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Woman drains ex’s retirement account

By Barbara Whelehan · Bankrate.com
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 PlanSponsor.com. 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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636 Comments
J M
January 03, 2013 at 10:56 pm

It is mail fraud. He likely didn't want to have his wife prosecuted for the crime - but still wanted his money. Sorry, dude, you can't have your cake and eat it too. Either the Ex goes to jail and/or pays restitution - or you get nothing but bitter memories.

William Gill
January 03, 2013 at 10:24 pm

If he had been in the military he would have half of his military retainer pay taken from him due to old archaic laws saying men have to support the ex spouse for the rest of there lives. It is esp bad here in Oklahoma.

Grannie
January 03, 2013 at 9:52 pm

She is guilty of mail fraud and should be prosecuted. And King o' the Surf, trust me, it's not just females that are bad. Really

Deb
January 03, 2013 at 9:32 pm

This sounds like anyone who happened to open the letter could take the steps to set up access to his account, whether it be his wife or ex-wife, a guest staying at his house, or a total stranger. Mail doesn't always get delivered to the correct party, you know. Maybe his wife knew something about him that allowed her to access the account when others couldn't have; but information on anyone is easy to come by nowadays, so it's conceivable that a stranger might have been able to acquire whatever information was needed to set up the account on-line in their favor. And marking the letter "To be Opened by Addressee Only" isn't going to stop anyone. Yes, he should have been in contact with the company investing his funds. But he was likely receiving account statements from them at his address long after he ended his employment; he'd just forgotten to tell the plan administrator about his more recent move. Usually, as a safeguard, before such a disbursement is made, it is confirmed with the owner of the account (and the owner only), either through a phone call, e-mail, or letter. If the investment company couldn't contact him personally to get a confirmation, they shouldn't have proceeded with the disbursements.

Marlowe
January 03, 2013 at 9:03 pm

This kind of theft is not the sole purview of women so I am requesting that the site administrator review posts prior to publishing and remove misogynist posts.

Gratefully Stable
January 03, 2013 at 8:49 pm

It seems to me that by pursuing his funds through the pension plan, he's barking up the wrong tree. His wife illegally opened his mail, chose to commit fraud by entering new information on his behalf on HIS online account, and withdrew money held in his name without his knowledge or consent.

Why nobody has advised him of this is beyond me. By suing his ex wife for fraud, he's unlikely to get much, if any of his money back, but he'd at least possibly set a legal precedent and perhaps ensure this doesn't happen to anyone else.

doontp
January 03, 2013 at 8:33 pm

Isn't it illegal to open someone else's mail?

Jay C
January 03, 2013 at 8:21 pm

Report her to the IRS and state revenue so that she is held accountable for paying the taxes on it.

Grif
January 03, 2013 at 8:14 pm

Just goes to show you, that you cannot fix stupid!!

King of the Surf
January 03, 2013 at 7:41 pm

If he had read the new book "The Bachelor's Guide to the Galaxy!" he would have never had this problem to begin with!!