Retirement Blog

Finance Blogs » Retirement » Ex loses right to pension benefits

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.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
208 Comments
jim
May 06, 2013 at 7:29 pm

i am a happily married man uneducated construction worker. I am married to a wonderful college educated woman who makes in excess of 100 g's a year and very good retirement plan. If something ever happens I will happily take half her retirement after all, women have been doing it to men for decades, its time we men fight back with a taste of their own medicine. Its a matter of principal right?

beanyncecil
May 06, 2013 at 6:37 am

If you don't want to be tied physically and emotionally to someone (divorce), then you should not expect the courts to honor financial ties. Women, support yourselves. And for the record: I am a first wife ex-wife, and a current wife second-wife. So I see it from all sides.

Joe D
May 04, 2013 at 7:43 am

She had a bad divorce attorney. A divorce is a closing. The attorney should have prepared the QDRO as part of the divorce settlement. He probably was in a rush and wanted to move on to another client. Imagine buying a house with many loose ends to be decided in the future. That would be a nightmare-like this.

fred
May 03, 2013 at 4:33 pm

Everybody wants your money. Taxes, employee contribution funds, schools, charities, friends, & of course family. Employers are doing everything they can think of to dump retirement/benefit plans, fire older employees (replaced by younger, often cheaper part time or outsourced workers). Retirement should be off limits. You have SS, which the government tries to cheat you out of by increasing the limits. Go to you kids to help, you supported/sent them to college. Does a rich old comatose person live better than a poor old comatose person? We give so much to foreigners, & people who hate us, & we can't take care of our own.

steve
May 02, 2013 at 8:58 pm

If the wife or husband are a team at the start of the retirement fund, then it should be equally owned in the end....If not, then NO judge or court action should steal it for either one in a divorce action....These wives that jump ship, and then want a lifetime of security is all BS...Unfortunately most deserve only the "gate"...regardless of time served as a spouse...We all know of those Blood Suckers that want a lifetime of security at the other half's sweat and tears....That "FLAKE" Congresswoman from Colorado (voted out of office)jammed that law through Congress to steal military pay from the men to those Blood Suckers, which she was one herself...

Ron
May 02, 2013 at 4:15 pm

My divorce split my pension, but as long as I work she continues to accrue, even if I work another 20 years. They factor it based on the date of the divorce, split it 50/50 and then multiply her half by years of service. So if I work, no matter how much I make, and no matter how long, she gains as much as I do. She had an affair, spent us into the poor house, and took everything we had when she left, but in court and in the eyes of the IRS, this was all my problem and all my fault. Make sure if you have a Public Employees Pension you find an attorney that KNOWS those systems or you will barter for nothing. My pension system told my attorney he was ignorant. By that time we were well over the dam and headed downstream, so there was no turning back. ANd yes she worked, and has a pension and benefits. She still gets half of mine and took my deferred comp up front. The IRS said we arent about fair and equitable , you sir are the primary taxpayer, we are taking your bank account, when she didnt pay the final year tax she owed in our marriage,even though court ordered.

J.A.
May 02, 2013 at 3:50 pm

In 1964 it was very common for women to work in the home and raise the kids. If this is the route her and her husband took then by the time the marriage ended she would have been virtually unemployable, in her 50's with no work history and no way to recover 30 years of lost benefits. Why should she retire in poverty when she and her husband chose traditional and accepted marriage roles? She has every right to 1/2 of his benefits. However, if she did work for a large part of that marriage and had her own retirement benefits, she should not be entitled to his benefits. And for all those men who say she shouldn't get the benefits when he did all the work, let me just tell you, keeping a home and raising kids IS work.

margaraet
May 02, 2013 at 3:28 pm

for "tom"
I was married 28 years to a navy man-some active some non-active duty
we divorced because of extreme cruelty
his next wife got it all-I was denied
don't feel so bad--it goes the other way too---just depends upon who knows who and what connections you have--nothing fair about it and isn't intended to be. Just a game played with peoples lives--blood is nothing but catsup now anyways. And here's a kicker right here. catsup is correctly spelled catsup butit wants ketchup. It's a new ball game now.

Keith Parsels
May 02, 2013 at 3:13 pm

I've been married 3 time, None of them lasted 10 years, and 2 of them worked for the government made more than me and had better pensions. so they always added that neither had the right to the others pension. I did agree to child support for my two sons which, although it was supposed to end at 18; I continued until they graduated college, got married, or became 25 years of age.

tom
May 02, 2013 at 11:22 am

These instances are sickening. I have my own personal experience with this. Retired Army 23 years married for 13 years of service. My ex remarried some fat slob then claims part of my retirment.
Bad thing is she refused to work although fully capable but according to these laws she is entitled to part of my retirement.
She did not go to war, break her body, spend hours, weeks months years away from home. NO she sat at home spent what i earned, ate, drank and did nothing.

To those who say "oh well she took take of the home" BS I cooked cleaned shopped etc. Oh for 5 years yes she took care of our son before he went to school; so I guess that entitles her to half of my retirement for 40 years.

This is a sickening system that allows people to be lazy,greedy and still benefit.