Accenture ESPP (Employee Share Purchase Plan)

Accenture has offered an Employee Share Purchase Plan (ESPP) since the company went public in 2001. It’s a great way to purchase Accenture shares, but we’ll cover a few things you need to know.

I probably could have FIRE’d even sooner if I never sold my Accenture shares accumulated through the ESPP, but they were a good source of funding along the way.

However, I know quite a few Accenture employees and managing directors who never sold any, which means many seven and eight-figure accounts! Let’s get into the plan.

Accenture Employee Share Purchase Plan details

Accenture offers qualified employees a 15% discount on shares purchased through its ESPP program. Employees can contribute up to 10% of their total compensation, accumulating for six months until the stock is purchased.

The ESPP contributions max out at $15,000 or $7,500 per each ESPP period.

You need to enroll in the program before the set start dates. After that, you elect after-tax contribution between 1%-10%, which accumulates in a separate account until the six-month period ends in either May or November. 

The ESPP purchase price is the stock’s average price on the last day of the ESPP cycle. The amount accumulated is used to purchase the shares based on that average stock price.

Based on my experience with the ESPP, it takes a few days for the stock to purchase and show up in the Morgan Stanley account.

After the stock shows up, employees can sell the shares whenever they’d like or hold onto them in the Morgan Stanley account.

As mentioned earlier, there’s one change that occurred after Accenture started the program in 2001. They previously offered a 15% discount on the stock price from either the first day or the last day of the ESPP period.

However, now they only provide the discount based on the stock price at the end of the period.

Cash flow implications of Accenture’s ESPP 

As I experienced in my early days with Accenture, the 10% reduced paycheck can hurt anyone on a tight budget. 

However, as long as you can swing it and afford the contributions, that money will soon come back to you, with typically a nice increase.

Paycheck withdrawals fund the ESPP, so once you commit, it all happens automatically.

Tax Implications of the Accenture ESPP 

There are a couple of elements to factor in when assessing the tax consequences of the Accenture ESPP. 

Firstly, the 15% discount, which might appear as “free” money, is taxed as ordinary income in the year you receive the stock. 

Secondly, when you sell the stock, you’ll pay a short-term or long-term capital gains tax on any additional gains after the purchase. 

If you sell right away, there’s a chance the stock price hadn’t moved much from when it was issued, but any profit is taxed at the short-term capital gains rate. 

Any stock held longer than one year and sold is taxed at the much lower long-term capital gains rate, ranging from 0-20% depending on your income bracket.

Your investment return is more than 15%!

While it seems clear you’re receiving a 15% return from the ESPP program, you’re receiving an even higher return. That’s because 15% is a discount on the purchase price. 

Let’s go through an example:

Let’s say you contribute $6,800 per year in the Accenture ESPP program. After each six-month contribution period, you’ll have $3,400 to purchase stock.

If the stock is trading at $200 per share, your discounted purchase price is $170 per share, so you’ll receive 20 shares. 

Your shares are actually worth $200, which means your total value is now $4,000 for a 17.6% return ($600 / $3,400)! 

You’ll have to pay ordinary income taxes on the $600, but it’s still an excellent return. It’s even better when you factor in the amount of time it takes to receive the return.

As the length of your contributions ranges from 6 months to just a few weeks, receiving a 17.6% return for the money you only invested a few weeks ago is massive!

Should you participate in Accenture’s ESPP?

If you couldn’t tell by the number of exclamation points in the last few sentences, I’m a big fan of the ESPP’s. As long as the reduced cash flow doesn’t adversely impact your living situation, the Accenture ESPP is giving you a minimum 17% bonus, minus taxes, of course. 

I was glad I participated in the program and still hold a fair amount of stock. However, I also think about the ~$20k of stock I sold in 2009 and 2010 to help start my married life and how much it would be worth today.

It’d be worth about 4x that amount, but of course the investment I made in my personal life and my wife is worth much more than that! (Just in case she reads this).

Many of the Accenture managers and partners I worked never sold their Accenture shares, which they started accumulating at under $20 per share. 

At $200 per share, you can see how they’re all incredibly loaded now!

Alternatives to the Accenture ESPP

Accenture Managing Directors don’t have access to ESPP, but they get something even better. They can contribute to the Voluntary Equity Investment Program (VEIP).

Part of the work I do with Adventure Wealth Advisors is to help clients plan out their cashflows to maximize these programs’ benefits and minimize the taxes.

I love helping my old Accenture co-workers and friends reach their financial and life goals as fast as possible, so feel free to reach out if you have any questions!