A district court recently upheld the denial by a 401(k) plan administrator of a participant’s claim for restoration of funds impermissibly withdrawn from his account by the participant’s ex-wife. Following his divorce in 2004, the participant continued to list his prior marital residence as his permanent address for all purposes related to the plan, despite notification that he was required to notify the plan of any change to his mailing address. As a result of his failure to notify the plan of his address change, all plan documents and communications continued to be sent to the marital address. In early 2005, the plan administrator mailed documents to the participant that described changes in the way plan participants would access their accounts, including the procedure for creating a new User ID. The participant’s ex-wife received the document at the marital address and made an online request for a new User ID. In accordance with the plan’s security procedures, confirmation of the new User ID and a temporary password were sent to the listed permanent address. The ex-wife changed the password, established a User ID for her ex-husband’s account, changed the permanent address on the account, and made a withdrawal. The money was electronically deposited into a bank account established by the ex-wife. Over the next few months, the ex-wife emptied the account of all available funds, an amount in excess of $42,000. The participant remained unaware of the withdrawals until January of 2006, when he received a Form 1099-R showing the 2005 distributions from his account. His subsequent demand that the plan restore the withdrawn funds was denied by the plan administrator, which determined that the plan was not responsible for the lost funds because the plan had in place all necessary and proper security measures, the benefits were paid in accordance with all plan terms and requirements, and the participant’s loss of benefits was due to the fraudulent conduct of his ex-wife and to his own failure to notify the plan of his change of address. The participant subsequently filed a lawsuit requesting restoration of his benefit. The court ruled in favor of the plan, holding that the plan administrator did not act arbitrarily and capriciously in its denial of the participant’s claim for restoration of funds. Pointing to the clear procedures contained in various plan documents that obligate participants to provide updated mailing addresses and informing them that PIN numbers and confidential information related to electronic withdrawals would be sent to participants at the addresses on file with the plan, the court found that it was the participant’s failure to comply with the notification requirements that permitted his ex-wife to receive confidential documents relating to his account. The lesson here for plan sponsors is to, like the plan sponsor in this case, establish and follow reasonable procedures for administering your plans. (Foster v. PPG Industries Inc., N.D. Okla., 2010)