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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
Wesley Ware
June 07, 2013 at 12:31 am

The questions are:
Who wanted out , him or her?
Did she remarry?
Is she getting retirement from 2nd husband (if remarried)?
Did she work after the divorce, if so, how much is her retirement?

Brian Jones
June 06, 2013 at 9:37 pm

How does this work if Gary had been married three times for ten years each?

Would only the first wife get an award?

Would the second and third divorcees have to sue the first ex?

Brian Jones
June 06, 2013 at 9:32 pm

For most men they earn at least half of their lifetime earnings in the last ten years of their career, due to raises and experience level.

In the post 1993 years, Gary earned half of his life earnings. They were already divorced, so why should she be entitled to post 1993 earnings of anything?

I can see where she had a valid claim to pre 1993 earnings but the article seems to imply that in the 1993 divorce she was awarded half of his lifetime retirement award which included earnings outside of the marriage post 1993.

I challenge the notion that she was "entitled" to the portion of the pension benefit earned between 1993 and his actual retirement in 2004.

JTH
June 06, 2013 at 1:57 pm

Equality?. You are exactly correct. Women/wives who want out should leave with absolutely NOTHING.

Dave
June 06, 2013 at 1:56 am

The military Survivor Benefir Plan requires that the retiree give up approimately 35% aof the retirement check permanently. In return on the retiree's death the surviving spouse gets the full retirement amount monthly for the rest of his or her life. When I retired from the Air Force in 1995 my wife and I did the math and decided to decline the SBP - regulations required that not only was my wife present when I signed the paperwork to decline it but she also had to sign. A retiring service member can not decline SBP without the written agreement of the spouse.

Dashall
June 06, 2013 at 12:53 am

This is for Jeffrey: when you retired from the military were you married to your current spouse? If you were, when you did your final out processing you would have done the paper work for the Survivor's Benefit Plan (SBP). This plan allows for a certain percentage of your retirement pay to go to your spouse. The spouse will not get the full amount but should be eligible for your Social Security benefits to off set what was cut. If you married after you retired you may be eligible to buy into SBP. If you have any questions about this you should see a Retiree Service Officer at your closest military installation.

When I retired it was mandatory that the spouse be present when SBP was being offered especially if the military member was going to refuse to do the SBP.

Equality?
June 05, 2013 at 11:55 pm

Why is it ACLU protects equal pay in the work place, diversity, and political correctness. Yet, are ok that U.S.A. still operates with 1950s divorce laws. Men and Women are able to, vote, to go college, have their own careers, own property in their own name, and pursue their version of the American dream. Yet, when a woman is unfaithful or any other reason that ends a marriage, the divorce laws still favor women. Divorce should not be a lotto for an ex-wife! Equality is not having an ex-husband still be responsible for an ex-wife. After 50 years, the McDonald brothers do not get to go back to court and challenge that they got a bad deal in the 1960s from Ray Kroc and now want 1/2 of all Mcdonalds? Contacts do not work that way. Marriage is a contract, and if you try to terminate that contract by divorce in many states you quickly learn its a lop-sided one. I divorced in the 1990s, I have a wonderful 2nd marriage and 19 year old daughter attending college. My responsibly is to provide for my current wife and my daughter. Not some lazy ex-wife. This is welfare mentality. STOP IT!!! No the ex-wife does not deserve a dime of his pension. Yes, I am glad she got nothing and stuck with the $55,562.50 legal fees that she created. Instead of trying to get a free ride off an ex-husband that divorced her three decades ago. Why didn't she invest her $55K and create her own retirement savings? There were other options and course of action that she should have taken. Equal pay, equal opportunity, I totally agree with. That applies to divorce as well, you shouldn't get both? I applaud the Minnesota Supreme Court, finally rational thinking and common sense prevails.

dee
June 05, 2013 at 2:46 pm

Se, you are a bit wussy whupped. Your post is the dumbest thing I ever read.

Jeffrey
June 04, 2013 at 11:28 pm

I know that some of my work pension will continue for my wife, but I don't know how she will continue to get my military pension. I thought when I die, the military pension stops. I know how social security works but the military pension is different, or so I thought. If anyone can shed some light on this, please email me.
cprtrainingco@comcast.net

‘Se
June 04, 2013 at 12:45 pm

I'm not that money hungry, I may be an a$$hole, but, I will provide
until I die; married or not. I will not leave my current wife up
to dry IF we divorce. As it is now, she gets my regular job
retirement check and my military retirement as well, all I get is
my social security check and that's it. She's still employed, but,
that doesn't mean that's all she gets even though we're separated
still she's my wife and entitled to my economic support.