have an opening statement. I apologize for not turning to you first, before the question.
Joel Crocker, Director, Policy and Planning, Planned Lifetime Advocacy Network: That is okay. Yes, I did have an opening statement. I will begin with that and then perhaps we can address that question.
Basically, we wanted to start by saying thank you; it's a pleasure to be here. This looks to be the beginning of another round of RDSP review, and we appreciate the great efforts the government has been putting into developing the RDSP, the original review that happened three years ago and the changes that happened as a result. There was broad community consultation, a lot put forward and a lot of intention put into making some decisions. We're excited by that and hope to see the same level of effort this time around.
One of the perhaps unintended consequences that happened with some of the changes in Budget 2012 is that the RDSP, which is already quite complex, became a bit more complex; there's a bit more to keep track of. As well, some of the solutions that were decided upon probably could have been a little bit simpler. One of them, of course, is the one we're talking about today, this temporary expansion of the definition of who may be an adult beneficiary's plan holder to include a spouse or common-law partner or parent, until the end of 2016.
The representation in the RDSP has been a major issue, as Mr. Pooran pointed out. In preparation for the last review, PLAN was involved in broad conversations across Canada. We organized feedback from over 1,200 individuals and launched two national surveys. About 10 per cent of survey respondents said that issues of contractual capacity were the primary problem with the RDSP and why they hadn't opened a plan yet.
Given that the majority of people with disabilities do not have issues of contractual capacity, many have developmental disabilities, and that this isn't the segment of the population that PLAN targets specifically, we found that number to be high at 10 per cent. In addition, here in British Columbia where we are located, people don't identify this as an issue given the B.C. Representation Agreement.
Since this temporary measure has been put in place, we continue to receive feedback on concerns regarding the RDSP. We noticed that there wasn't a discernible increase in the uptake of the RDSP after June 2012, when the temporary measure began. We believe this is because it takes a long time for this information to get disseminated throughout the population, throughout beneficiaries and families, and perhaps more importantly at the financial institution level, where there have been repeated examples of confusion and misinformation that's being shared with families. It is our hope that any changes that are to be made will be made as clear and as simple as possible and be made permanent so that, as time goes by, people aren't having to readjust to new provisions. As this temporary provision comes to an end — probably by about that time — people will just become accustomed to it; in the meantime, something else will be in place. We prefer something sooner than later, something that is national and permanent.
Indeed, the provinces have been moving forward with some changes to the representation. We were told that this temporary measure around the RDSP was meant purposely to push for changes at the provincial and territorial level. Although that's great, it's a slow process and there's going to be a number of different results. It's going to be a patchwork, as has been described.
In the same way that the Minister of Finance is pushing for a national securities regulator to replace the current patchwork, we would like to see something more national for people opening an RDSP. As Mr. Pooran pointed out, a group of us had put together a proposal that included a form that would be specific to the RDSP. This doesn't address representation at the broadest level, which is important, but specifically to the RDSP, given that it's important that people are able to open one as soon as possible before they become too old or miss out on any potential benefits.
We built the form on the foundation of the Representation Agreement Act here in B.C. Proponents of supported decision making regard the B.C. Representation Agreement as the closest approximation here in Canada to true supported decision making that is in alignment with Article 12 of the UN Convention on the Rights of Persons with Disabilities. Like the B.C. Representation Agreement, our form and essence allow an eligible RDSP beneficiary to appoint or revoke someone else to be a qualified person to be a joint holder of an RDSP. This will be done through an expansion of the definition of ``qualifying person'' in the Income Tax Act. A qualifying person could be a family member or a person in a relationship of trust to the beneficiary.
By filling out the form, this person would sign an agreement, basically, to act honestly in good faith, exercise the care, diligence and skills of a reasonably prudent person and act on the basis of the beneficiary's known belief and values on behalf of the beneficiary.
Finance institution issuers would take instruction from one holder, but the form would commit qualified persons to consult with the beneficiary first.
The process of appointment would be inclusive of people who might not be able to provide directions, and no one would be excluded. That means the qualified person could be appointed by the beneficiary, or the qualified person could self-appoint if the beneficiary is unable to appoint. However, in either way, a third party would attest to the relationship between the qualifying person and the beneficiary.
