Retirement Blog

Finance Blogs » Retirement Blog » Ex loses right to pension benefits

Ex loses right to pension benefits

By Barbara Whelehan ·
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 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.
June 04, 2013 at 9:33 am

I'm appalled by the majority of these comments... she should have gotten her own job and shored up her own retirement? Really? My guess is in 1964, she was a stay at home mother raising their children, providing care for their home and family. Those are admirable jobs even though our society rarely thinks so anymore. They, unfortunately, don't provide pension or 401K. Not all stay at home mothers/ wives are high spending moochers as several disgruntled commenters seem to think. Sheesh.

robert terzich
June 04, 2013 at 9:12 am

A pension is nothing but money $. A retirement plan becomes a pension when someone else pays for it. Pension plans were replace by 401(k) deffered compensation plans. Consider it as a deffered compensation for services rendered (not work) during your years of employment> It is not yours until the provider awards or grants it to you. Retirement benefits are supposed to be protected by the Alienation of benefits clause.

robert terzich
June 04, 2013 at 8:58 am

A pension is nothing but $. A retirement plan become a pension when somebody else pays for it. Think of a pension as a deffered compensation for services rendered during your years of employment. There is no definition of a pension and you wont find it in ERISA. Pension plans no longer exsist the were replaced with 401k plans. These are call deffered compensations and are subject to federal taxes upon withdrawal> People do not retire, they are terminated.

Joe Smith
June 03, 2013 at 11:09 pm

Along those lines.... why is it not required to have the receiver of (child support) to not have to account for the money received "on behalf of the children"... or, make it a requirement for the payer of child support to pay such until a child is 21-23 y.o. while in college??? I paid my own way through college (and paid my own student loans off). Allegedly my daughter (that was going to college) never got a penny of the child support nor was my ex-wife required to pay (her) fair share to put out daughter through college.

June 03, 2013 at 10:44 pm

In the mid-south, court orders trump any document that was signed after the divorce. In Tennessee, one can return to the Court that issued the Order. Judges make these decisions to avoid any confusion or retribution from either party. She should have gone to a court of equity for a fair decision.

June 03, 2013 at 11:05 am

When you divorce that should be finale. No more free hand outs. Those who earn it should be able to keep it, and the ousted partner is just that ousted. Go get your own job.
I am just glad when my x divorced me for money she got nothing, I had no retirement at the time and no pensions and no savings, just a nice income that she spent lavishly. Things are different now, and the x will finally have to work for hers and not mooch from me.....

June 02, 2013 at 10:10 pm

after retiring from the military, i got divorced. My ex got half of my retirement pay because we lived in Texas, which is a community property thoughts are who earned the retirement pay should be the one to decide who gets any or non, because of death or wife got half..I got nothing from her that fair

May 31, 2013 at 12:26 pm

The bottom line is this: She shouldn't be such a lurch. She could have gotten a job herself and setup her own retirement fund. If you decide to be a "house wife," decide not to work, get a divorce, and suddendly find yourself without money that is your own fault.

May 30, 2013 at 4:26 pm

nope. When one loses out. she should have worked and rec'd her own pension and not count on an Ex to provide.

May 30, 2013 at 2:58 pm

Pension? What's that?