AbbVie 2012 Annual Report Download - page 140

Retirement Benefits
In 2012, the named executive officers participated in the Abbott Laboratories Annuity Retirement
Plan and the Abbott Laboratories Supplemental Pension Plan. These plans are described in greater
detail in the section of the proxy statement captioned ‘‘Pension Benefits.’’
Since officers’ Supplemental Pension Plan benefits cannot be secured in a manner similar to
qualified plan benefits, which are held in trust, officers receive an annual cash payment equal to the
increase in present value of their Supplemental Pension Plan benefit. Officers have the option of
depositing these annual payments into an individually established grantor trust, net of tax withholdings.
Deposited amounts may be credited with the difference between the officer’s actual annual trust
earnings and the rate used to calculate trust funding (currently 8 percent). Amounts deposited in the
individual trusts are not tax deferred. In 2012, since amounts contributed to the trust had already been
taxed, Abbott remitted the tax owed on the income earned by the trust or any company-funded
adjustment paid to the trust, thus preserving the parity of the benefit to those payable under the
qualified plan.
Going forward, AbbVie will provide pension benefits under the AbbVie Pension Plan and the
AbbVie Supplemental Pension Plan, which are based on the Abbott pension plans. As noted above,
beginning in 2013, officers will not receive tax gross-ups on their grantor trusts. The manner in which
the grantor trust will be distributed to an officer upon retirement from the Company generally follows
the manner elected by the officer under the Pension Plan. If an officer (or the officer’s spouse,
depending upon the pension distribution method elected by the officer under the Pension Plan) lives
beyond the actuarial life expectancy age used to determine the Supplemental Pension Plan benefit, and
therefore exhausts the trust balance, the Supplemental Pension Plan benefit will be paid to the officer
by AbbVie.
Deferred Compensation
Officers of the Company, like all U.S. employees, are eligible to defer a portion of their annual
base salary to the Company’s qualified savings plan, up to the IRS contribution limits. Officers are also
eligible to defer up to 18 percent of their base salary, less contributions to the qualified savings plan, to
a non-qualified deferred compensation plan. Up to 100 percent of annual incentive awards earned by
the officers are also eligible for deferral to a non-qualified plan. Officers may defer these amounts to
unfunded book accounts or choose to have the amounts paid in cash on a current basis and deposited
into individually established grantor trusts, net of tax withholdings. These amounts are credited
annually with earnings. In 2012, since amounts contributed to the trusts had already been taxed, Abbott
remitted the tax owed on the income earned by the trusts or any company-funded adjustment paid to
the trusts. As noted above, beginning in 2013, officers will not receive tax gross-ups on their grantor
trusts. Officers elect the manner in which the assets held in their grantor trusts will be distributed to
them upon retirement or other separation from the Company.
Change in Control Arrangements
As noted above, AbbVie’s named executive officers have change in control agreements, the
purpose of which is to aid in retention and recruitment, encourage continued attention and dedication
to assigned duties during periods involving a possible change in control of the Company, and to protect
the earned benefits of the named executive officers against adverse changes resulting from a change in
control. The level of payments provided under the agreements is established to be consistent with
market practices as confirmed by data provided to the Committee by its independent compensation
consultant. These arrangements are described in greater detail in the section of the proxy statement
captioned ‘‘Potential Payments upon Termination or Change in Control.’’
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