The primary purpose for being a joint holder is, again, to assist the beneficiary in exercising their legal capacity to open and manage an RDSP. The beneficiary would be a decision maker throughout, as per the UN Convention on the Rights of Persons with Disabilities.
During the lengthy discussions about our proposal, it was widely accepted that this mechanism did not put anyone at any greater risk than current systems in Canada. In fact, many agree that the qualifying person in the proposal is a safer bet than someone who comes to that role by reason of guardianship, committeeship, or what have you. In our proposal, they're designated solely and exclusively by reason of the intention to open an RDSP. The more control a single person exercises over another, the more risk there is of misusing the control.
Again, that builds on the principles of the B.C. Representation Agreement whereby you can appoint someone to be a representative over a specific party or life. In B.C., one can have multiple representation agreements with multiple different representatives. Most other forms of representation in Canada require one to give up all of their decision making rights and, therefore, autonomy, dignity and citizenship just to have, for example, a bank account, just to open an RDSP and save, just to be able to plan ahead for a day when they can fulfill a dream that might cost more than the poverty level income and asset level set by the provinces and territories.
Our proposal is open to modification, but there is wide consensus that it is an appropriate solution. It addresses the key issues of ensuring the rights of persons with disabilities to enjoy legal capacity on an equal basis with others, while protecting those vulnerable to financial abuse.
However, of course it was denied, and in its place was the temporary measure, which, as I say, will result in financial institutions having to deal with a fragmented patchwork of solutions across the country. And from this confusion, we expect mistakes to continue to be made. Until each province comes up with a solution, people will continue to not have access to RDSPs. Some provinces may never come up with a reasonable supported decision-making solution.
Furthermore, the temporary measure that was put in place allows only parents, spouses or common-law spouses to act as plan holders. We would like to see this extended to all family members. In fact, we wanted people in a situation of trust, like a friend, to be included. And when pushed as to why this list was so limited, the government stated that there was simply too much risk, but we disagree. Again, looking at the general principles of supported decision- making, the risks of abuse would not be greater under our proposed reform to the RDSP rules and, in fact, might be a lot less likely than would be the case where a guardianship gives a substitute decision maker sole and total control over the process and the subsequent management of the plan.
Again, before we clean up the entire Canadian landscape, which we hope to do, we want to make the RDSP as simple and as accessible as possible. Let's avoid some of the overly complicated changes that were made last time and put forward a reasonable and simple solution. Thank you.
The Chair: Thank you very much, Mr. Crocker.
If I could go back to my question, you're indicating concern over a patchwork of systems across the provinces. You are recommending a national solution. Is the system working at this point to your satisfaction in any of the four provinces that have adjusted provincial rules?
Mr. Crocker: It is working in British Columbia, as Mr. Pooran pointed out. The Representation Agreement preceded the RDSP, and when the RDSP came into place, people were just simply able to use the Representation Agreement, which is a form, go into a financial institution and open an RDSP. But somebody who didn't have contractual capacity could appoint somebody else to open an RDSP on their behalf.
The Chair: You are suggesting it is not an issue in B.C. at the moment?
Mr. Crocker: That's right. It hasn't been an issue in B.C.
The Chair: Is it an issue, to your knowledge, in Saskatchewan, Manitoba and Newfoundland and Labrador, where they have also, as I understand it, adjusted their provincial legislation to accommodate the RDSP?
Mr. Crocker: This is a great discussion. We have had some conversations with people in those jurisdictions. Some relatively new things are coming into place in those provinces, and I haven't heard conclusively whether or not that has solved the issue.
The Chair: Thank you. I'm going to move to my list of questions from senators, starting with Senator Black to be followed by Senator Massicotte.
Senator Black: Thank you very much, Mr. Chairman. To all the witnesses, thank you, not only for being here today, but also for doing the very, very important work that you are doing for Canadians. I very much appreciate it.
As one of the witnesses has indicated, there is no doubt that this is extraordinarily complicated. If you could help me just work through something that I'm having trouble understanding, and I know that you all can help me with that, I understand that you put forward what we will call this ``Canadian solution,'' which to me sounds excellent. I will tell you that right off the bat: I think it is an excellent, quite intelligent solution. But I also hear that you have advice from the Department of Justice that constitutionally it will not work.
Mr. Pooran: Not the Department of Justice, but the Ministry of Finance.
Senator Black: There's a determination that as good as that plan is, unfortunately, it's just not going to work.
