Amazon 401k vesting

Amazon 401k vesting DEFAULT

*The following benefits apply to Class F (40 hours/week), Class R (30-39 hours/week), and Class H (20-29 hours/week) excluding employees who work in the following states: Connecticut, Illinois, Indiana, Maryland, North Carolina, Pennsylvania, Utah, and Wisconsin.  View the benefits overview for employees who work in CT, IL, IN, MD, NC, PA, UT, and WI.

Amazon’s benefits can vary by location, the number of regularly scheduled hours you work, length of employment, and job status such as seasonal or temporary employment.

The following benefits are effective from April 1, 2021 — December 31, 2021.


Plans include coverage for prescription drugs, emergency and hospital care, mental health, X-rays, lab work, etc. There are no pre-existing condition exclusions with any of Amazon’s medical plans. Employees have a choice of multiple plans. All plans cover preventive care 100%.

Shared Deductible Plan

Health Savings Plan

Network options: Aetna or Premera Blue Cross

Coinsurance: 90% covered in network


  • $1,000/employee
  • $2,000/employee + spouse/domestic partner or children
  • $3,000/family

Comes with a company-funded Health Reimbursement Account that automatically covers the first 50% of your deductible.

Depending on who you cover, Amazon contributes the following amount toward your HRA:

  • $500/employee only
  • $1,000/employee + spouse/domestic partner or children
  • $1,500/family

Out-of-Pocket Maximum (Medical and Prescription):

  • $2,000/employee
  • $4,000/employee + spouse/domestic partner or children
  • $6,000/family

Prescription Drug:

After you've paid your deductible

  • You pay 10% in-network
  • You pay 30% out-of-network

Network options: Aetna or Premera Blue Cross

Coinsurance: 90% covered in network


  • $1,500/employee
  • $3,000/employee + spouse/domestic partner or children
  • $4,500/family

Comes with a company-funded Health Savings Account (HSA) that you can also contribute to and save for health care expenses.

Depending on who you cover, Amazon contributes the following amount toward your HSA:

  • $500/employee only
  • $1,000/employee + spouse/domestic partner or children
  • $1,500/family

Out-of-Pocket Maximum (Medical and Prescription):

  • $3,000/employee
  • $6,000/employee + spouse/domestic partner or children (up to $3,000/person)
  • $9,000/family (up to $4,500/person)

Prescription Drug (Retail):

After you've paid your deductible:

  • You pay 10% in-network
  • You pay 30% out-of-network
Standard Plan

Network options: Aetna or Premera Blue Cross


  • In-network: $300/person, up to $900/family max
  • Out-of-network: $600/person up to $1,800/family max

Out-of-Pocket Maximum (Medical):

  • In-network: $2,300/person up to $4,900/family max
  • Out-of-network: $4,600/person up to $9,800/family max

Prescription Drug

 30-day Retail:

  • $10 generic
  • 10% up to $30 for preferred
  • 30% up to $40 non-preferred

90-day Mail Order:

  • $20 generic
  • 10% up to $60 for preferred
  • 30% up to $80 non-preferred

Out-of-Pocket Maximum (Prescription Drug):

  • $4,150/person
  • $8,000/family

Network options: Premera Blue Cross only


  • In-network: $100/person, up to $300/family max

Out-of-Pocket Maximum (Medical):

  • In-network: $3,600/person up to $7,300/family max

Copays after deductible is met:

  • $30 for primary care provider
  • $30 for mental health & substance abuse
  • $45 for specialist visit
  • $75 for urgent care visit
  • $150 for emergency room visit

Prescription Drug:

Copays for 30-day Retail:

  • $10 generic
  • $30 preferred
  • $40 non-preferred

Copays for 90-day Mail Order:

  • $20 for generic
  • $60 for preferred
  • $80 for non-preferre

Out-of-Pocket Maximum (Prescription Drug):

  • $2,850/person
  • $5,600/family
Kaiser Permanente HMO (CA, CO, HI, MD, VA, WA, Washington DC) 

Deductible: None


  • Primary Care Office visit: $30
  • Specialist Office visit: $45
  • Mental Health Outpatient: $30 (individual) / $15 (group)
  • Inpatient Hospital: $0
  • Emergency Room: $150
  • Urgent Care: $30

Out-of-Pocket Maximum (Medical):

  • $1,500/person
  • $3,000/family

Prescription Drug (Retail):

After you've paid your deductible:

  • $10 generic
  • $30 preferred brand


Dental (Delta Dental of Washington)

Basic Dental PlanEnhanced Dental Plan 

Plan Year Maximum: $1,500


  • $50/individual
  • $150/family

Included Services:

  • Preventive (cleaning and x-rays) covered at 100%, deductible waived
  • Basic (fillings and extractions) covered at 90%

Plan Year Maximum: $2,000


  • $50/individual
  • $150/family

Included Services:

  • Preventive (cleaning and x-rays) covered at 100%, deductible waived
  • Basic (fillings and extractions) covered at 90%
  • Major Restorative (dentures and crowns) covered at 50%
  • Orthodontia covered at 50% with $2,000 lifetime maximum (deductible waived)


Vision (Vision Service Plan)

Basic Vision PlanEnhanced Vision Plan

Plan pays 100% for an eye exam at an in-network provider once every calendar year.

