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Woman drains ex’s retirement account

By Barbara Whelehan ·
Friday, December 7, 2012
Posted: 5 pm ET

Divorce is a tough experience, but such hardship doesn't cut you any slack if you don't stay on top of your retirement paperwork, as one poor fellow discovered.

Imagine this scenario: After 11 years of marriage, you and your spouse call it quits and you move out of the house. After you leave, a letter from your former employer is delivered to the house that your ex now resides in. The envelope is clearly marked: "To be opened by addressee only." Your ex opens it and discovers there's a new procedure in place to access your retirement funds online. After following the procedures, your ex drains the account in four months.

This happened to William Foster of Tulsa, Okla. He lost $42,126.38 altogether -- and didn't even find out about it until January of the following year, when he received a tax form from the plan provider reporting a distribution of that amount. Foster sent a letter to his former employer's plan administrator, "claiming potential fraud, as I did not request withdrawal from my plan and I did not authorize any disbursement from this plan," according to court documents.

The 10th U.S. Circuit Court of Appeals concurred with a district court's ruling that the plan was not at fault because it doesn't have to insure against wrongful actions by third parties, according to The court found that the plan isn't under any obligation to pay the benefits twice "because of William Foster's failure to comply with his obligations to ensure the plan had his correct address," according to the report.

Foster neglected to notify his former employer, where he hadn't worked for the previous six years, of his change of address. And now he's out 42 grand.

From the PlanSponsor article by Rebecca Moore:

The court found that the employer and plan did nothing wrong. The decision to process account withdrawals was based on receipt of a procedurally sound request. According to the court's opinion, Foster was fully informed of how the plan would allow him access to his money, and that someone with the correct User ID and PIN would be treated as the legal participant for purposes of processing withdrawals.

Foster failed to notify the plan of his new address until 15 months following his split from his wife. In the meantime, the plan mailed a document to the Foster home describing changes in how participants would access their accounts. It included an explanation of how a User ID created by the participant would replace the Social Security number for identification purposes. Foster's ex-wife received the document and made an online request to put in place a new User ID, which the plan confirmed in April 2005. The following month, she changed the account password, changed the listed permanent address to a post office box and withdrew $4,000 from the account. During the next several months, she drained the account.

Anyone is capable of this type of oversight. Let's learn from this poor guy's mistake and stay on top of our retirement planning paperwork, no matter what may be going on in our lives.

What do you think? Should the court have ruled differently? Should the plan provider cough up his money?


Follow me on Twitter: BWhelehan.

Correction: A previous version of this post identified the plaintiff as Michael Foster. His name is actually William Foster.

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December 28, 2012 at 4:58 pm

The ex-wife committed mail fraud by opening Mr. Foster's mail; then she accessed the money without authorization. I think the retirement plan provider should be held responsible also for disbursing the money to someone without authority
. Mr. Foster needs a really good lawyer to file charges against everyone involved.

December 27, 2012 at 10:24 pm

If it was reversed and the women got taken advantage of they would rule in her favor,nothing new here.

Brian McCue
December 27, 2012 at 3:52 pm

What if the neighbor had instead had taken the money after opening his mail? Would the outcome be different?

December 27, 2012 at 10:28 am

The ex is guilty of mail fraud (when opening mis-addressed letter), forgery, "identity theft". The employer and "plan" not at fault.

Kathy Lake
December 27, 2012 at 7:18 am

If I were the husband, 1) garnish the ex wife's paychecks 2) sue to get the money back 3) have the ex wife pay any penalties & taxes owed 4) notify Social Security to garnish HER retirement 5) create a lien on the house she resides in - when it's time to sell, the house cannot be sold until all liens are paid. Whatever the purchase price is, the seller has to deduct the amount owed to the ex husband.
As for the employer and plan distributor, they are not to blame.

David Stone
December 26, 2012 at 10:44 pm

If no divorce decree, likely half belong to her ultimately. If there was and he had not given her that half--again half is hers.

If decree said no part was hers then ots all his.

So, for that portion not hers, it was theft. If she misrepresented herself as him , it was also fraud. If across state lines, then certainly federal crime. Might be regardless..

Civilly, she would have liability if any of it was not hers.

He might be forgetful or whatever, but simply not remembering to change all the addresses does not excuse criminality on her part-nor would a reasonable person feel it justified-civil test.

Now, since SHE took the money, it could be referred to the REALLY big dog--the IRS. To assess any early withdrawal penalties and tax liability (and penalties, if no tax paid on it).

If not officially divorced, the civil part might be reconcilled in a divorce court--BUT any criminal infractions are there--and divul;ging in the divorce court or in a civil trial might come back to bite her in a criminal proceeding.

Big “B”
December 26, 2012 at 10:02 pm

X wife should be in some serious trouble real soon. She should not only be charged for theft (At most she was entitled to would be half correct?) but also be on the hook for the taxes and penalty on what was withdrawn.

May be time to send a message about spousal theft.

Dave Huffman
December 26, 2012 at 8:17 pm

Oh, there is no doubt his wife is at fault, and should be held liable up to, and including every cent. Just because she could access it doesn't mean she had the legal right. Whether she was entitled to any of it would be crystal clear in their divorce decree, and if not, I would bring charges against her. She should have to pay full resitution, including interest, until she pays it off, and she should probably do a stint in jail....

December 26, 2012 at 4:10 pm

I would want to know who the checks were made out to that she cashed. If it was his plan it should of had his name on them. That would be fraud if she signed them. Also if she had them direct deposited his name should have been on the account for them to direct deposit it.

Sage Green
December 26, 2012 at 2:29 pm

I do not think the wife or the employer is at fault. Like it was stated he should've made a change of address at the post office and his wife would have never gotten the letter in the first place eventhough half of it belong to her anyway. So if he just up and left her to fend for herself and they have children I agree she did the right thing. Like all parties that are going through a divorce does not think ahead. So now he's angry SO WHAT!!!!