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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?


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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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April 22, 2013 at 8:55 pm

If you have any ambition to do anything with your life don't ever get married. Especially if you are a man. It's an obsolete institution anyhow. You want to have kids - have them. Just keep the state's domestic relations laws out of your life. Only suckers get married in today's day and age it is a fool's bet.

April 22, 2013 at 4:09 pm

She should have hired a better lawyer. Her rights would have been protected had she filed a timely notice under ERISA with the plan administrator. The court decree was proof that she was entitled, but she failed to do so. (She should have done it when the divorce was final - before he remarried or claimed his pension.)

On a side note: For those of you who think your will is ironclad - the beneficiary you name in a retirement plan contract or annuity contract or life insurance policy will get a check regardless of what your will says. So update those documents when you get a divorce or the money may not go where you hoped.

April 22, 2013 at 9:50 am bad so sad...hehehe

April 21, 2013 at 10:05 pm

Gary legally awarded the goods to first wife. To view it otherwise is financial polygamy. The Minnesota Supreme court wouldn't recognize the first decree, which has precedence? And the whole judgment is now based on the retirement plan's actions of an erroneous payout? Cease payment to the second wife, begin same payout to first wife, calculate a fair amount to bring the first wife's account current, send the bill to the State of Minnesota.

April 21, 2013 at 2:28 pm

"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."

It's a bad system. What was agreed to in 1993 should have been adhered to, and her half separated in '93.

There's no limit to to confusion caused by retirement accounts, including pensions, IRAs, 401(k), etc. And a good reason to make it a habit to revisit the beneficiary statements for any of these accounts.

April 21, 2013 at 1:42 pm

Child support? Yes.

Paying a woman 50% of your pension because she gave up a promising career as a waitress? No.

April 21, 2013 at 12:08 pm

I having the same thing done to me because lawyers do not know some of the laws, and the bad thing they seem not to care. Any wife, that is entitle to his benefits and the federal and state law says so you should be put in there the right way when you get the divorce.

Like me I have been in court 5 times because of this and it is don't care, just give me the money that's it. Has cost me thousand of dollars that would not have. The first lawyer I had was doing me an another client at the same time and charging me for doing nothing. While I stood around and charged me for it, then wanted to sue me. And they never tell you the law of thing I have found out on my own. Then the say don't play lawyer.

April 19, 2013 at 10:21 pm

Her divorce attorney should have know the rules. Sue him!!!

April 19, 2013 at 8:15 pm

Dee Dee, are you SURE you have a PhD? Your grammar and spelling are atrocious, not to mention the dangling participles! I suspect you most likely took advantage of your ex-husband during the divorce proceedings. Most courts do not mandate a college education for a child. BTW, a PhD is not referred to as a "PH degree."

April 19, 2013 at 7:05 pm

The misconception is that people think they are entitled to live in the manner they had become accustomed. Really? Nobody wins in a divorce, especially the offspring of happier times. So, everyone should learn to scale back lifestyles including can become a good life lesson for things like choosing a mate and when.

Many men try to skate on their reasonable responsibilities to their children and many women don't want give a inch "for the sake of the kids" unfortunately reason goes out the window and emotion rules as evidences in some of the posts.