Materials Copayment: $10

Lenses: Covered 100% in-network

Frames or Contacts (contacts are in lieu of glasses): 1 pair every calendar year up to $130 allowance in-network

Contact lens fitting and evaluation exam covered in full once every calendar year, after a maximum %60 copayment in-network only.

Plan pays 100% for an eye exam at an in-network provider once every calendar year.

Materials Copayment: $10

Lenses: Covered 100% in-network

Frames or Contacts: 2 pairs every calendar year up to $130 allowance for each pair in-network

Contact lens fitting and evaluation exam covered in full once every calendar year, after a maximum $60 copyament in-network only.


Infertility Benefits

Amazon partners with Progyny, the leading infertility benefits provider, to provide our employees with infertility treatment coveage. When enrolled in one of Amazon's medical plans, employees have access to Progyny's premier infertility treatment specialists and receive personalized support from a patient care advocate. Ask your recruiter if you'd like more information about this program.  

Amazon 401(k) Plan

  • For every $1 of employee contribution you make (up to 4% of your eligible pay), Amazon will contribute $0.50 to your account in the form of matching contributions. You can get up to a 2% match. Note: Catch-up contributions are not matched.

  • You become vested in matching contributions after you are credited with three years of vesting services. A year of vesting service is defined as a calendar year in which you complete 1,000 hours of service.

  • You can contribute from 1% to 90% of your eligible pay on a pre-tax basis, a Roth after-tax basis, or both, subject up to the annual IRS limits. For calendar year 2021, the IRS limit is $19,500 (If you turn 50 or older in 2021, you may contribute an additional $6,500 in catch-up contributions in 2021).

  • All Amazon employees age 18 or older are eligible to join the plan immediately upon their date of hire. To learn more about the Amazon 401(k) Plan, watch a video here. 

Employee Restricted Stock Units

At Amazon, most employees have the ability to become owners of the company through the granting and vesting of Restricted Stock Units (RSUs). Depending on your job level and if you are scheduled to work 30+ hours per week, you are eligible to:

  • Receive a grant of RSUs that vest over time, in accordance with plan documents.
  • Have opportunities for additional RSU grants.

Amazon is continually evaluating new ways to provide other types of ownership opportunities for all employees. 

Flexible Spending Accounts

Flexible Spending Accounts (FSAs) provide a convenient way to pay for certain eligible health care and/or dependent care expenses with pre-tax dollars. If you contribute money to an FSA, you lower your taxable income, which reduces your federal income and Social Security taxes.

  • Health Care FSA can be used to pay for health insurance copays, deductibles and other eligible services and supplies not covered by your medical, dental or vision plans. The Health Care FSA has a minimum contribution of $120 and a maximum of $2,750 per plan year to use for eligible health care expenses. If you enroll in the Health Savings Plan with a Health Saving Account (HSA), you are not eligible to enroll in the Health Care FSA.
  • The Dependent Care FSA can only be used to pay expenses for dependent care, such as child or elder care while you are working. The Dependent Care FSA has a minimum contribution of $120 and a maximum of $5,000 per plan year. 

Disability Insurance

Available to employees working 30+ hours. Amazon provides both short-term and long-term disability coverage at no cost to you. Both plans provide partial income (60% of eligible salary up to certain limits) if you become medically disabled.

  • There is a 7-day waiting period for short-term disability (STD) benefits; benefits are then paid for up to 26 weeks. For STD benefits related to pregnancy, there is still a 7-day waiting period, but pay is retroactive to the first day of disability.
  • Short-term pregnancy disability coverage is available for birth mothers and is equal to 100% of basic earnings for up to 4 weeks pre-partum and 10 weeks post-partum.
  • There is a 180-day waiting period for long-term disability (LTD) benefits; benefits are then paid for an extended period depending on the severity of the disability and other factors. The LTD plan has a pre-existing condition exclusion provision.

