Microsoft Employee Benefits
DCP
MICROSOFT 401(k)
& RETIREMENT
MICROSOFT RSUS
& ESPP
MICROSOFT’S OTHER BENEFITS & COMPENSATION
How Do I Maximize My Microsoft Employee Benefits in 2023?
As your career evolves at Microsoft, your salary increases and stock awards compound. Your benefits can help you realize financial security when leveraged correctly.
We know how busy you are and value your time. We help you optimize your equity compensation, reduce taxes, and plan for your long-term goals.
Key Dates
We have outlined the key dates concerning benefits. Click the button below to 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
Microsoft New Hire Compensation
There are a few different ways that Microsoft employees are compensated; base salary, annual cash bonuses, on-hire cash bonus, and stock awards (on-hire and annual).
BASE SALARY
This is very straight-forward, you receive a base salary which is paid out twice each month.
ANNUAL CASH BONUS
Annual cash bonuses are paid out in September of each year; these typically range between zero and 40% of eligible salary but can go higher.
ON-HIRE CASH BONUS
If you recently joined Microsoft, you may have also received an on-hire cash bonus. These bonuses are typically paid out within the first 30-60 days of employment. On some occasions, these bonuses can be split into two separate payments.
STOCK AWARDS
There are two main types of stock awards: On-hire stock awards and Annual stock awards. More than likely each of these types of awards will have their own vesting schedule.
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 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.
Most RSUs 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.
Supplement Cash Flow Using Your Restricted Stock Units
As a Microsoft employee you receive Restricted Stock Units which can be sold once they vest. With careful
financial planning you can sell these shares and use the proceeds for your monthly expenses. This can free up cash from your salary to allocate towards your 401(k) and Mega Backdoor Roth.
Microsoft 401(k) Basics and Employer Match
Your 401(k) contributions increased in 2023.
- If you’re under 50 you can contribute up to $22,500
- If you’re 50 or older you can contribute up to $30,000 ($22,500 plus a $7,500 catch-up contribution)
These contributions can be made on a traditional pre-tax or Roth basis.
Microsoft Employer Match
Microsoft will match 50% of your 401(k) contributions, this means you can earn up to an additional $11,250 in free money in 2023. We encourage you to make the most of this benefit by maxing out your 401(k) contributions before utilizing any other benefits available to you.
After-Tax Roth Conversion (Mega Backdoor Roth Conversion)
In 2023, the total contribution limit for a 401(k) plan is $66,000 if you’re under 50 and $73,500 if you’re 50 or older to your Microsoft 401(k).
This limit applies to all sources of contributions, including employee, employer match, and catch-up contributions. You can fully leverage these limits by taking advantage of the Mega Backdoor Roth – a powerful benefit within your Microsoft 401(k).
The Mega Backdoor Roth feature of the Microsoft 401(k) allows you to contribute after-tax dollars, up to $32,250 in 2023, and automatically convert those dollars to Roth.
The Mega Backdoor Roth is a way for high-income earners to utilize the benefits of a Roth.
Within a Roth your money grows tax-free. These same dollars, and the growth, are also distributed tax-free when accessed in retirement. Having a bucket of retirement assets that can be distributed tax-free, provides for greater control of the income you realize and your resulting tax bill throughout retirement.
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).
Reduce Taxable Income Using Microsoft’s Deferred Compensation Plan
Microsoft employees who are Level 67 or above have access to the Microsoft Deferred Compensation Plan (DCP).
DCP has the potential to reduce your tax bill by tens or even hundreds of thousands of dollars in taxes each year. Contributions to your DCP reduce taxable income in the year of the deferral and can be invested into a selection of investment options.
It works similarly to a pre-tax 401(k) plan. It is an opportunity to save and invest dollars on a pre-tax basis.
You can enroll in DCP 2 times a year:
May 1 – 31: Elect to defer up to 100% of next year’s September bonus.
November 1 – 30: Elect to defer up to 75% of your salary.
Other Benefits
Employee Stock Purchase Plan
This benefit allows you to purchase Microsoft stock at a 10% discount each quarter. Payroll contributions are limited to 15%, with an annual limit of $25,000. Since these contributions are not tax-advantaged and the discount is considered ordinary income, we typically do not recommend prioritizing the Employee Stock Purchase Plan. In addition, you may already be too heavily concentrated in employer stock as a result of RSUs, and participating in the ESPP may 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 ! 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.
If you are heavily concentrated in MSFT stock, and/or have old shares with low basis, consider gifting these low-basis shares to charities instead of cash for tax-efficient diversification.
Health Benefits
Microsoft offers its employees the option to enroll in a Health Savings Account (HSA). The HSA comes with 3 significant tax benefits: contributions are tax-free, money grows tax-deferred, and you can withdraw the money tax-free if the funds are used for qualified medical expenses. And, once you reach age 65, you can use your HSA dollars for any reason without penalty, only paying ordinary income taxes. Essentially, turning your HSA into a pre-tax retirement account, like a traditional IRA or 401(k).
Life Insurance & Other Coverage
Life insurance at Microsoft has a cap of 10x 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.
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.
DCP
MICROSOFT 401(K)
& RETIREMENT
MICROSOFT RSUS
& ESPP
MICROSOFT’S OTHER BENEFITS & COMPENSATION
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