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.

You've got questions about your benefits. We have the answers and are here to help. Feel free to give us a call or click below to get in touch with one of our advisors.

Benefits At A Glance

Avier Wealth Advisors is not affiliated with the Microsoft Corporation. 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.

Click on a tile below to learn more about a specific Benefits area, or simply scroll down the page for a comprehensive overview of the key benefits available.

Key Dates

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

Q1

January – March

JanuaryReview 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+)

FebruaryMSFT Stock Awards

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

MarchMSFT ESPP

  • Sell ESPP shares at the end of the quarter
Q2

April – June

MayMSFT Stock Awards

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

MayDeferred Compensation Election (Level 67+)

  • Identify deferral amount for following year’s cash bonus

JuneMSFT ESPP

  • Sell ESPP shares at the end of the quarter
Q3

July – September

JulyReview 401(k) Contributions

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

AugustMSFT Stock Awards

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

SeptemberEmployee Reviews Completed

  • Cash bonus and new MSFT stock awards are received
  • Download new stock grants and vesting schedules

SeptemberMSFT ESPP

  • Sell ESPP shares at the end of the quarter
Q4

October – December

NovemberMSFT Stock Awards

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

NovemberLife Insurance and Health Plan Review

NovemberDeferred Compensation Election (Level 67+)

  • Identify deferral amount for following year’s salary

November/DecemberCharitable Giving Review and Tax Loss Harvesting

DecemberMSFT ESPP

  • Sell ESPP shares at the end of the quarter

Taxable Income Reduction and Tax Savings

Available to senior directors, partners, general managers, and other executives, the Deferred Compensation Plan allows you to reduce your tax bill 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.

The Five Secrets of Deferred Compensation Series

    Are you a Microsoft employee Level 67 or higher? Sign up below for our email series.

    401(k) Plan

    Contribution Matching

    Microsoft matches 50 percent of contributions that you make into your 401(k) account up to $19,500. We encourage you to make the most of this by maxing out your 401(k) contributions before utilizing any other benefits available to you. When you do the math, this is a lot of free money that is available to you. $9,750, to be exact. We encourage employees to max out this benefit.

    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).

    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 Fidelity or Morgan Stanley 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.

    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.

    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.

     

    Latest Articles about Employer Benefits

    At Avier Wealth Advisors, client education is the bedrock of our service model. Our advisors regularly publish articles on how you can best leverage the benefits available to you. Take a moment and check out their latest tips below.

    How Does the Microsoft Mega Backdoor Roth Work?

    Nick Wright | February 24, 2021
    The Mega Backdoor Roth 401(k) is one of the best employee benefits available to Microsoft employees. We want to help you understand how this benefit can help you invest more towards retirement and reduce some of your future tax liabilities. This video explains how the […]

    Planning Considerations for Microsoft Employees Considering Enrollment in the Deferred Comp Plan

    Dave Welty, CFP® | November 13, 2020
    Level 67+ Microsoft employees have three big questions to answers by November 30th.    Do I want to enroll in the Microsoft Deferred Comp Plan? What do I need to know before I enroll? How much of my income do I want to defer? Do […]

    How do I Receive My Deferred Compensation Payout?

    Lars Phillips, CFA, CFP® | August 28, 2020
    The Microsoft Deferred Compensation (DCP) payout structure is different than what most people are used to when it comes to retirement savings. There is a lot of flexibility when it comes to withdrawing funds from a 401(k) or an IRA...

    Microsoft Benefits Video Library

    We invite you to peruse our video library to learn more about the key benefits available to you as a Microsoft employee. Our advisors break down complex financial topics into the basics of what you need to know to get the most out of your plan.

    Interested in Learning More? We'd Enjoy Meeting You.