Life and Accidental Death and Dismemberment Insurance

  • Amazon currently provides two times your annual base salary for Basic Life and AD&D Insurance at no cost to you.
  • You can buy supplemental life insurance coverage for yourself, payable to your designated beneficiaries if you die. You can buy coverage in amounts of 1x to 10x your base annual earnings, up to $2,000,000.
  • You can buy life insurance to cover your spouse/domestic partner in amounts of $25,000 or ½ to 5x your base annual salary, up to $250,000 not to exceed 100% of your total amount of life insurance (basic and supplemental). 
  • You can buy life insurance to cover your children in certain amounts up to $20,000.
  • An accelerated death benefit is available in certain situations involving a terminal illness.
  • You can buy supplemental AD&D insurance to cover just yourself, or yourself and your eligible dependents, of 1x to 10x your basic annual earnings, up to $2,000,000.

Critical Illness & Personal Accident Insurance

Get discounted rates on Critical Illness and Personal Accident Insurance through MetLife.

  • Critical Illness Insurance can help fill the gaps in your health or disability plan by paying a lump-sum benefit if you are diagnosed with a serious medical condition like a heart attack, cancer or stroke. It helps cover things like your deductible and coinsurance, transportation and lodging.
  • Personal Accident Insurance can help protect against unexpected costs related to accidents by paying a specific dollar amount for covered events, including dislocations, burns, emergency room visits and more.

Homeowners, Renters, Auto, and Pet Insurance

Take advantage of discounted rates and compare homeowners, renters, auto, and pet insurance carriers on one platform. You can also save up to 20% when you enroll with ASPCA Pet Health Insurance. You can enroll in or change these benefits at any time during the year, not just during Open Enrollment.

Legal Services

With MetLife, receive discounted rates on legal advice and fully covered legal services for a wide range of personal legal matters including wills and estate planning, real estate matters, family law, and more.

Mental health care and daily living assistance

  • Free counseling services and referrals are available 24/7 for any Amazon employee or household member.
  • You can receive up to three freecounseling sessions- virtual or in person-per issue, per year.
  • Referrals are available for legal and financial issues and for personal convenience and care needs (child care, elder care, relocating, and other personal needs).

Child, Elder and Pet Care Referral Services

Receive free membership to Sittercity and Years Ahead, a portal to locate qualified child care or elder care. You pay for the actual care you need. The site provides access to background checks, references and reviews from other users.

Other Benefits

  • Discount Code for 10% discount off Amazon merchandise
  • Employee discount program for a variety of goods and services such as travel, event tickets, cell phone services, restaurants, entertainment, sports, and more.

Leave of Absence

In general, leaves of absence are available to eligible employees for time off due to a qualifying medical condition, or to care for a qualified family member experiencing a medical condition. Other types of leave may include: the birth, adoption, or placement of a new child, pregnancy, personal reasons, the death of a member of your immediate family, jury/witness duty, military reasons, or other reasons provided under various laws. Most leaves are unpaid, except some pregnancy and parental leaves, and some portions of jury/witness, military, and bereavement leaves. All leaves have various length limits, and some leave types may require certification or the approval of your manager or Human Resources.

Pregnancy & Parental Leave

All blue badge employees who are considered full time (40 hours per week) or reduced time (30-39 hours per week) are eligible for leaves as summarized below. Your health care, life insurance, 401(k), and vacation benefits under Amazon’s plans will continue during the following.

Pregnancy Leave (runs concurrently with state and federal leaves, as applicable)

  • Amazon provides pregnant employees with the following:  
    • Pre-Partum: Up to four weeks of paid leave, conditional on medical recommendation
    • Post-Partum: 10 weeks of paid leave
    • Short-term disability benefits during leave
  • Restricted Stock Units (RSUs) will continue to vest according to your current vesting schedule.
  • Sign-on bonus payments (if included in your job offer) continue per original schedule.

Parental Leave (must also have one continuous year of employment at time of birth or adoption to be eligible)

  • Six weeks of paid leave following the birth or adoption of a child.
  • Parental Leave can be taken in one consecutive six-week period or split into two increments, and must be used within twelve months of birth or adoption.
  • You do not need approval from your manager to take Parental Leave.  You should discuss your leave plan with your manager, but how and when you utilize your leave is at your discretion.
  • RSU vesting will suspend after 14 days cumulative after leave and resume upon return to work with an adjusted vest schedule. Your updated vesting schedule may take up to four weeks to appear in your Morgan Stanley account.

Leave Share Program

  • The pay benefit of any unused portion of the Parental Leave can be shared if your spouse or domestic partner does not have access to a paid parental leave through his/her employer
  • You will be asked to affirm that your spouse or domestic partner does not have paid parental leave benefits through his/her employer.
  • You’ll receive your base pay for the unused portion of the Parental Leave in your next available paycheck along with your regular base pay.

