Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 5 - Evidence - February 5, 2014
OTTAWA, Wednesday, February 5, 2014
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:22 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: Today the committee is holding its sixth meeting as part of its study on Registered Disability Savings Plans, or RDSPs, with a particular emphasis on legal representation and the ability of individuals to enter into a contract. The committee commenced this study in December and so far has heard from the Minister of State (Finance), officials from the Department of Finance, several groups who work with disabled Canadians, as well as financial institutions and financial planning institutions who offer or manage RDSPs.
Today the committee is pleased to welcome Mr. Jean Sylvain, Chief of Product Line with the Specialized Investment Product Line Management Department of the Desjardins Group. The Desjardins Group is the largest cooperative financial group in Canada and the largest financial group in Quebec.
Mr. Sylvain, you may start with your introductory remarks, and then we will go to the members of the committee for questions. The floor is yours, sir.
[Translation]
Jean Sylvain, Chief of Product Line, Specialized Investment Product Line Management Department, Desjardins Group: Mr. Chair, senators, on behalf of Mouvement Desjardins, I thank you for having invited me before you today to discuss the Registered Disability Savings Plan, a program we consider important for Canadians.
My name is Jean Sylvain, and I am the Chief of Product Line at Desjardins. I am the resource person for the RDSP. I am pleased to be here to share our comments on the RDSP and to contribute to your study on the ability of individuals to establish a Registered Disability Savings Plan.
The Desjardins Group, as you know, has $200 billion dollars in assets, and as such is the largest financial cooperative in Canada and the fifth largest in the world. With our strong network of credit unions and branches throughout Canada, we offer the whole range of financial services, such as banking services, life and damage insurance, as well as securities.
Desjardins recognizes the government's leadership in having set up the plan, and we support the government's objective to ensure the long-term financial security of those who are eligible for the disability tax credit, by offering this plan to our members and clients. We have very close links with the government, in particular with the Department of Employment and Social Development.
Indeed, Desjardins participates in the meetings of the Canadian Disability Savings Plan Program to discuss the challenges and issues around the plan. We are very happy to take part in those meetings and we consider these meetings very important, since they enable us to communicate with the financial institutions and the government.
Desjardins wishes to continue offering the RDSP, as we wish to contribute to the financial security and economic and social well-being of persons living with a disability. In order to make our members and clients more aware of this savings vehicle, we use several means to promote and educate people about the plan, including a special section dedicated to the RDSP on our website and a folder that is available in each Desjardins credit union.
Moreover, we provide awareness-raising meetings and information meetings on the plan for disabled persons' associations. We believe that the RDSP offers key advantages that must continue to be offered. For instance, when a plan member makes a contribution, the government provides up to a 300 per cent subsidy; there is also the $1,000 a year bond and the advantage that savings deposited in an RDSP are tax free.
In order to give everyone access to the RDSP, we were in favour of the changes instituted in 2012 that simplified the plan, and the rules involved in opening one, and put in place temporary measures that will be in effect until the end of 2016, allowing those close to the disabled person to open RDSPs. This makes the plan more accessible and more popular with that clientele.
Moreover, the temporary measure will allow the provinces and territories to put in place their own measures before the end of 2016. Already, some provinces and territories have put in place measures and work has begun in other provinces and territories where we are not present. We are going to follow these developments and we encourage discussion and cooperation between the federal government and the provinces and territories so as to ensure that everyone has access to the plan.
Although the RDSP is an excellent program, certain issues have been identified since it was launched. When legal changes are brought in, financial institutions have a limited period of time to apply them. It would be preferable that financial institutions be given more time to update their plans.
Moreover, the government could consult the industry so as to assess the impact of new features, so as to allow for greater effectiveness and flexibility. The plan is complex. For instance, the introduction of deductions at source has made it even more complex. The principle of deductions at source seems simple enough; taxes are deducted as soon as the taxable amount goes beyond the basic personal amount added to the disability tax credit.
However, the application will be relatively complex. The rate of deduction at source can vary during the year.
The next changes to be made to the plan to improve it should be aimed at simplifying it. The rules concerning minimum and maximum withdrawals and the proportional repayment are poorly understood by the plan holders. The plan holders do not yet grasp the basics, and the plan is complex.
