What is the Microsoft Deferred Compensation Plan?
Nick Wright | August 28, 2020
The Microsoft Deferred Compensation Plan (DCP) is available to employees who are Level 67 and higher. It is a powerful benefit that can reduce your annual tax bill by tens of thousands of dollars. In this video, Nick Wright, CFA, provides an insightful overview of this powerful benefit and illustrates how it works.
Similar to your 401(k), DCP enables you to:
- Save and invest dollars on a pre-tax basis
- Make contributions to reduce your taxable income
- Invest funds into Mutual funds that grow tax-deferred
The primary differences between the Microsoft DCP and your 401(k) is the amount that you can contribute and the payout period.
Eligible employees can defer up to 75% of their salary and 100% of their bonus, meaning you can contribute ~$250,000+ per year. The payout period for DCP is a lot more rigid than your 401(k) and must be set with each election period.
We work with Microsoft Employees Level 67 and above to help them save substantially on taxes when deferring large portions of their salary. We develop a custom plan that looks at your RSU vesting schedule and factors in potential changes in share price to ensure you have the income you need now and in retirement.
Please schedule some time with us to discuss your specific needs.