Ramp Back Program

  • Birth parents and primary caregivers can gradually return to work on a reduced schedule over an eight-week period immediately following a Pregnancy or Parental Leave.
  • You can select one of three reduced-hour options: 50% for eight weeks, 50% for four weeks/75% for four weeks, or 75% for eight weeks.
  • Your base pay, sign-on bonus payments and RSU vesting will be proportional to the option you select.
  • A new RSU vesting schedule will be established upon return to full-time work. Your updated vesting schedule may take up to four weeks to appear in your Morgan Stanley account.
  • You do not need manager approval for Ramp Back. You should discuss your leave plan with your manager, but how you utilize Ramp Back is at your discretion.

Adoption Assistance

  • Amazon reimburses qualified adoption expenses up to $5,000 for a single-child adoption or $10,000 combined maximum for a sibling-group adoption.
  • Generally, the child must be under the age of 18.
  • Limit of one single or group adoption reimbursed per calendar year.​

Paid Time Off

For information about paid time off, please refer to the separate PTO webpage shared by your recruiter.

Paycheck Contributions

View the paycheck contributions for Medical, Dental, and Vision coverage for you and any eligible dependents, effective April 1, 2021, to December 31, 2021.

Important Note

This page is a summary of benefits only. It is not a legally binding document. If there is a discrepancy between this information and the plan or policy documents, the plan or policy documents will govern in all cases. Participation in Amazon benefits does not signify a contract of employment. Amazon reserves the right to modify or terminate any portion of the Amazon benefits program and/or any of its policies at any time with or without notice.

If you are not part of the group that this document applies and, as a result, have received this document in error, please contact your recruiter or human resources to receive the documents applicable to you.


Amazon’s 401k Match Explained

If you are a software engineer receiving your first six-figure offer from Amazon, you must be beyond excited. However, in addition to the annual base salary, at, we suggest that you also pay attention and gain a thorough understanding of the full array of offered benefits and eligible compensations, including Amazon's 401k match, sign-on bonus, and relocation benefits. Having knowledge of these will allow you to take advantage of your full compensation and negotiate better deals.

This article will answer questions on everything you need to know about Amazon's 401k contributions and match, along with other considerations to take into account.

Amazon's 401k Contributions and Company Match

As of January 2020, Amazon employees have access to the new Amazon Mega Backdoor Roth Conversion or after-tax contribution to the 401k plan. But what does it mean for you as an Amazon employee, and how can you benefit from it?

How Much Does Amazon Match Employees' 401k Contributions?

With Amazon's 401k contribution retirement plan, you can contribute up to $19,500 per year if you are under the age of 50 and an additional $6,500 per year if you are over 50.

In this example, let us focus on employees who are under 50.

If you contribute the maximum amount of $19,500 per year, Amazon's 401k match will equal to 50% on your first 4% contributed. This means that Amazon's contribution to your 401k plan will translate to 2% of your base salary.

Let's say your base salary is $160,000 per year. After you contribute $19,500 to your 401k, Amazon is going to put an additional 2% of your base salary ($3,200) as a match.

Mega Backdoor Roth Conversion

As of 2020, the Federal limit for the total amount going into a 401k per year is $57,000.

With Mega Backdoor Roth Conversion, Amazon now lets you put up to 10% of your base salary into the after-tax portion of your 401k plan and subsequently convert it to Roth.

Going back to the example where you were making a base salary of $160,000. With Mega Backdoor Roth, Amazon will let you put 10% of every paycheck to your 401k, translating to $16,000 over one year.

You will then need to contact Fidelity to make sure that this after-tax amount is converted to Roth.

How Can You Reduce Taxes with Amazon's Mega Backdoor Roth Conversion?

Mega Backdoor Roth Conversion allows you to reduce the total amount of taxes you pay.

If you are planning on saving money beyond your 401k, chances are you are going to put them in a brokerage account. With these accounts, you have to pay taxes every year.

For example, suppose you have a brokerage account. In that case, you need to pay taxes on interest income, capital gains, and interest every year, which can seriously drag your investments' performance in the long run.

On the other hand, if you save extra money into a Roth through Mega Backdoor Conversion, you have it saved safely, while all the interest, dividends, and capital gains are tax-free.

Amazon's 401k Contributions as Compared to Other Companies

Similar to Amazon, Facebook, Microsoft, and Google match 50% of employee contributions. Unfortunately, Amazon's maximum contribution is up to 4%, while competitors like Facebook and Microsoft offer 7% and 6%, respectively.

