Microsoft Employee Benefits

MICROSOFT
DCP

MICROSOFT 401(k)
& RETIREMENT

MICROSOFT RSUS
& ESPP

MICROSOFT’S OTHER BENEFITS & COMPENSATION

Avier Wealth Advisors is not affiliated with Microsoft. While Avier communicates with its clients regarding their Microsoft employee benefits, and educates itself on the Microsoft Benefits, there is no guarantee that the information we have provided is accurate. Microsoft employees are encouraged to contact their employer should they have any questions regarding their specific employee benefits.

How can I best utilize the Microsoft employee benefits package?

You have questions about benefits. We have the answers and are here to help. Feel free to give us a call or click the button below to schedule a time to chat one-on-one with an advisor.

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Key Dates

We have outlined the key dates concerning benefits. Click the button below to view timeline.

VIEW TIMELINE

Q1 : JANUARY – MARCH

JANUARY

Review 401(k) Contributions

Update 401(k) contribution percentages to reflect new tax laws
Adjust for increases in salary and September bonus
Confirm after-tax contributions with in-plan Roth conversion benefit
Increase contributions due to the catch-up provision (Age 50+)

FEBRUARY

MSFT Stock Awards

Sell and diversify vested shares
Determine investable amount and reserves for cash needs

MARCH

MSFT ESPP

Sell ESPP shares at the end of
the quarter

Q2: APRIL – JUNE

MAY

MSFT Stock Awards

Sell and diversify vested shares
Determine investable amount and reserves for cash needs

Deferred Compensation Election

Identify deferral amount for following year’s cash bonus

JUNE

MSFT ESPP

Sell ESPP shares at the end of the quarter

Q3: JULY – SEPTEMBER

JULY

Review 401(k) Contributions

Confirm contributions are on pace to
max out benefits Review and adjust allocation if needed

AUGUST

MSFT Stock Awards

Sell and diversify vested shares
Determine investable amount and reserves for cash needs

SEPTEMBER

MSFT ESPP & Employee Reviews Completed

Sell ESPP shares at the end of the quarter
Cash bonus and new MSFT stock awards are received
Download new stock grants and vesting schedules

Q4: OCTOBER – DECEMBER

NOVEMBER

MSFT Stock Awards

Sell and diversify vested shares
Determine investable amount and reserves for cash need

Life Insurance and Health Plan Review

Deferred Compensation Election (Level 67+)

Identify deferral amount for following year’s salary

Charitable Giving Review and Tax Loss Harvesting

DECEMBER

MSFT ESPP

Sell ESPP shares at end of the quarter

Taxable Income Reduction and Tax Savings

Available to senior directors, partners, general managers, and executives, the Microsoft Deferred Compensation Plan allows you to reduce your tax bill by significantly minimizing the amount of taxable income. It works similarly to a pre-tax 401(k) plan, and any dollars you contribute can then be invested for growth and used down the road during your retirement. If you are eligible for this benefit, you can defer up to 75 percent of your salary and a full 100 percent of your cash bonus. This has the potential to reduce your tax bill by tens or even hundreds of thousands of dollars in taxes each year.

Only employees level 67 or above can engage with this plan. There are two important dates for employees considering and eligible for deferred compensation: May 1 – 31, which is when employees can choose to defer the following years bonus. November 1 – 30, which is when employees can choose what percentage of next year’s salary they want to be deducted from their paycheck.

REACH OUT WITH QUESTIONS ON DEFERRED COMPENSATION

Contribution Matching

Microsoft matches 50 percent of contributions that you make into your 401(k) account. The total amount you can contribute annually is $19,500, so when you do the math, this is a lot of free money that is available to you: $9,750, to be exact. We encourage you to make the most of this by maxing out your 401(k) contributions before utilizing any other benefits available to you. There is no vesting period for Microsoft’s matching contributions. Employees can contribute up to 65% of their compensation to their 401k.

After-Tax Roth Conversion

Otherwise known as the Mega Backdoor Roth Conversion, this benefit is relatively new in the 401(k) world and many employees are simply unaware of it. This feature allows you to make additional after-tax contributions to your 401(k) to make up the difference between your contributions, Microsoft’s matching contributions, and the annual federal 401(k) contribution limit. These contributions are then converted to tax-free Roth dollars on a continuous basis. By taking advantage of this benefit, you can contribute over four and a half times the typical Roth IRA annual limit and build a nice nest egg of tax-free dollars.

BrokerageLink Option

BrokerageLink is one of the investment options offered within your Microsoft 401(k) plan. This option gives you access to thousands of additional mutual funds not available within the standard plan, including funds managed by Vanguard, PIMCO and Eaton Vance. Why does this matter? For starters, it allows you to invest in asset classes that would otherwise be unavailable to you. This increases diversification, which may potentially create opportunities to increase the value of your long-term returns.

