Evidence of meeting #3 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cmhc.
A recording is available from Parliament.
Acting Director, Personal Income Tax Division, Department of Finance
That is in fact the objective of that provision.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
It's what the individual must provide to have that right that's problematic. There are two important elements. First, the person must get a doctor's note certifying that the beneficiary will die within five years. There are few doctors who would make such a medical prognosis for a five-year period.
The second issue is that individuals are given five years to die. They're basically told they must die within five years because if they don't and are still alive in a convalescent centre or a hospice in the sixth year, they will face heavy tax penalties.
There is no protection. You're obligating people to die within five years. I don't understand why, in terms of taxes, we are confusing medical evidence, which is not at all clear-cut, with tax liability.
Acting Director, Personal Income Tax Division, Department of Finance
I will start by answering your first question. There are of course cases where a doctor does not want to state how long they think an individual has to live. However, there are cases where such an opinion can be given, where it would be possible for beneficiaries of a registered disability savings plan to have access to their savings.
Currently, there is a penalty. The plan is designed so that the beneficiary can receive the money in the future. A provision requires that beneficiaries who withdraw a certain amount of money repay the government all the grants they received over the last 10 years.
That provision enables the beneficiary to withdraw money from the plan during those five years. However, there is no penalty if the beneficiary does not die. Of course, government grants and contributions must cease during that period, but there is a provision that covers a change in the beneficiary's situation. Beneficiaries can change the plan's status, resume contributions and receive government grants in the future.
Alain Giguère NDP Marc-Aurèle-Fortin, QC
That doesn't exactly address the issue. Here is a hypothetical situation. A man has been diagnosed with brain cancer, and thanks to medicine and a certain medical futility, he lives for longer than five years. In the sixth year, perhaps even the seventh year, while he is dying in a hospice, he loses his rights. His life expectancy is limited to five years from a tax standpoint.
We can resolve the issue by removing the five-year requirement. We would say that we simply acknowledge the doctor's certificate stating that the individual has a critical illness that could sooner or later be fatal. No doctor would have a hard time signing that kind of a document. That way, in terms of taxes, we would do away with any obligation to die within five years.
It would be ridiculous for individuals receiving palliative care, who need their money to pay for additional or private care, such as the services of a caregiver, to lose their income, pursuant to tax laws, because they are not dead within five years. I think that it's completely unreasonable to set a deadline for dying in revenue law.
Conservative
The Chair Conservative James Rajotte
Okay, thanks.
I think Mrs. Glover would like to add to this point.
Conservative
Shelly Glover Conservative Saint Boniface, MB
This clause matters a whole lot to my family. As you talk about brain cancer, I have a daughter who has been given 12 years...because she has brain cancer. I think this clause speaks very well to the fact that when her miracle happens--because she is in year six. There is no penalty if she has used the funds, right? She can go on to a new program if she so desires, which I think is what we want for these folks, because there are miracles that happen.
I don't think Monsieur Giguère understands the importance of having the words “not likely to survive five years” as opposed to “five years”. It's important to have that. I think this absolutely addresses his concern...and my concern that my daughter won't have a penalty when her miracle happens, and she will be able to start a new plan if that happens.
My question is, if someone survives the five-year period that was not likely to happen, what is required from a medical doctor or the person himself or herself to switch and restart the plan?
Acting Director, Personal Income Tax Division, Department of Finance
In order for the plan to be changed from a regular plan to a plan in which you can make an early withdrawal without penalties from the assistance holdback amount, the beneficiary must file with their financial institution an election and a medical certificate from a medical doctor. That would then be filed with the Canada Revenue Agency and Human Resources and Skills Development Canada, and they would keep it in their records that these amounts may be withdrawn without penalty.
In order to reverse that election, the individual merely needs to file a notice that essentially says they wish to reverse that election.
Conservative
Shelly Glover Conservative Saint Boniface, MB
On pages 2 and 3 of the bill itself--just for the benefit of Monsieur Giguère--it talks about how the recipient can actually change the plan. Am I correct?