Consequently, advisors need much more time to explain the RDSP to the plan holders than they need for the other registered savings plans. Employment and Social Development Canada could prepare documentation for plan holders so as to facilitate their understanding of the program.
One of the challenges the plan faces is its lack of visibility. It is difficult for financial institutions to communicate with eligible persons, since, as opposed to the RRSP and the TFSA, it is addressed to a small part of the population.
In 2013 and in the beginning of 2014, the Canada Revenue Agency sent a letter to urge eligible people to take advantage of the plan. In addition, the government could do more promotion of the RDSP through disabled persons' associations or at special events for that clientele. Since the clientele is difficult to reach, we think it is very important that the government continue and increase its efforts to promote the RDSP.
In order increase the number of RDSPs and facilitate the efforts of financial institutions to allow the plan to flourish, you could consider an incentive such as the Canada Learning Bond Incentive, which is deposited in the Registered Education Savings Plan.
On behalf of Desjardins, I thank you for your invitation and would be pleased to send you more information. I am available to answer your questions.
[English]
The Chair: Thank you very much, Mr. Sylvain.
One of the areas that our study has been covering relates to the legal issues and the ability of persons to enter into a contract for the purpose of establishing an RDSP. Are there any unique challenges for mentally disabled Canadians and their families in setting up an RDSP in Quebec as opposed to the other provinces as a result of your operating under the Civil Code versus common law?
[Translation]
Mr. Sylvain: Indeed, the challenges are similar to the ones in Canada, that is to say that the temporary measures will help. The target group may open RDSPs, but in Quebec, an adult disabled person must have a guardian or trustee who takes care of his affairs in order to open an RDSP. That is the situation currently.
When the temporary measure changes go into effect, it may become more difficult in Quebec — to use Quebec as an example — to open an RDSP.
[English]
The Chair: I will start with my list of questioners.
[Translation]
Senator Maltais: Mr. Sylvain, you have raised some very important questions. I want to congratulate the Mouvement Desjardins for its commitment to a part of the population that is not necessarily the most profitable, but you took to heart the well-being of disabled persons and this is to your credit.
When a national plan is introduced, such as the one the Minister of Finance tabled, it involves both the Civil Code and common law. In Quebec, the fact of having a legal guardian or trustee appointed by a judge is a factor. The person has to go through multiple steps if he or she wants to open an RDSP.
There is also another irritant and that is the bequeath of an RDSP by will. I spoke to the Chamber of Notaries and to the Professional Association of Chartered Accountants who often have to execute these successions.
Only persons with a severe disability may contribute to this registered savings plan. Persons living with severe disabilities are not always able to prepare wills in due legal form. What will the person do if the parents have passed away? The guardian or trustee will take the money. That is one of the fears parents have. Parents are afraid of the relatives passing on as well as; they do not know what will happen to their money. Have you encountered that type of problem?
Mr. Sylvain: Yes, that is a serious worry that parents have when they have a disabled child; they do not know what will happen when they die.
You said that the RDSP was for persons living with a severe handicap. That is not necessarily so. In order to qualify, people must be entitled to the disability tax credit. They may also be living with a physical handicap.
Now, the parents' RRSP may be transferred, since 2011, into an RDSP. This may promote the long-term financial security of the disabled person. In the case you mentioned, if there is no guardian, the public trustee will have to take care of the finances of the disabled person.
Senator Maltais: How can we make sure that when the disabled person reaches the age where he or she can withdraw the money from the RDSP, if he no longer has his parents, that the money will really be used if he needs to go to an institution?
Mr. Sylvain: Well, certainly in cases where there is no guardian and the trustee plays that role, the trustee will have the obligation of managing the assets of these beneficiaries properly. The withdrawals from the plan will always be used for the disabled person. If there is a guardian, there could be abuse, but normally the guardian is someone who wants to ensure the well-being of the disabled person.
Senator Ringuette: Mr. Sylvain, thank you for your presentation. How many RDSPs has Desjardins opened since the plan's inception?
Mr. Sylvain: Currently, we have more than 1,500 RDSP accounts. There has been an annual increase of approximately 30 per cent since the plan's inception. An increasing number of people are expressing interest in the RDSP to Desjardins. It is fair to say that there is more than $15,000 per beneficiary, in savings in these accounts.
Senator Ringuette: So this clientele is quite financially comfortable.