Mr. Pooran: The solution was presented.
Senator Black: Just yes or no. I think that's where we are, isn't it?
Mr. Pooran: Yes, okay.
Senator Black: Moving ahead, then, we need to find a solution that allows the constituency in question to meet the needs that you have defined.
Now, I want to understand who exactly this constituency is. This is what I'm having trouble understanding. I will just fill you in what my understanding is, and please, where I go wrong, just let me know.
Individuals who have a disability that is not a mental competency issue can open the RDSPs without any issue.
Mr. Pooran: Yes.
Senator Black: We are then down to the pool of individuals who have mental disabilities.
Mr. Pooran: Yes.
Senator Black: Take out of that the group of individuals who have mental disabilities but either have parents or spouses or common-law spouses who are able to act on their behalf. They can enter into an RDSP.
Mr. Pooran: Yes.
Senator Black: We are now left with a pool of individuals who are mentally incapacitated without the support group as is defined not by the legislation but by the existing rules. Agreed?
Mr. Pooran: Yes. There's also one other group.
Senator Black: Yes, okay.
Mr. Pooran: People with a developmental disability, depending on the provincial legislation, may be deemed capable of managing their own property and, therefore, they may be able to enter into an RDSP. There may also be legislative allowances that allow the individuals to grant, let's say, a continuing power of attorney for property legally authorizing somebody else to act on their behalf.
Senator Black: I understand that. You would agree with me we're not only talking about a very small pool of people in the disabled community, but we're also likely talking about a group who may never need or rely upon the RDSP. Is that correct?
Mr. Pooran: No.
Senator Black: That's what I want to understand.
Mr. Pooran: Okay.
Senator Black: I see the pool to be a small pool of people who are mentally disabled without support.
Mr. Pooran: Right.
Senator Black: Whom I suspect in most circumstances would already be in care.
Mr. Pooran: Well, they may be in care, but even if they are in care, they may not be in an ideal situation. I mean, they may be in group home environments.
Senator Black: Okay.
Mr. Pooran: And they may want to move out of that at some time.
The other piece is that individuals who have parents or spouses right now won't always have parents or spouses.
Senator Black: Oh, of course.
Mr. Pooran: A lot of my practice is estate planning for these families. I would say close to half of the families that I work with will not open up an RDSP for their son or their daughter because they're too worried about what happens to that RDSP when they die.
Senator Black: I see. That's very helpful. Where we are left is that we have identified that it is a small pool, but you still feel there's a need for this pool to access this product.
Mr. Pooran: On a proportional scale, it may be small, but I think, in terms of numbers, it is still quite a large segment of the population.
Senator Black: I'm not mitigating it in any way; I just want to understand. With respect to Senator Gerstein's question, the model in British Columbia is working?
Mr. Pooran: Yes.
Senator Black: So there is a solution out there.
Mr. Pooran: There's a solution out there. Now, the model in British Columbia, and I believe in a couple of the other jurisdictions, is broader in nature. In B.C., the Representation Agreement Act, as Mr. Crocker said, predated the RDSP, so these are legislative schemes that are meant to encompass more than just the RDSP. I believe it is only in Newfoundland and Labrador where the legislation is RDSP-specific.
Senator Black: Okay, good. That was very helpful; thank you very much.
Mr. Pooran: My pleasure.
Senator Massicotte: Thank you for being with us today, all of you. It is much appreciated.
Like Senator Black, I'm just trying to get a sense of the issue. We were told by the government officials that approximately 15 per cent of the potential beneficiaries of this plan were participating. They seem to be satisfied with that progress, given, I guess, the number of years it has been in place, and yet I guess 15 per cent means that 85 per cent don't participate.
Mr. Pooran, is 15 per cent a good number? Should we be relatively satisfied? If not, what should we be aiming for?
Mr. Pooran: I think the government officials are correct; we're still only in year six. It is quite a complex plan to understand. I think individuals have a difficult time really believing that the plan is a reality. It is so incredibly generous, from our standpoint; it is one of the most, if not the most, progressive income support benefit for individuals with disabilities anywhere in the world. People have a hard time really grasping that it is a reality.
However, there are certain barriers in place that do prevent individuals and family members from opening up the plan. They're too prominent.
Senator Massicotte: You are referring to the legal obstacles?
