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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
Toni
January 15, 2013 at 11:48 am

I meant $25,000 not $25

Toni
January 15, 2013 at 11:47 am

My husband at the time did this by getting the letter sent and setting up my account online to access it. He borrowed $25 from it and defaulted on it before I knew what happened. By that time, he had been jailed for another crime against me. I got an attorney (my cousin) and we crafted a letter from me and sent it to the retirement company's fraud department via certified mail. This forced them to investigate. He was charged with fraud and identity theft and the retirement company returned my $25.000. The ex got 5 years for this.
I admit that they will use any reason not to pay and evidently they used the lack of an address update not to pay at all. They were unable to got around my claim.

Tee
January 15, 2013 at 11:25 am

I don't understand how this isn't identity theft? I don't understand how a plan doesn't ask for a signature for distribution from the owner? where are the checks and balances?

Bob
January 15, 2013 at 11:06 am

Worse yet... He probably has to pay 30% or more in early withdrawal fees / taxes.

angels_everywhere
January 15, 2013 at 9:32 am

mr foster if you are reading this, its clear you have a case against your wife and if you want her to repay you then file charges against her
you went after a corporationi which rarely will be found guilty unless you follow a contract to the letter of the law and show that they were somehow negligent because even with evidence, there is always some statute, caselaw, etc... that can allow good corporate lawyers to loophole their way out of it
federal mail crimes have some hefty penalties so if i were you and wanted to stick her for her illegal malicious actions, i would file every single charge against her then make her pay restitution and possible even jail time (although they would probably take it easy on her and give her probation citing her situation regarding the divorce)

Karl
January 15, 2013 at 9:31 am

All too often, financial institutions want to dismiss such problems as "domestic disputes." My Ex drained a $100k from a mutual fund account that required two signatures on checks. She told the fund we had lost the checks and had new ones sent to her requiring only one sig. When I found out, the fund wanted to dismiss it as a domestic dispute. I insisted they get the money back and they had breached their fiduciary duty. The money came back into the account!

Jim
January 15, 2013 at 6:25 am

Jason, what about receiving stolen property. This is a feloney and being treated like a small mistake by the ex-wife. This is State Prison time for any other theif!!

M
January 14, 2013 at 11:09 pm

To : "Hexxuss" : I totally agree with you !! I wish everyone "felt" this way !!! He should've notified his company of the move and not waited so long !!!! That man really wasn't "thinking !!"

Julia
January 14, 2013 at 10:50 pm

In a word: YES The wife should've been charged and made to make restitution for stealing this mans money.

Jason
January 14, 2013 at 9:43 pm

Hmm, let's see...mail fraud, wire fraud, identity theft, theft by receiving, grand theft. Those are just the ones I can think of. Where is the City Attorney on this?