Acting Director, Personal Income Tax Division, Department of Finance
That's right, yes.
Conservative
The Chair Conservative James Rajotte
Is there a section that addresses his concern that you can reverse the notification?
Acting Director, Personal Income Tax Division, Department of Finance
It starts at line 31 on page 2:
(1.2) A plan ceases to be a specified disability savings plan at the earliest of the following times:
(a) the time that the specified Minister receives a notification, in a manner and format acceptable to the specified Minister, from the issuer of the plan that the holder elects that the plan is to cease to be a specified disability savings plan;
So the individual can make an election to reverse the treatment of their plan.
Conservative
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
Mr. Chair, the problem remains exactly the same. Mrs. Glover is talking about someone who, by a miracle, survives and regains perfect health within five years thanks to a new drug. That can really happen, I agree.
However, I am talking about someone who is ill and remains ill. In the sixth year, that individual is no longer entitled to receive benefits through a disability savings plan. There is a cut-off period.
Conservative
The Chair Conservative James Rajotte
Just for clarification, Mr. Keenan, my understanding is that.... I mean, we talk about cures; if the person lives beyond the five years, you can reverse the notification. Is that correct?
Acting Director, Personal Income Tax Division, Department of Finance
They can reverse the notification at any time. They have a plan. What this provision does right now is that if you make a withdrawal from the plan, for government contributions that have been made within the preceding ten years, those contributions have to be repaid to the government. That's in order to promote the long-term savings objectives of the plan.
Essentially, the premise or the notion is that parents want to save for their children, their severely disabled children, when they're no longer able to look after them. So the plan is set up. It receives government support. Then, when the parents are no longer able to support the child, the money will be there.
In certain instances, people will have an expectation that they will die very soon, and therefore that ten-year rule becomes very punitive in terms of repaying those funds. There's no requirement that they withdraw all of the money within the five years. It just gives them the capacity to do so. They can withdraw up to $10,000 in taxable amounts.
So the plan doesn't necessarily expire. It won't expire after five years.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
The plan doesn't expire, but the issue is that, in the sixth year, the person receiving palliative care in an institution will no longer be able to withdraw money without having to repay the government.
That would be extremely easy to correct by eliminating the five-year deadline, the obligation to die within five years. That would be extremely simple, Mrs. Glover. All we need to do is remove the obligation to die within five years.
Conservative
Conservative
Shelly Glover Conservative Saint Boniface, MB
Mr. Chair, I don't see an obligation to die within five years anywhere in this act.
If I am correct, Mr. Keenan, it says in fact that a certification can be received from a medical doctor if a doctor believes they are not likely to survive five years. However, I see no limitation in the act that says they must die within five years or a penalty is assigned. I'm not sure where Monsieur Giguère is getting that.
Can you confirm, Mr. Keenan, that if the person is in palliative care and a legal representative is now taking over that person's affairs because they are not able, that legal representative can continue to access funds as a result of this act? Is that not correct?
Gonzague Guéranger
If I understand your question, you're saying that if the person does not die after five years, the funds are still available. There is no requirement that the funds be repaid. Any withdrawn amounts--
Conservative
Shelly Glover Conservative Saint Boniface, MB
Right, and because the person is no longer able to make withdrawals personally, there is a potential to transfer it over so that the legal representative can also access the funds to further take care of that person in need. Is that correct?
Gonzague Guéranger
The plan always has a plan holder, who is either the beneficiary or that person's appropriate legal representative.
Conservative
The Chair Conservative James Rajotte
Reading the language for proposed subsection 146.4(1.1) in subclause 2(2), I'm not sure, Monsieur Giguère, where you're getting the understanding that they have to die within that five-year period. I don't see it within the phrasing I'm reading here.
Mr. Keenan is indicating that is not the case. I'm not sure where the problem is.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
Mr. Chair, basically, at the beginning of part 1 of the book, two points related to subsection 146.4(1) clearly indicate that, in terms of regulation, the subsequent five calendar years are the set cut-off.