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
Phillip
April 26, 2013 at 5:08 pm

I think it worked out perfectly. I am a bit biased. As I am divorced and feel that I got the shaft in my divorce it is always nice to see it work out in favor of the man once in a while.

David Wade
April 25, 2013 at 11:01 pm

The retirement had already been given to the first wife at the time of the divorce. There was nothing left to give to the second wife except maybe the extra earned after the marriage ended. However, the divorce decree seemed to include the extra retirement earned after the divorce goes to the first wife also.

Military Retirement works that way. Once it is given, some accountant cannot give it to some "hotter chick" later.

Christine
April 25, 2013 at 1:28 pm

It was agreed upon in the divorce, so yes, I believe she should have gotten half of her ex's pension. Also, she shouldn't have waited soooooo long after he retired to get her fair share. That was her stupidity.

Mike Schwab
April 25, 2013 at 1:17 pm

1. If she had filed the document before he started taking benefits, she should have gotten her share of his benefits up to the date of the divorce. The second spouse would get her share based on benefits earned from that date forward.

2. Once she filed, I would have split *FUTURE* payments according to the dates above. Her penalty for filing late is the loss of payments already paid to someone else.

Gail
April 23, 2013 at 1:32 pm

I think every case such as this should be looked at individually. In some cases, the wife should get his benefits and sometimes not. The circumstances of each case should be considered seperately. I think that if a man is married to a women 20 years or more leaves her for someone else. or just gets a divorce then the women should be entitled to a portion of his pension.

30 years employed
April 23, 2013 at 12:31 pm

This is an interesting debate because it has been going on for so long and since money is the leading cause of divorce; why not continue to cause problems later in life. I believe the spouse should be entitled to some of the pension if that was agreed upon or the spouse was unable to establish their own because of childrearing or constant moves. But a spouse who chooses not to work outside the home and work on developing a pension of their own even if they start later. Which is why I believe the percentage of pension awarded should be based on opportunity and not flat rate.

SalishSpeed
April 23, 2013 at 6:42 am

Blood sucking Succubus is right! My girlfriends mother tried her best to suck every last ounce after their bitter divorce. She never worked a day before or during their marriage. She was given every opportunity and was asked to help with part time jobs....but her QVC fueled elementary intellect would not allow her to see past herself! She was and still is a very bitter person. Glad she did not get any additional compensation or benefits.....the bare minimum but actually "bare" would be better suitable for her ms. selfish :)

Mike
April 23, 2013 at 6:40 am

Tough toenails to the ex. She should have done her due diligence. She had an attorney, she should have had him check it all out.
Too dang bad for her. LOL

Tim
April 23, 2013 at 5:46 am

She should of had her own retirement plan. This is the reason people do not marry in the first place. I am not going to bust my rear end and end up in a divorce, so the bimbo can receive my retirement. Are laws over here are a joke.

exanchor
April 22, 2013 at 11:45 pm

the woman who sued after her remarried ex-hubby was dead to claim a portion of his pension is a vampire. it cost her almost 56,000 to try to suck blood from his dead body., I'd say justice was served.