Mr. Sylvain: The plan is very generous. When the beneficiary realizes all the advantages the plan can provide, I think it is clear that it is worthwhile contributing to it.
Senator Ringuette: You said that the average yearly contribution was $15,000?
Mr. Sylvain: Fifteen thousand dollars in total assets, but no annual contributions?
Senator Ringuette: I see. Last week, the committee heard an organization that represented groups living with physical and psychological issues and they told us that one of the problems is that most often, banking institutions refuse to open accounts for persons with psychological problems. What is the attitude of the Desjardins Group with regard to that group of people?
Mr. Sylvain: Desjardins would like to see everyone who is entitled open an RDSP. That is what we would like to see.
Senator Ringuette: But before you can obtain the incentive to open an RDSP, first you have to open a savings account, a checking account or something along those lines, an account with you as an institution?
Mr. Sylvain: Not necessarily. To benefit from an RDSP, you do not have to have an account with Desjardins. You may open an RDSP account without having any other products or services with us. That is not a problem.
Senator Ringuette: Perhaps my question was not sufficiently clear. The witnesses we heard last week told us that first of all, to inform people and encourage them to open an RDSP, they needed a vehicle to make transactions, a saving account or a checking account, and a debit card from a financial institution. And this seemed to be a major obstacle for them.
My question is this: since you are very different from Canada's other large banking institutions and are present in small communities, what type of basic banking services do you offer actively to persons with psychological problems that would allow you to communicate with these people and inform them about the program?
Mr. Sylvain: This adds an additional difficulty. Financial products and services may be complex for them. But we are there to help them. We will take the time that is needed to explain how to open an account and how the plan works. It depends on the severity of the disability; the person may need a guardian or parents to help him with his financial transactions.
[English]
Senator Black: Thank you very much, Mr. Sylvain, for being with us this afternoon. I thought your presentation was excellent and, because it was so good, I have two or three questions for you that I hope you will be able to help us answer.
The first thing is a bit of an advertisement, if I can, for Desjardins. In reading your biography information on Desjardins, I don't see that there is reference to you being in Alberta. I understand that you are an important financial player in Alberta. Is that not so?
[Translation]
Mr. Sylvain: The Desjardins Group offers the RDSP throughout Canada, but in Alberta we are mainly present through personal or life insurance and damage insurance.
[English]
Senator Black: Thank you for that. Now that the advertisement is over, we have to get to work.
As you have correctly acknowledged, we're currently operating under what I will style as a temporary solution, which, as you indicated, is to expire in 2016. You indicated in your testimony that Desjardins is currently working with the provinces and the federal government to effect what you termed as a solution. Can you please share with us what you believe to be the ideal solution for the problems as you see them?
[Translation]
Mr. Sylvain: Since I am not a lawyer, it is difficult for me to answer that question. This involves common law versus the Civil Code. What I said earlier is that we are actively working at this time with Employment and Solidarity Canada to improve the plan. We are not holding formal discussions with the provinces, however, regarding the matter of eligible relatives, either in Quebec or other provinces.
[English]
Senator Black: Thank you. You have no specific recommendations for us?
[Translation]
Mr. Sylvain: I do not have any specific solutions to offer post 2016.
[English]
Senator Black: Thank you very much. You have correctly identified that a problem with this program is that of increasing knowledge amongst potential beneficiaries. Would it be acceptable to you if you were to file a short brief with our clerk, not today but subsequently, outlining what you think the government could do to more effectively communicate this program?
[Translation]
Mr. Sylvain: In 2013, the Canada Revenue Agency began sending out letters to people who are eligible for the tax credit but do not have an RDSP. I believe that is an excellent measure and I think that the Canada Revenue Agency should continue and even broaden that.
The last mail-out was sent to 180,000 persons who were eligible for the disability tax credit, and there are 500,000 disabled persons in Canada. Something more could perhaps be done there. Financial institutions may find it harder to reach a disabled person because they have no lists to allow them to reach them directly.
That is why we are providing information meetings with disabled persons' associations and I believe the government should be helping those associations to convey information on RDSPs to those people.
[English]
Senator Black: That is very helpful.
I understand there's a rule that, after the last government contribution to an RDSP, the beneficiary must wait 10 years before drawing funds out. Would you please comment on your view as to the appropriateness or not of the 10- year waiting period?