Mr. Pooran: One is the legal obstacle, and the other is something that we've spoken on in the past, and that's the combination of the 10-year holdback pool and the life expectancy formula used for disbursements, withdrawals from the RDSP.
Senator Massicotte: What percentage is that of the total of those who could participate — the 85 per cent?
Mr. Pooran: I couldn't say. Because disability varies — and there's a presumption of capacity in virtually every jurisdiction here in Canada — a very small percentage of the population is officially deemed to be incapable.
Senator Massicotte: Senator Black basically forced you to segment that. If you get down to those who can't, what percentage of the total of handicapped people fall into that sector where they don't have that trust of a dependent?
Mr. Pooran: I don't know.
Senator Massicotte: Is it less than 5 per cent?
Mr. Pooran: I know that, in Canada, individuals with disabilities are 15 or 16 per cent of our population. Feel free to jump in here, Mr. Nikias. I don't know how the numbers break down in terms of who would be deemed incapable and, of those people, who doesn't have supporters. I think it is important, again, to understand that even for individuals who have supporters, this is a significant issue because, once parents pass away, there is nobody to carry the torch.
Senator Massicotte: In B.C., the problem has largely been resolved. What's your percentage of penetration of the program?
Mr. Crocker: It is roughly on par with the rest of the country.
Senator Massicotte: How do you explain that when you seem to have resolved the most significant problem to better participation?
Mr. Crocker: We didn't say it was the most significant problem, but it is an issue. Our stance at PLAN, aside from how small the number of people who run into this issue is, is that Canada has ratified the UNCRPD, Article 12, which basically states that people with disabilities need to be on equal footing with everybody else. This is a stance of ours. The RDSP just exposes the fact that some people in this situation are unable to exercise their equal citizenship and rights.
Senator Massicotte: You referred to a survey of the potential penetration. Name, if you could, the three issues that you think impede better penetration. What would those three things be?
Mr. Crocker: Lack of knowledge is a big one. That's a combination of its being a new plan and its being a relatively small population of people with disabilities. Half a million people in Canada are expected to benefit from this program. Although that's a large number, it is not as many people as could enjoy an RRSP, for example. The banks don't necessarily put a lot of emphasis on it, and there's a lot of misinformation at the bank level. All of that just creates misinformation.
Often people with disabilities are not fully exercising their way in Canadian society. Many are not comfortable going into a bank. They're not comfortable speaking with a teller. There's a whole broad range of reasons as to why that is the case, but it is our intention to break down those barriers.
Senator Massicotte: Other than communication, what else would there be? You said, basically, a lack of knowledge, lack of communication. What are the second and third most significant impediments to better penetration?
Mr. Crocker: The age is obviously an issue, but that's a full stop. There's an age deadline. It is just lack of knowledge and age issues. Really, getting the word out there is the biggest one. Another one, of course, is the Disability Tax Credit. That's an onerous form to fill out. The goal posts seem to be moving over time. What was approved under the DTC before, now isn't, or somebody who had been given a longer term is now given a shorter term.
It used to be that somebody would fill out a form, and they got accepted or denied. Often, now, secondary forms are sent to the medical practitioner to confirm some of the questions. This is done without the beneficiary knowing. Often, it is a very long form that doctors and medical practitioners find to be confusing, and so they often don't get to it or answer it wrong because the questions aren't clear. This is the feedback we're getting broadly.
People are not getting approved because of that, so that's a major barrier as well. Of course, the Disability Tax Credit is really what makes you qualified for the RDSP.
Mr. Pooran: The other piece is that the parents are concerned that the beneficiaries of the plan may not actually benefit from the money, given the restriction of having to wait 10 years after the date of the last government contribution to withdraw funds and the Lifetime Disability Assistance Payment formula that's been implemented that takes into account the fair market value in the plan and divides it by life expectancy.
Age 83 is used for life expectancy, which means that in many cases people will have to wait until age 59 to withdraw money from the plan. Due to the nature of their disability, they may or may not live until age 83, and, therefore, it will end up being their next of kin who benefit from the proceeds and not the beneficiaries themselves.
Senator Massicotte: Have you raised these issues with the Department of Finance?
Mr. Pooran: This was a key issue for us in the previous review, and it was an issue that I articulated before the National Finance Committee, a few months ago, here.
