Accelerating your wealth through the AbbVie Incentive Plan (AIP)

Accelerating your wealth through the AbbVie Incentive Plan (AIP)

June 29, 2021

AbbVie prides itself on providing a very rich compensation package to reward its employees. Among AbbVie’s compensation options includes the AbbVie Incentive Plan. Depending on your position as well as your role and responsibilities, you could be eligible for one of three tiers of the Abbvie Incentive Plan.

The three tiers include the Global Plan, the Area Plan, and the Affiliate Plan. The amount of the bonus received under these plans depend on several factors - non-GAAP organization financial goals, sales and margin ratios, and personal and functional performance within your role.

You will see the Global plan is 20% derived from Abbvie’s financial goals and 80% derived from Individual and Function Performance measured by the “Ways We Work” doctrine and your “Goal Rating”. Subsequently the Area Plan starts to include “Area Sales and Margin” as well as Abbvie’s financial performance and your individual performance.

Finally, the Affiliate Plan removes Abbvie’s overall performance element and replaces it with “Area Sales and Margin”. 


 


How Do I know which Plan I am eligible for?

Since this plan could be a substantial addition to your overall compensation package, the specific part of the AIP for which you’re eligible depends on your role within the company. As this can change as you progress through the company, it’s important to check with HR to determine which plan you fall into in your current role.

 

When are the Incentive Plan Funds Paid out?

As the AbbVie Incentive Plan is based on your and the company’s performance in the prior year, the bonus is paid out in the first quarter of the year. You’ll see it as a line item on your paystub, and depending on your role and seniority, it can make up a substantial part of your compensation. 

 

How will the dollars from my Abbvie Incentive Plan be taxed?

The total dollar amount of the Incentive Plan will be taxed as ordinary income in the year in which it is received. For example, if you received your Abbvie Incentive Plan payout for 2020 in January of 2021. You will pay ordinary tax rates on those funds on your 2021 tax return.

 

How should you maximize your Abbvie Incentive Plan to grow your wealth?

The total dollar value of this award is dependent on several factors. This means from year to year your total “Taxable income” could change and could place you into a higher marginal tax bracket than you normally experience. If this happens, you could be paying more in income tax over the years than you need to. Being aware of your tax situation each year is important. You don’t want to be paying more in taxes throughout your career if you had the option to prevent yourself from doing so. By saving all, or a portion, of your AIP to your AbbVie Savings Plan, Health Savings Account, Flexible Savings Account, or AbbVie’s Deferred Compensation Plan, you can defer most - if not all - of the taxes due on your AIP payout.

 

We recommend you work with your financial planner every year and discuss the amount of your Incentive Plan in addition to all your other “taxable income sources” to keep your marginal tax rate as low as possible for your situation. Maximizing your Abbvie Incentive Plan is a smart choice. Making sure you coincide this benefit with all others available to you to help prevent you from unknowingly making any wrong choices by hiring a financial planner to help you is the best choice.

If you are interested in learning how a financial planner can help you navigate these issues or any others please feel free to reach out to me at dave@retirementmattersillinois.com for your free, no obligation consultation.