[Translation]
Mr. Sylvain: I understand the reasons why the 10-year rule was put in place. However, what we are now hearing from RDSP holders is that they find the rule more or less precise, and they find it to be complex. They do not quite understand why the government brought in this regulation. This is what we hear our members say.
I am not managing that program now, but perhaps it could be improved and the number of years could be reduced, or the penalties could be reduced, if withdrawals are made during that 10-year period.
[English]
Senator Black: Thank you for the tremendous presentation. You have been very helpful.
[Translation]
Senator Rivard: Welcome, Mr. Sylvain. I am very pleased to have you with us today.
The Registered Disability Savings Plan (RDSP) has been in existence since 2007. So six years have gone by and you mentioned that on the average people who opened a plan almost in the beginning contributed about $15,000 to it. If I compare that to the registered education savings plan that people contribute to when a child is born until he or she goes to university, which means about 18 years, if they contribute approximately the same amount, that means that they will have about $30,000 or $40,000; so it could be said that both are comparable.
But in the case of the Registered Education Savings Plan, the representatives are very aggressive. The Fondation Universitas is having great success in Quebec, for instance. I do not know where they get all their information, whether in hospitals or if maternity wards inform them, but as soon as a child is born you get a telephone call in the days or weeks following the event to strongly urge you to open one of those plans. Indeed, they do good work.
I understand that you do not have people who are directly assigned to contact disabled persons to offer them this service. You probably have folders in your bank branches, which raises the issue of a disabled persons' register. Is this a question that is asked in the census every two or three years? Is there a box that is checked, for instance, indicating that there are disabled persons in a household? I am not a tax expert, but I do file income tax returns and prepare them on a regular basis since I am an accountant and I do not recall seeing any box to be checked to indicate if one has a disability.
I understand that what makes this difficult for you to sell is the fact that you do not have a list of disabled persons and you said that the government should publicize the program more. How can a federal government reach disabled persons if there is no such register?
Mr. Sylvain: In fact, the Canada Revenue Agency is aware of those who are entitled to the disability tax credit. That is how we know that there are approximately 500,000 Canadians who could benefit from the Registered Disability Savings Program (RDSP).
Since the government knows that there are 500,000 disabled persons — I referred earlier to the 180,000 — we conclude that some people are not being reached currently. There may be reasons for that, but I am not aware of them.
Financial institution representatives do not necessarily know from speaking to someone on the telephone whether that person is entitled to the disability tax credit. Of course we may mention it. If we have any doubts, we can say that there is a very, very interesting program, the Registered Disability Savings Plan (RDSP) that might apply to them. But that is the problem; we cannot send a letter to all of our member-clients to inform them of the existence of the RDSP because that really amounts to shooting in the dark.
Senator Rivard: The issue is that people are not sufficiently aware of the existence of the program. I saw that my colleague from Alberta had some knowledge of the Desjardins Group. I would like to take this opportunity to blow our horn and say that in Quebec the Desjardins Group is a bigger employer than all other companies combined, with more than 40,000 employees. Is that correct?
Mr. Sylvain: Yes, it is.
Senator Rivard: Allow me to congratulate you.
[English]
Senator Gerstein: We have advertising today at our committee. Senator Massicotte, are you continuing the advertisement?
[Translation]
Senator Massicotte: Well, I will complete it by saying that my daughter works for Desjardins, and my father-in-law was a member of the Desjardins board of directors, as well as one of my good friends.
Thank you for being here today. It is very important that this program be well understood and that we improve it if possible. Do you know what percentage of people eligible for this program have been reached in Quebec, and what percentage could be reached?
Mr. Sylvain: According to available data, which may not be the most recent, we estimate that there are 112,000 people in Quebec who could benefit from the Registered Disability Savings Plan (RDSP). The data on the number of RDSP plan holders in Quebec currently indicate that we have 10,000. So that means 10 or 12 per cent.
Senator Massicotte: I believe the figure is 8 or 9 per cent. I thought that in Canada we had reached 20 per cent; is it possible that that is the figure for the rest of Canada?
Mr. Sylvain: The latest data I have at my disposal indicate that the percentage for the rest of Canada is 15 per cent.
Senator Massicotte: Why is the figure lower in Quebec?