Sustainable Investing

Sustainable Investing, also known as Socially Responsible Investing (SRI), means incorporating Environmental, Social, and Governance (ESG) criteria into the investment selection process. Essentially, it allows you to invest in a way that aligns with your values without necessarily compromising diversification or returns. While there are currently no SRI Fund options within the standard 401(k) investment lineup, you can access hundreds of SRI mutual funds and ETFs through BrokerageLink. These options allow you to create a SRI Portfolio within your 401(k).

FIND A TIME TO DISCUSS 401(K) OPTIONS WITH AN ADVISOR

Stock Awards

Restricted Stock Units

For many employees, stock awards can be a significant portion of total compensation. You may receive these awards upon being hired, as a part of your annual compensation package, or as a special award. These awards come in the form of Restricted Stock Units (RSUs). These RSUs become available to you as they vest over time. As the stock shares vest, you are taxed at ordinary income tax rates based on the total value of the vesting shares of stock.

Microsoft directs your custodian to sell some of the vesting shares in order to withhold funds for taxes. This amount is sent to the IRS on your behalf. As a result, you will only receive a portion of the shares that have vested in your brokerage account. If shares are held for over a year after they vest, any potential gains from the time the shares have vested will get preferential long-term capital gains tax treatment. However, there is nothing that can be done to defer the taxable income generated by vesting shares of stock.

Most RSUs are Microsoft vest every three months starting in February (which you can remember using the acronym FMAN: February, May, August, November). These stocks vest at the end of each month. Microsoft’s Review awards (similar to “Refresher” awards at other companies) follow this schedule. Eligible employees may receive Special Stock Awards /Leadership Awards. The vesting schedule for these shares vary from other RSUs you receive. These awards vest mid-month in March-June-September-December.

Typically, employees let their stock grants accumulate in their investment accounts while covering expenses through their salaries. We encourage you to flip this thinking. By living off of vesting shares of stock, you gain cash-flow flexibility and can then take advantage of the many tax-preferred benefits available to you. Restricted Stock Units vest multiple times per year and vary significantly in amount each time. We can work with you to organize and plan your cash flows in order to implement many of these tax-saving strategies.

SCHEDULE A TIME TO TALK ABOUT YOUR STOCK AWARDS

Other Benefits

Employee Stock Purchase Plan

This benefit allows you to purchase Microsoft stock at a discount (typically around 15 percent) to the open market. Since these contributions are not tax-advantaged, the Employee Stock Purchase Program is usually one of the benefits we suggest that employees capitalize on last. You may already be too heavily concentrated in employer stock as a result of RSUs, and participating in the ESPP can exacerbate this problem. Please reach out to us to discuss your specific situation and whether the benefit would be a good option for you.

Charitable Giving

Double the donation! Microsoft matches gifts to qualified charitable organizations made by employees dollar-for-dollar, up to $15,000 per
year! Increase your impact for the causes that matter most to you by leveraging this benefit. If you’ve already made charitable gifts, you can submit requests for Microsoft to match gifts made anytime in the last 12 months. For more information or to register for this program, click here.

Health Benefits

Microsoft has two different health plans: a standard employee health plan and a Health Savings Account (HSA). For anyone interested in taking a strategic approach to wealth management while working at Microsoft, the HSA plan can be especially appealing and Avier can help workers interested in the Microsoft HSA identify ways they can invest HSA funds.

Life Insurance & Other Coverage

Life insurance at Microsoft has a cap of 7x salary. However, as with other negotiated health benefits provided by the company, an individual’s health can determine whether the standard Microsoft group plan is best for them. For healthy individuals, outside plans may be more advantageous and for high net worth individuals, a combination of the Microsoft group plan and an outside plan may be necessary to ensure desired coverage.

Time Off

Microsoft’s paid time off (PTO)and vacation policy typically provides employees with 20–30 days off a year.Often times new employees negotiate their PTO during the hiring process, so the amount awarded may vary based on your situation. The company also offers flexible work schedules and encourages its employees to find a healthy balance between work and home.Microsoft also provides family caregiver leave which allows employees to take time to care for their family members.

Employee Discounts

Like other large employers, Microsoft also offers a series of discounts and deals with other companies along with plans or bundles for some of those discounts. One of the most appealing for high earning tech workers is the Microsoft Legal Plan: this plan can allow for very inexpensive estate planning, which can lead to a savings of thousand of dollars, as well as legal assistance for basic legal filings of all kinds.

MORE MICROSOFT INSIGHTS

For more information and advice from our Microsoft-focused advisors, visit our main Microsoft page, our Microsoft Compensation and Miscellaneous Benefits page, our Microsoft Deferred Compensation Page, or our Microsoft RSU and ESPP page.

MICROSOFT
DCP

MICROSOFT 401(K)
& RETIREMENT

MICROSOFT RSUS
& ESPP

MICROSOFT’S OTHER BENEFITS & COMPENSATION

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