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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
Troy
January 16, 2013 at 2:50 pm

There is nothing in the court ruling to stop him from suing her for fraud and recover all funds including damages (taxes on early distributions).

john davis
January 16, 2013 at 2:21 pm

WHAT A TYPICAL WOMAN THING TO DO, I WAS LUCKY IN MY DIVORCE, I GOT CUSTODY AND SHE HAD TO PAY ME $500 A MONTH, LOL, HOW OFTEN DOES THAT HAPPEN?, I ALSO HAD TO PUT A RESTRAINING ORDER AGAINST HER, SHE ATTACKED ME IN FRONT OF OUR SONS, IT'S BEEN 14 YRS NOW AND SHE HAS NEVER TRIED TO CONTACT THE BOYS, WE FOUND OUT SHE WAS CHEATING FOR MOST OF THE TIME, A DOUBLE LIFE! AT AGE 57 SHE TRIED TO GO TO COURT TO GET A GUN, I WROTE THE JUDGE A LETTER SAYING ALL THE CRAZY THINGS SHE DID, HE DENIED HER THE GUN LOL HOW IS YOUR LIFE THESE DAYS JACKIE? LOL

bob
January 16, 2013 at 2:11 pm

It was not part of a divorce settlement. she stole his money. didn't see anywhere in the report he was cheating on her. make her pay it back.

Ann
January 16, 2013 at 2:05 pm

It's theft and she deserves not only jail time, but she should have to pay the money back + attorney's fees, etc. Doesn't matter if he cheated (and I have been cheated on so I can certainly empathize with the anger). One wrong does not justify another. He broke a moral law, she broke a civil law. Her disregard has consequences that involve jail time.

chuck
January 16, 2013 at 1:50 pm

Cheating is not the issue One way or another has nothing to do with it, It is theft by her period, And no they should not have to pay twice but she would have to pay back either all of the money or his portion If she recieved it in the divorce.

TN
January 16, 2013 at 1:40 pm

So, Alex, a cheating man justifies felony theft? That is what she did. People get up to 20 years for that, particularly if the theft was accomplished using interstate communications. But it is OK. He cheated on her. I hope she can tell that to her cell mate until she gets shanked for it.

Rebecca
January 16, 2013 at 1:17 pm

The court also noted in its ruling that the plan was not at fault because it did not have to insure against wrongful actions by a third party. She is a third party and it was wrongful. If he had moved out of an apartment and a male roommated had done the same thing, it would still be theft. I hope he sues the pants off her.

Rebecca
January 16, 2013 at 1:14 pm

I would think this constitutes outright theft on her part. She has no legal entitlement to it. Just because she can break into a bank does not mean she gets to keep her "booty". I would imagine if the shoe were on the other foot, "Alex" above would be singing a different tune.

jason
January 16, 2013 at 1:05 pm

She undoubtedly received half of the 401k from the divorce. Now she drained out the other half. He gets to spend his retirement on social security now. She gets to enjoy a shopping splurge at the mall. I have no doubt that the woman is the one who was cheating prior to the divorce as well.

Alex
January 16, 2013 at 12:56 pm

GOOD FOR HER! SICK & TIRED OF MEN CHEATING/LYING ETC ON THE WOMAN! LIKE TO SHAKE HER HAND! POOR,POOR MEN!!!