Microsoft 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.
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 different types of stock awards: On-hire stock award and Annual stock award. More than likely each of these types of awards will have their own vesting schedule
Download Prioritize Your Benefits at Microsoft
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 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.
401(k) Plan
Contribution Matching
Microsoft matches 50 percent of the regular contributions you make into your 401(k) account. The total amount you can contribute in 2022, is $20,500, if you are under 50 years old. For individuals 50 and older you can contribute $27,000. 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 401(k).
After-Tax Roth Conversion (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
Taxable Income Reduction and Tax Savings
Available to Microsoft employees who are Level 67 or higher, 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.
Other Benefits
Employee Stock Purchase Plan
Charitable Giving
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
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
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.
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