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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
ABP2001
January 11, 2013 at 11:23 am

There had to be a compelling reason for the judge not to obviously side with this man. I would have to know the "whole" story before commenting "yea or nay."

Lisa
January 11, 2013 at 8:26 am

Well the good news for him is he really only lost about 10K because when you add in the taxes and the fact that it is his and his wives acct, his share would be about 10k.

JillBritt
January 11, 2013 at 1:23 am

It's a federal offense to open mail not addressed to you. Regardless if you are still married to your spouse or not.

Ron
January 11, 2013 at 1:20 am

What the ex did is called felonious mail fraud. He needs to contact the Postmaster General and have them investigate and file charges. This is a Federal offense.

Jtom
January 10, 2013 at 11:10 pm

Allen: The procedure to establish online access to the account probably required personal information the ex-wife knew - his social security no., date of birth, etc. So, no, not just anyone opening the letter could access the account.

That's a common weakness of all on-line accessible accounts. If I wanted to, I have no doubt I could access all of my ex's accounts, even the ones set up years after the divorce, simply because I know all of her identifying information. She's just lucky that I have absolutely no interest in her whatsoever. I'm not worried that she might access my accounts. She was a total moron who couldn't remember my birth date, much less my SS number. I doubt if she could turn a computer on, and definitely doesn' knows the difference between a URL and a WMD. The only thing she knew how to do was write checks. That's why she's an 'ex'.

Big L
January 10, 2013 at 10:13 pm

Maybe I am just way too jaded, but did anyone else get the thought that the reason he did not sue his ex wife was because this was all their plan in the 1st place. She takes all the money out, and he sues the company to try and get them to pay out again. Win-Win for both of them. Maybe I should stop watching so much tv. lol

Kathy Howard
January 10, 2013 at 10:07 pm

LOL Good one John!

Sylvia
January 10, 2013 at 10:05 pm

Did anyone not think to retrieve the money from the ex-wife? Is this not theft?

Allen
January 10, 2013 at 9:40 pm

So anyone who received this letter would have been able to access this account? What an idiot of a judge.

John Kantor
January 10, 2013 at 8:50 pm

That's a good argument for semiautomatic weapons.