Retirement Blog

Finance Blogs » Retirement Blog » Woman drains ex’s retirement account

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.

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.
January 10, 2013 at 4:39 pm

Ex wife? Sounds like they were still married in a legal sense. She did nothing illegal. And the IRS can go after her for all of the tax and he can claim innocent spouse. He still out the net, however.

January 10, 2013 at 3:24 pm

It's a crime and that's probably his only remedy. Larceny and possibly interstate wire fraud. She could go to jail. With a good judge, the ex might be given a choice of reimbursement or perhaps a couple of years in the clink.

Probably a waste of time to sue her civilly as she sounds like the type to have quickly spent or hiddent the money.

January 10, 2013 at 1:18 pm

the x should be on probation until all is recovered.

N Rich
January 10, 2013 at 1:10 pm

I think the ex probably deserved the
He could obtain a lawyer, go after her for the $$ and
end up spending that amount on him ...
What a Get Rich Scam !!!

January 10, 2013 at 1:08 pm

It sounds like the ex-wife is responsible for the fraud and crime. File the police report against her. He may not get any tangible money in hand, but a judgement againstr her would deduct anything she might get in the future.

January 10, 2013 at 12:57 pm

Blah blah blah

Elaine Jelsema
January 10, 2013 at 12:50 pm

I notice respondents are all male. This woman is the Robin Hood who actually did what many women would cheer about! Of course she needs to be prosecuted, but you've got to admit she used technology (and her husband's laziness) to her advantage.

Joe From Hell
January 10, 2013 at 11:13 am


Joe From Hell
January 10, 2013 at 11:12 am

Since it was his EX wife and not HIS wife SHE should be in jail for fraud...

January 10, 2013 at 10:45 am

I think this is a case of identity theft by using electronic communication. It is similar to getting a credit card and maxing it out using a the social security number of a child or parent. Since they are no longer married and the legal documents did not include the account for distribution then it should not acceptable for her to get his money. She may legally been entitled to half but there should still be some type of legal procedure that should be followed. Press charges on identity theft and see how fast you get the money back....from the ex-wife.