Senator Massicotte: Thank you, chair.
The Chair: Further to your comment, I might indicate that tomorrow we will have witnesses from the Canadian Bankers Association and two Canadian chartered banks to respond to some of the issues that have been raised.
[Translation]
Senator Hervieux-Payette: Could you tell me the percentage for children and adults? Are there more children using the plans or more adults?
[English]
Mr. Pooran: Are more plans opened for minor beneficiaries than for adults? I'm not sure.
[Translation]
Senator Hervieux-Payette: No one knows?
[English]
Mr. Crocker: Employment and Social Development Canada does have those statistics. They were sharing them until about a year ago. I don't have the latest numbers, but it is being used across all age groups, for sure.
[Translation]
Senator Hervieux-Payette: How do we align the education savings plan with this other document? Can family allowances, the RESP and this program be accumulated? If you have a child with disabilities, can all three be used at the same time?
[English]
Mr. Pooran: The RESP, the RDSP, and what was the third program?
[Translation]
Senator Hervieux-Payette: Family allowances; what are they called now? They are child allowances, the monthly amount children receive when they are very young. They do not last a long time, but there are family allowances for children for a certain number of years.
[English]
Mr. Pooran: Our solution that we had proposed, the form that we had proposed, was RDSP-specific because this problem is RDSP-specific. We don't see it with RESPs. We don't see it with the Child Tax Benefit. We only see it with RDSPs because the Income Tax Act does include the language around the prerequisite of the beneficiary being contractually capable.
[Translation]
Senator Hervieux-Payette: For parents of children with disabilities who are diagnosed at a fairly young age, is the idea behind it all not only to provide for their retirement, but also to help them enjoy more comfortable lives, because they would also be entitled to benefits under the program through adulthood?
[English]
Mr. Pooran: Absolutely. We encourage parents of young children to open these plans as early as possible so that they don't have to wait until their fifties or sixties to start making withdrawals. They can start making them in their mid-thirties.
[Translation]
Senator Hervieux-Payette: When can you start collecting benefits under this program? Can you start when you are 50 years old?
[English]
Mr. Pooran: It's not really a specific age. It's dependent upon when the last government contribution occurred. The rule is that when a withdrawal is made, you look 10 years back and you determine how much money or how much the RDSP attracted in federal contributions. If federal contributions were paid into the plan within 10 years of the withdrawal, then a portion of those contributions would have to be repaid to the government. Really, what individuals are looking to do is to wait 10 years after the date of the last government contribution to withdraw. If the plan was opened at age 5 and the government completed their contributions at age 25, then the beneficiary could withdraw from the RDSP at age 35 without penalty.
[Translation]
Senator Hervieux-Payette: Is that taxable? If you contribute when you are young and manage to graduate from university or complete other studies, but can no longer work at all when you are 40 because of the illness, will those amounts be taxed? Let us just say that from such and such an age to such and such an age, you make $25,000 a year and all of a sudden you become ill and can no longer work; will the federal government's contribution be taxable while you work?
[English]
Mr. Pooran: Every dollar that's withdrawn from the RDSP is comprised of three components: government contributions, private contributions and growth. The proportion of the withdrawal that's comprised of the government contributions and the growth would be considered taxable income in the hands of the beneficiary. The portion that's made up of private contributions would not because those contributions were already taxed prior to being contributed.
[Translation]
Senator Hervieux-Payette: I think it is complicated enough to need a financial adviser. Thank you.
Senator Maltais: Welcome, Mr. Nikias. It is nice to see you here.
At the beginning of your presentation, you said that you have made many representations to the Minister of Finance. Are some of your demands included in the current legislation?
You have made representations to the minister; are they anywhere in this bill?
[English]
Mr. Nikias: What I said is that when the Minister of Finance, Mr. Flaherty, established the three-person expert panel to set up the RDSP, the National Coordinator of the Council of Canadians with Disabilities was appointed by the minister to participate in the work that led to the RDSP. We are very pleased that the RDSP has been put in place. It's a very generous, innovative, Canadian contribution to the financial security of Canadians with disabilities. At this point, we are working with CACL and PLAN to make sure that the issues that have been raised are addressed. Personally, I have not appeared before the Department of Finance.
[Translation]
Senator Maltais: I would like to ask Professor Pooran a question. You pretty much gave us a lesson on constitutionality in your brief. You are a distinguished constitutional expert and you are certainly going to be able to answer my question.
