Why you should maximize the Accenture VEIP

One of the biggest perks of becoming a Managing Director at Accenture is gaining access to the Voluntary Equity Investment Program (VEIP).

You can find all the details of the VEIP here, but many MDs still wonder if and how much they should contribute. The short answer is to max out the 30% contribution maximum if you can manage it.

The biggest challenge of maximizing the VEIP is many MDs go cash flow negative each month because the VEIP is an after-tax contribution, so you need to strategize beforehand on how to make it work.

The good news is you can sell your VEIP purchases after completing the program year, so it’s just the first year that’s the toughest.

It’s also important to note the VEIP does increase your risk due to concentration in a single stock and a chance the stock price can go down.

Why the VEIP is worth it

Let’s walk through the numbers to prove why maximizing the VEIP makes sense. There are two ways to look at the VEIP return:

Option 1. 15% increase in compensation

Many will use this as their reasoning for maximizing the VEIP because it feels like a 15% raise. While not exactly true because it takes two years to receive this extra 15% and it’s not guaranteed, it’s an easy way to view it.

Here’s the math behind this theory: 

• Contribute 30% of your salary
• Receive an RSU grant of 50% of your contribution in two years (50% of 30% equals 15%)

So while this isn’t entirely true due to the two-year delay and increased risk of your money going into one stock, it’s not a bad way to look at it.

Option 2. Possibly a 22%+ annualized return on investment

I prefer this second approach because it views the VEIP as an investment rather than a “guaranteed” salary increase. And as with all investments, there’s a risk of it going down.

Since the VEIP RSU grant takes two years to vest, that’s our investment horizon. Let’s look at two different scenarios to see your investment return possibilities. 

Scenario A: Accenture stock stays flat for two years

Let’s say your cash compensation was $300,000 in 2020, and you maxed out your 30% contribution ($90k). If Accenture was $250 per share when the grant was awarded, you’d receive 180 shares.

Two years later, when your RSU vests, the stock price is still $250, so your grant is worth $45,000. Your initial investment was $90,000, and you received a $45,000 return in two years.

This makes your annualized return around 22% — not too shabby!

Scenario B: Accenture stock rises 10% per year

Although Accenture share price has grown at an annualized rate of 17% for the last ten years, let’s go with a more conservative 10% growth rate.

We’ll use the same example that you received 180 shares purchased at $250 per share. 

When your RSU grant vests in two years, Accenture would now be $303 per share. This makes your grant worth $54,500, for a nearly 27% annualized return!

You should also remember the entire vesting amount of the RSU grant is taxed as income when it vests so you will get hit with a large tax bill on this return.

In review, as long as you can manage the cash flow challenges that come along with the VEIP, you should try your best to maximize the 30% contribution maximum.