Mr. Sylvain: That is an excellent question, and one that I cannot answer. Perhaps the disabled persons' associations talk about it less or are less active than in other provinces; because the same financial institutions offer the plan, whether in Quebec or everywhere else in Canada.
Senator Massicotte: If the percentage is 8 or 9 per cent, what percentage does Desjardins hold and what is the figure for the federal banks?
Mr. Sylvain: In Quebec, Desjardins may have approximately 20 per cent of the accounts. The rest of them are held by the banks, and I believe most of them are with BMO. BMO started right away; as soon as the program was launched, they offered the plan. We took a little longer, but we have 20 per cent at least.
Senator Massicotte: What proportion of individual accounts do you hold in Quebec?
Mr. Sylvain: It is hard to answer that; it depends on the products and the plans.
Senator Massicotte: What percentage of the personal accounts do you have, as compared to banks?
Mr. Sylvain: We say that Desjardins has five million members but of course that may also include some people in Ontario. Five million members represent a large part of Quebec, but I am not sure that the parallel can be drawn with regard to number of members we have.
Senator Massicotte: I thought you had 50 per cent of the individual market in Quebec; Am I mistaken?
Mr. Sylvain: We may have even more than 50 per cent of the market in some areas, such as mortgage loans, but the figure is a little lower for savings.
Senator Massicotte: First of all I want to congratulate you, but why do you have so many bank accounts, bank fees, et cetera, and far fewer RDSP accounts — 20 per cent being the figure — when it comes to this program to help the disabled?
Mr. Sylvain: The first reason that comes to mind is that we did not launch the program in 2008, that is to say from its inception. We launched it in 2010, so two years later. This probably allowed the banks to get a larger share of the market. However, we are very interested; as I mentioned earlier, there is very good progress and our members are happy to benefit from the plan. I have no doubt that their numbers will increase in the years to come.
Senator Massicotte: When we examine the program from the tax perspective, we have to admit that it is a bit complicated. I dare hope that the average education level of our senators is higher than the average in the population, although that may not be the case. That said, even we find it complicated. Must it necessarily be so complicated, could it not be simplified?
Mr. Sylvain: I share your opinion concerning the fact that it is complex. I referred to that earlier; we receive a lot of comments from our current RDSP holders who do not understand certain rules. Some changes were made in January 2014 and this of course raises questions. I also mentioned this in my presentation; I think that the government should aim to simplify the plan.
Senator Massicotte: What would you recommend specifically to simplify all of this?
Mr. Sylvain: Regarding deductions at source, the amount that is withheld can vary over the course of the year. That is already a complicated situation for tax specialists, but imagine how the disabled person feels. This adds a layer of complexity.
We do not have much experience yet with minimum and maximum withdrawals when the time comes to withdraw the funds, since the plan is new; not many funds have been withdrawn from the plan, but we may have to take a look at that in the future.
The other aspect is the 10-year rule. Our plan holders told us that they went to the Canada Revenue Agency site but the explanations provided there did not reflect reality. Perhaps some effort needs to be made to simplify websites and facilitate their understanding by using language that may be more easily understood by disabled persons.
Senator Massicotte: Thank you.
[English]
The Chair: Thank you, Senator Massicotte. That concludes round one. I have a question from a senator in round two. Senator Maltais, please.
[Translation]
Senator Maltais: You talked about an awareness-raising program in Quebec and the rest of Canada. Do you have any contacts with the Office des personnes handicapées du Québec, the disabled persons' protection office, or not?
Mr. Sylvain: No, we do not have any dealings with them to my knowledge.
Senator Maltais: You have a lot of tax specialists and lawyers in your firm; I would like you to make a legal suggestion that would lead to a standard plan throughout Canada. That is what the Minister of Finance is looking for. The Desjardins Group could probably provide us with answers to our questions. I am not asking you to provide that today. You cannot wear all hats for the Desjardins Group but I think that your legal opinion as a tax expert within your movement would help us and would be very useful to the members of the committee. I would appreciate your sending this to the clerk, it would help us a great deal. Thank you.
[English]
The Chair: Thank you very much, Senator Maltais.
Mr. Sylvain, thank you very much for your appearance today. On behalf of all of the members of the Senate Banking Committee, I thank you very much. You have helped us in our deliberations.
(The committee adjourned.)