Microsoft provides employees with an excellent benefits package. Which provide the most value to employees? Here’s a ranking of the benefits based on their financial impact to employees. Note that financial impact of benefits that are standard at almost all employers (i.e. healthcare) aren’t included here.
1. 401K Match – >$11K benefit!
Microsoft matched over $10K to employees who maxed out their 2022 401K contributions. For 2023 that match is worth up to $11,250! Microsoft matches 50% of employees 401K contributions. It’s hard to beat that much free money and that’s why maximizing your 401K contributions is usually step #1 in optimizing your benefits.
2. Employee Stock Purchase Plan (ESPP) – up to $2,778 benefit
Microsoft employees can contribute up to 15% of their salary to purchase Microsoft shares. At the end of each quarter the money you set aside into the ESPP program will purchase Microsoft stock at a 10% discount to the stock’s market value at the end of the period. By selling your shares as soon as you receive them you lock in that discount.
If you saved the 2022 maximum of $25K into the ESPP program and sold your shares each quarter you’d receive approximately $27,777 for a gain of $2,778. That gain is taxable as a short term capital gain but it’s still a free boost to your compensation!
3. Mega Backdoor Roth – Allows you to contribute over $32K into a Roth!
Microsoft’s 401K plan allows you to make after tax contributions to your 401K and then roll them into a Roth, which makes the mega backdoor Roth strategy possible. This a great planning tool for high earners to get more money into tax advantaged accounts. Microsoft employees can contribute up to $32,250 into a Roth 401K account in 2023 by utilizing the Microsoft Mega Backdoor Roth!
4. Deferred Compensation Program – Potentially tens of thousands in tax savings!
Microsoft generally allows employees level 67 and above to participate in Microsoft’s Deferred Compensation Program. This program can potentially provide massive tax savings. However, it introduces a lot of planning complexity. The tax savings could add up to tens of thousands of dollars in some cases but the benefit will vary significantly according to your unique circumstances.
5. Charitable Donation Matching & Volunteer Time – Up to $15K match!
Microsoft will match gifts to qualified charitable organizations up to $15K. Volunteer work is also matched with a $25 per hour contribution to qualified organizations.
Bonus: Miscellaneous benefits – they can really add up!
- Gym/Wellness Reimbursement – up to $1,500 per year
- Parental Leave – 20 weeks paid time away for birth mothers and 12 weeks for all other new parents (including adoptions and foster placements)
- Relocation – Either a lump sum or an assistance package covering various expenses
- Life insurance – equal to 2 times an employee’s salary at no cost. Supplemental insurance can be purchased but I’d suggest comparing the cost to outside plans.
- Disability insurance- equal to 60% of an employee’s salary up to $15K per month. Short-term benefits will cover your total salary/bonus for 7 weeks, followed by 18 weeks of coverage at 75%.
- HSA health insurance – nice way to get additional tax advantaged money.
How much value you get out of each benefit from Microsoft likely depends upon your individual circumstances. Nevertheless it’s helpful to have a solid understanding of the many wonderful benefits that Microsoft offers so that you ensure you’re maximizing them for your unique situation.
If you have questions about your situation set up a free consultation with me.
Scott Caufield, CFA, CPA