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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 09, 2013 at 6:38 pm

I can't believe he has no recourse. What if the person who drained his retirement account had been the new tenant of his former home and not his ex wife? Would the court still rule that the retirement account was sufficiently protected by the former employer? It absolutely was not protected if the account could be accessed and drained without verifying the identity of the person initiating the transaction.

There should be a way to opt out of online management of your retirement accounts. They are not sufficiently protected or insured against this sort of fraud.

January 09, 2013 at 6:26 pm

I definitly hope that this guy does not let her go easy and sue her and get to the bottom of it.

January 09, 2013 at 5:59 pm

He needs to file a fraud report on the ex, then file a lawsuit on her. She needs to pay that back. A small oversight on his part doesn't mean he should be robbed.

January 09, 2013 at 5:53 pm

"Heaven has no rage like love turned to hate
and Hell no fury like a woman scorned."

It sounds like William Congreve had been through a divorce.

To the point, though, civil AND criminal charges are in order.

Marion White
January 09, 2013 at 5:36 pm

Although I do not feel that the company did anything wrong, I feel that the ex husband needs to sue the ex wife for all of his retirement money. First of all opening someone else's mail is a criminal offense even if it was sent to the wrong address; she should have returned the letter; second, she knowingly open his mail and used his account numbers for her benefit which under the law is called "stealing", if it was her money and he took it she would have sued him so he needs to sue her for every penny. If they were together she would have gotten half of the money, but for her to take all of it tells me that she is a low-life human being who only cares about herself. Since they were legally divorced the money was his and his along; that was his retirement from his job(s) and she should not have taken it. she needs to repay back all the money and be arrested on fraud charges.

January 09, 2013 at 4:41 pm

Michele, this is not a conspiracy. go to the website for the 10th US Circuit Court of Appeals and search for case 10-5123. The opinion of the court is posted.

January 09, 2013 at 4:26 pm

It is not the plan's responsibility -- that lies with the ex-wife. He should file a suit against her for fraud, and take a money judgement against the house.

January 09, 2013 at 3:25 pm

Lets hope the ex has to pay

The PlanSponsor is NOT liable

the ex is

The PS has no responsibility in this matter

The ex spent the ex's money

its all on her

January 09, 2013 at 3:14 pm

It is ashame as to how simple the Retirement's security measures are that all you have to do is open the mail and the account is yours.

January 09, 2013 at 3:12 pm

I agree with Paul. Also he should in civil court get her to cough up the house. Then he should sell it. She will not need it, because she will be in prison.