What Is Microsoft's Voluntary Exit Offer?

On October 26, 2026, Microsoft introduced a Voluntary Exit Offer, which it describes as a time-limited, voluntary program that lets eligible employees leave with financial support and career planning resources. It is open to eligible employees at level 70 and below on participating teams in Canada, India, the United Kingdom and the United States, and those employees receive an email linking to their own offer details. Microsoft says the offer builds on what it learned from its Voluntary Retirement Program earlier this year. Companies tend to make offers like this when they want fewer employees and would rather people leave by choice than be laid off. An offer can look generous at first glance, but whether it works for you depends less on the headline number than on your savings, your health coverage, your unvested stock and how many years you were planning to keep working. The questions below follow U.S. tax and benefit rules and are the ones to answer before you sign anything from Microsoft.

How Are Exit Payments Usually Calculated?

Many packages pay a set number of weeks of salary for each year of service, sometimes with a minimum and a cap. Microsoft's public memo gives no payment amount, so your own offer details are where to find the actual terms. Find out if the money comes as one lump sum or as salary continuation over several months, and whether it counts toward a bonus or the 401(k) match. Severance is wages for tax purposes, subject to Social Security and Medicare tax, and an employer using the flat supplemental rate withholds 22% federal income tax for 2026 (37% on amounts above $1 million). If your tax bracket is higher than 22%, that withholding may fall short of the tax you end up owing.

What Happens to Your 401(k)?

If you leave Microsoft in or after the year you turn 55, withdrawals from Microsoft's 401(k) are not subject to the IRS's 10% early-withdrawal tax, though income tax still applies. Rolling the account to an IRA ends that exception for the money you roll. A distribution paid to you, instead of rolled directly to an IRA or another plan, has 20% federal income tax withheld. If you are younger than 55 in the year you leave, the 10% tax generally applies to withdrawals before 59 1/2 unless another exception fits.

How Will You Cover Health Care Before Medicare?

Medicare generally starts at 65, with a 7-month sign-up window around the month you turn 65. Until then, the usual options are coverage paid for in the package, COBRA for up to 18 months at up to 102% of the premium, a spouse's plan, or a Marketplace plan. For 2026, Marketplace premium tax credits stop at 400% of the federal poverty level, which is $62,600 for a single person in the continental U.S.

How Much Time Do You Have to Decide?

Microsoft calls the offer time-limited, so the deadline in your offer details sets the clock. If you are 40 or older and the offer asks you to waive age-discrimination claims, you generally get at least 45 days to review a group offer, or 21 days for an individual one, and 7 days to revoke after you sign. For a group program, the company must also tell you in writing who was eligible and the ages and job titles of those who were and were not offered the package. Use that time to have an employment attorney read the release.

Should You Accept?

Accepting may make sense if your savings and health coverage can carry you to Social Security and Medicare, or if you were planning to leave within a year or two anyway. Declining may make more sense if you need the paycheck, you have sizable stock awards still to vest, or any health benefit in the package ends quickly. Social Security can begin as early as 62, but at a permanently reduced amount, about 30% less for someone whose full retirement age is 67. Microsoft is not obligated to repeat the offer, and a later round of cuts could be less generous. A side-by-side projection of both choices, with taxes and health costs included, can show which one holds up for you. The Microsoft plan details below are the starting inputs for that projection.

How Does Microsoft's 401(k) Fit Into the Decision?

Two Microsoft benefits move the numbers in that projection most: the 401(k) money already in your account and the stock that has not vested yet. Microsoft's fiscal 2026 10-K describes U.S. retirement benefits as 401(k) savings plans and discloses no pension or retiree medical plan. The company matches 50% of every pre-tax and Roth dollar you contribute, up to the IRS basic deferral limit; for 2026, contributing the $24,500 limit earns a $12,250 match. You are 100% vested from the start, so the match leaves with you. At separation the plan allows full or partial payouts and installments, and Microsoft stock in the plan can come out as shares or cash.

What Happens to Your Stock Awards, ESPP and HSA?

Stock awards generally vest over four or five years. Under Microsoft's 2017 and 2026 stock plans, shares that have not vested when your employment ends are forfeited unless the plan or your award agreement provides otherwise. Before you sign, check how your offer details treat awards scheduled to vest after your last day. The employee stock purchase plan buys shares each quarter at 90% of the fair market value on the last trading day, using up to 15% of gross pay. Under the plan's 2021 terms, leaving withdraws you automatically and your account balance is paid to you. Your HSA stays yours after you leave, though Microsoft's contributions stop once you are no longer covered as an active employee. Microsoft's pre-retirement checklist notes that COBRA premiums can be paid from an HSA.