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Ex loses right to pension benefits

By Barbara Whelehan · Bankrate.com
Saturday, April 13, 2013
Posted: 6 am ET

I had dinner some time ago with friends and witnessed some friendly banter between a happily married couple. The husband teasingly threatened to trade his wife in for a newer model. "That would be a very costly decision on your part," was her rejoinder.

Divorce among couples in their 50s can be very expensive, indeed, particularly as it pertains to retirement planning. But those who choose this route should be sure to cross all their t's and dot their i's when they get a divorce decree, or they can lose some benefits to which they might otherwise be entitled.

Patricia Langston learned this lesson the hard way. As reported in Plansponsor.com earlier this week, the Minnesota Supreme Court ruled Langston wouldn't be entitled to surviving spouse benefits from her ex-husband's pension plan, though her 1993 divorce judgment and decree seemed to ensure that she would.

Splitting up fairly

When married couples split up, their marital assets are fair game to be split up as well. This might include the pension benefits of either party, but you have to follow the rules.

Pension benefits are protected by the Employee Retirement Security Act of 1974, or ERISA, a complex set of regulations designed to ensure that workplace retirement plans meet certain minimum standards. But it wasn't until 1984, when the Retirement Equity Act passed, that spousal protections were put into place.

First a bit of history in this case: According to court documents, Patricia and Gary Langston married in 1964 and nearly three decades later, divorced in 1993. Gary was a participant in the Twin Cities Carpenters and Joiners Pension Fund at the time. In 1993, Patricia was awarded half of all future pension payments, as well as survivors benefits. But the divorce decree wasn't enough to guarantee those benefits.

Years passed, Patricia's ex-husband married someone else and retired in 2004, at which point he chose a joint and 50 percent survivors benefit to be payable to his new bride.

Then in July 2005, well after Gary's retirement began and nearly a dozen years after their divorce, Patricia served a domestic relations order to the plan administrator to claim her share of the retirement benefits. The plan rejected the order, saying it didn't satisfy the requirements of a qualified domestic relations order under ERISA. The reason:  The pension benefits were already being paid out when Patricia got around to notifying the plan to cough up her share. She should have notified the plan before her ex began receiving pension checks.

A few months later, Gary Langston passed away, and Patricia's claim for joint and survivors benefits wound its way through the court system. The district court found in favor of Patricia. The plan administrator appealed, and the appellate court found in favor of the plan. Finally, the Minnesota Supreme Court reviewed the case and concurred with the appellate court. The reason: Surviving spouse benefits vest at the time a person retires. The plan cannot award benefits to two people (a spouse and an ex-spouse) because actuarially, it can't plan for such contingencies.

Bottom line: Patricia should have hired a knowledgeable attorney shortly after the divorce went into effect to put in place a qualified domestic relations order, as required by ERISA, that could stick. Because she waited too long, she lost the opportunity to get her share of her ex's pension benefits.

To add insult to injury, reimbursement for attorney fees incurred by Patricia, awarded by the district court, was denied by the court of appeals and then affirmed by the Minnesota Supreme Court. Patricia is out at least $55,692.50 in legal fees. Meanwhile, Gary's widow gets the goods.

What do you think? Should the plan have honored Patricia's divorce decree and granted her the pension benefits? Or should Gary's second wife be entitled to get them?

***

Follow me on Twitter: BWhelehan.

Barbara Whelehan is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It is available at Amazon, Barnes & Noble, iBookstore and other e-book retailers.

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208 Comments
Linda
May 02, 2013 at 11:15 am

Question to John: where do you get from this article that Patricia dumped Gary? The article does not say that at all. I could just as easily surmise that Gary dumped Patricia, as is very common, for a younger trophy babe. Happens a lot in long term marriages. Since most women in the 1960 were not allowed to work, part of Patricia's retirement planning was by necessity through her husbands pension. She messed up by 1) depending on a man to take care of her and 2) not knowing the laws that would ensure he did so after he dumped her for the latest tramp.
Women today are not necessarily smarter but we are wiser in that we know men are not dependable. Most of us women take care of ourselves, and the term gold digger can just as easily apply to men. Know how many men live off their wives money? Seems more common than ever.

John
May 02, 2013 at 4:30 am

If I recall correctly, the marriage vows include the phrase "for better or for worse". All too often women forget the "for worse" part. In this case the ex seems awfully greedy to me. She dumped her husband, so she dumps all her rights to his future benefits, whatever they are. Men are entitled to a life after divorce, a concept most women are unwilling to embrace. Too often the wife gets the house, the cars, the investments, the kids, leaving the husband to live at the YMCA. Equal rights means equal responsibility. Get a job and stop leaching off the men in your life.

I don't think filing the QDRO would have had any effect on the court's decision. Bottom line is the spouse at the time of retirement should receive the survivors benefits, after all the ex wasn't the survivor - she had already dumped the guy, now she wants a do-over?

Runaway
May 01, 2013 at 10:30 pm

Gold diggers are gold diggers. Do women really see men as meal tickets? Whatever happened to love, and all that other emotional stuff?

Mike Johnson
May 01, 2013 at 9:47 pm

She is a gold digger if she still needed his money after he had remarried. She deserves nothing after his death. That's ridiculous.

Snowball8
May 01, 2013 at 8:06 pm

I agree with Jackie, she should get partial. I also agree with Anonymous Talent, in that, her lawyer should have told her that she needed to file a domestic relations order with the pension administrator ASAP. After all, the lawyer was the one fighting for these things in the divorce proceedings, he/she should have made sure everything was in order(in fact they should have prepared the order for filing) so that she would get what she was promised.

Sara
May 01, 2013 at 7:18 pm

Tell this woman to get a job and earn her own pension. What a gold digger.

Anonymous Talent
May 01, 2013 at 6:17 pm

She should sue the attorny that represented her in the divorce, for malpractice and she will win!!

Randy Smith
May 01, 2013 at 2:18 pm

Patricia should have hired a competent attorney or actuary at the time she originally filed for divorce. None of the subsequent events would have happened if she had a QDRO in effect prior to her ex-spouse commencing benefits using a separate interest approach. The Plan must determine benefits based on the facts as they exist at benefit commencement and can't be made to revisit these facts after benefits commence because the Plan can't be forced to pay out more than the actuarial value of the benefit.

Laura
April 30, 2013 at 10:16 am

Patricia should have insisted on having her own retirement account throughout the marriage, not afterwards....and in my own opinion, should have done something in 29 years to earn income to put in it. Too many couples settle into their comfort zones and stop striving. Hubby comfortably goes to work. Wifey does the homey thing. Since the 60's, that just doesn't work!
It is terribly unfair for either partner in a family NOT to partake in all the responsibilities and privileges. Both should clean, fix, parent, work. It makes for equal, interesting and stronger individuals AND marriages.
Yes, that often means that both have to make sacrifices. I suspect that Patricia would have still been Gary's widow and would have received his pension had they shared their marriage roles more equally. Spending 50K+ on litigation is just sour grapes....and a year's EARNED salary.

Jackie
April 30, 2013 at 12:54 am

Depending on the circumstances I do believe that the ex-spouse should be intitled to a portion of the pention especially in this case because that is what was awarded to her in their divorce. Agreements are made everyday and whether the ex-spouse gets remarried or not the new spouse should be very aware of the prior agreement and the company should know what is old retirement funds and what is new and what portion needs to go to ex-wife and what should go to new wife. Its not that hard to figure out from what I am seeing. He worked here for how long while they were married and this is what he had for retirement at that age etc. She should have been awarded those benefits plan and simple.