Four provinces and territories have signed on; what representations have you made to the other provinces?
[English]
Mr. Pooran: I can speak from the Ontario perspective. In Ontario, this issue was part of the provincial budget in 2013, and the Province of Ontario has charged the Law Commission of Ontario to effectively come up with a recommended solution. The Law Commission of Ontario has just released a discussion paper on this topic, and they are seeking input from the public between now and the end of February. They plan to issue a final report in May. I'm assuming the hope is that that report will recommend a provincial solution and that that provincial solution will move on to the provincial legislature.
[Translation]
Senator Maltais: What about Quebec and the Maritimes? Have you contacted anyone?
[English]
Mr. Pooran: I'm not sure what kind of traction this issue has received in Quebec. I know, moving east, Newfoundland and Labrador has recently introduced some RDSP-specific legislation. I'm not sure about P.E.I., New Brunswick or Nova Scotia. I'm not sure if any of the folks at PLAN have any input there.
Mr. Crocker: Nothing that I've heard. Newfoundland was the most active recent province, as far as I know.
[Translation]
Senator Maltais: In your brief, you said that it would be ideal if the provinces administered the plan. Did I understand you correctly?
[English]
Mr. Pooran: No, it would be ideal if there was a national solution, a federal solution, one solution that was applicable to all 13 jurisdictions.
[Translation]
Senator Maltais: Since this program is for persons with disabilities of any kind, I think we need to get to the bottom of the issue. In your view, would it be feasible for parents with children with disabilities who have RRSPs to transfer those RRSPs to their disabled children at the end of their lives, without paying taxes, of course?
[English]
Mr. Pooran: Yes. In Budget 2012, the federal government introduced a measure that would allow a tax-free rollover of retirement assets from an RRSP or a RIF to transfer to a dependent child or grandchild's RDSP on a tax-free basis upon the parent passing away.
[Translation]
Senator Maltais: People in British Columbia have been pushing to have more than one guardian, than one parent, a father or a mother, or a legal guardian.
Are you not afraid that, if a lot of people manage the RDSP of the disabled person, if a lot of people want to get a piece of the pie, the disabled person will get less? Is that something you are concerned about?
[English]
Mr. Pooran: We always have to be cognizant of ensuring that any solution has the appropriate safeguards in place. But as most legislative frameworks stand now, anybody can apply to be another person's guardian if that person has been found incapable — not just a family member. We see a lot of abuse already with powers of attorney documents and guardianship orders.
As Mr. Crocker from PLAN mentioned, the solution we're proposing here is RDSP-specific, so it's not broad enough to affect any other source of income that the individual may have or any other asset that the person may own.
It's not that I'm not concerned with potential abuse, but I do not see the potential for abuse being increased with the implementation of a national solution.
[Translation]
Senator Maltais: As you and the folks from British Columbia pointed out, there is a lot of red tape to go through to be able to register for RDSPs.
Does this red tape come from the government only or have the financial institutions not really understood what the government wants to do?
Have you made representations to financial institutions to rectify the situation?
[English]
Mr. Pooran: I do have relationships with financial institutions. The general feedback or sentiment that I receive from them — and I'm by no means speaking on their behalf here today — is that they would like to see a national solution.
Again, they are the entities responsible for implementing the plan. So if we've got different requirements in each provincial and territorial jurisdiction, they've got to be able to adapt to that, from both a process and a systems standpoint, whereas if we had a national solution in place, it would be a lot simpler for them to operationalize the solution.
[Translation]
Senator Maltais: How would the national plan overstep the constitutional rights of the provinces?
[English]
Mr. Pooran: I don't think it does. I think the case law and the legal doctrine have been consistent since the 1970s. It basically allows the federal government to encroach upon provincial jurisdiction if it is necessary to do so, and if the encroachment doesn't displace any kind of provincial jurisdiction.
The solution we've been talking about here is consistent. I know that CCD and PLAN do concur that it does not encroach upon provincial jurisdiction at all.
The Chair: Thank you very much, Senator Maltais. That concludes the questions we have of our panel. On behalf of all of the members of the Senate Banking Committee, I would like to express our great appreciation to each of you for appearing before us today. Your comments have been very helpful.
(The committee adjourned.)