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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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January 02, 2013 at 2:57 pm

Wow, an ex-wife stealing money. There's a shocker.

January 02, 2013 at 2:09 pm

"It seems unbelievable that the defense of the retirement plan is that they had the wrong address. "

Well, it should not be believed because it is not true. That was NOT their defense at all! Not even CLOSE!

Their defense was really very simple: Not their problem.

The owner of the money didn't take ANY reasonable precautions to protect his assets. He left himself wide open, and that is not the fault of the retirement plan.

It's not their job to wipe his bottom for him, and it's not their job to check with him every few days to see if he still lives at the address he gave them, and it's not their job to make sure his wife doesn't rip him off.

January 02, 2013 at 12:39 pm

Of course the plan shouldn't have to pay out twice. He should be suing his ex for the money and hopefully convincing a DA to prosecute her for fraud.

January 02, 2013 at 12:29 pm

His going after the wrong person. He should go after his ex. He should sue for her identity theft.

Don Bronkema
January 02, 2013 at 8:44 am

This couldn't happen in a Populist society [e.g., Netherlands; Scandinavia], but reactionaries will never permit equity here, citing the dread beast of Bolshevism [deceased or not]!

Frank Previte
January 02, 2013 at 7:05 am

It seems unbelievable that the defense of the retirement plan is that they had the wrong address. What if your mail comes to a non-locked mailbox, as nearly 70% of all mail boxes are? A thief steals your mail. The retirement plan would claim that it wasn't their fault that someone stole your mail. It seems like there should be a procedure in place at the retirement plan to cover issues like this. Fraud is fraud. The retirement plan should provide insurance protection for all account holders and make it an account expense. Insurance is unbelievably cheap when spread across the entire plan.

The woman violated U.S. mail laws by opening the victim's mail, a criminal offense. She also assumed the identity of the account holder to misappropriate the money which is identity theft, a criminal offense. The victim should file a sworn complaint with the U.S. Postal service, and file sworn complaints, both federal and state, for identity theft.

IRS regularly forgives female spouses when the male spouse takes some action that effects her taxes when the action was unbeknownst to her. The victim here should claim the same treatment--the IRS innocent spouse rule, shifting all tax liability to the one who got the money--the woman.

The story doesn't say, but if the account sent checks in the victim's name and she cashed them, that would be bank fraud. The bank would have to prove that the victim signed the checks, which they would not be able to do. It would be up to the bank to make the victim whole.

If the withdrawal was direct deposited there might be other issues in which the bank could potentially be liable.

If they were divorced at the time of this action the victim could easily go back to family court seeking restitution, provided that his account has been disclosed in the divorce proceedings. The same would apply if this occurred in a state that allows legal separation and a separation order was in place.

As the old saying goes, the thieves spend more time worrying about how to steal your money than you worry about protecting yourself against having them steal it.

Finally, it cost a lot of money to for the victim to get all the way to the Court of Appeals--probably a lot more than the $42k that was misappropriated. Who is out that money, the victim, an attorney that took the case on a contingency basis, or perhaps some insurance company providing coverage against identity theft??

Tom B.
January 01, 2013 at 11:22 pm

seems like any other case of one spouse squandering joint assets after separation, and that the divorce court would require restitution of whatever portion the husband was due as well as reimbursement for untoward tax consideration borne by the husband. Both my ex and I were warned by counsel that stupid moves like this would be looked at dimly by the (Virginia) courts.

Gary C,
January 01, 2013 at 11:09 pm

If Michael Foster doesn't get any money back from his ex, he will also have to pay taxes on the withdrawn funds as income. Ouch!

Edward D
January 01, 2013 at 5:39 pm

I don't know all the specific points entailed by the plan administrator for the unfortunate victims "former" retirement account. In some states his ex would be entitled to half of his retirement as well as he being entitled to half of hers. Unless, a type of arrangement were worked out in the separation agreement. The point now is certainly mute. One observation I would like to pont out, after 11 years of marriage, it would be easy for his ex to forge his signature on most any document. A notary witness isn't always needed for these simple withdrawals. Embezzlement of funds carries a harsh penalty where I live.
I hope he gets an honest restitution.

January 01, 2013 at 4:34 pm

Isn't it illegal to open someone elses mail when it is to addressee only? That's mail fraud or something like that.