Facebook's and Microsoft's 401k vesting is immediate. With Amazon, on the other hand, you will not get your match until you stay with the company for three years. Amazon often pays out in company stocks, but employees are free to redirect according to their personal financial plan.

Check out our ranking of FAANG 401k plans for more detailed information.

Other Amazon Benefits to Consider

A mix of benefits you receive from a company can have a significant impact on your future wealth. When considering a job offer, you need to think about various aspects and how they compare to competitors.

Other benefits offered by Amazon include:

  • Base pay. As compared to other big tech companies, Amazon's base pay isn't the highest. For example, a "software engineer" position at Amazon pays $162K a year, while the same position at Google or Facebook offers a bit more.
  • Sign-on bonus. Amazon offers an enormous sign-on bonus, which can be up to 35% of your total compensation, distributed over the first two years of employment.
  • Cost of living. Employees at Amazon and Microsoft living in Seattle enjoy a lower cost of living than Silicon Valley, where Facebook and Google are based.
  • Relocation packages. Amazon offers generous relocation packages. You can select either a single lump-sum payment of around $10K you can use toward moving expenses or a relocation package that includes housing and moving services.
  • RSUs. Amazon's Restricted Stock Units (RSUs) are paid out over four years with an increasing vesting amount, starting at 10% in the first year. Above-average stock performance over time is one of the strongest parts of Amazon's benefits package.
  • Other considerations . Amazon enjoys an excellent business reputation, with 74% of its current employees recommending work opportunities to their friends. However, Amazon lacks some of the benefits offered by other tech giants, such as student loan payment match, family planning benefits, educational grants, and more.

See Amazon Benefits page to learn more about the variety of benefits Amazon offers.

Negotiate Your Total Compensation with

When applying for a job with Amazon, you need to consider Amazon's 401k match and other company benefits. Even small differences in compensation can translate into significant differences in financial goals over the years.

The good news is you can use the salary negotiation service from to negotiate the best mix of benefits and total compensation for your long-term wealth. Book your one-on-one consultation with our negotiation specialists today.

  Get updates on salary trends, career tips, and more.

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What Should I Know About My Amazon Benefits?


There are many reasons to want to work at Amazon and the way it supports its employees and their families from the day you first start working is one reason. 

Amazon provides great benefits for all employees working between 20 - 40 hours a week. While actual benefits may vary by position and negotiated compensation, Amazon protects its employees’ financial well being by providing great financial benefits including Amazon restricted stock unit (RSU) shares and a 401(k) plan.

Related Article | The Finance Dictionary: Learn the jargon your Finance friends speak!

What is an Amazon RSU?

An Amazon RSU is the right to receive a share or payout at a future date or subject, to some performance condition. It is gifted by Amazon at the start of your employment. For reference, one RSU equals one share of stock once you become vested.

You receive your shares upon being hired, but they aren’t worth anything just yet. You’ll receive a vesting schedule based on your compensation. Your plan documents tell you the exact number of RSUs you’ll receive and how you may earn additional units.

Related Article | The Ultimate Guide on Equity Compensation and Taxation

Things You Need to Know About Amazon Restricted Stock Units

As we said above, Amazon Restricted Stock Units are a part of your compensation, but they aren’t worth anything until you’re vested. Once you’re vested, though, you’re free to do what you want with the stock.

Each unit is worth the current price of an Amazon share on the date that you become vested. However, Amazon RSUs create a tax liability when you become vested. You’ll pay taxes as you would on your ordinary income at that time.

Other things to know about Amazon RSUs are:

  • Make sure you understand what happens to your RSUs if you take parental leave

  • Your RSUs don’t expire

  • You’ll lose vesting if you leave Amazon before you’re fully vested

  • You may have specific trading windows to trade the stock once you’re vested to prevent insider trading

Related Article | 8 Tips If You're Being Compensated With Incentive Stock Options (ISOs)

Amazon RSU Vesting Schedule

Most companies operate on a 25-25-25 vesting schedule, but Amazon RSUs are on a different schedule. Amazon is on the 5-15-40-40 schedule. 

For example, if you are promised 200 shares of Amazon, you’d receive 10 shares on the 15th of the month of your first anniversary, 30 shares on the 15th of the month of your second anniversary, 80 shares six months later, and the final 80 shares in another 6 months.

This means your tax liabilities are much higher in years 3 and 4, so prepare your finances accordingly or get with your tax advisor. 

Amazon Employee Stock Options

In a move to increase its minimum wage, Amazon revamped its compensation plan, which no longer included Amazon employee stock options, and after 2019, with RSUs vesting in 2020 and 2021, Amazon is replacing the program with a Direct Stock Purchase Program. 

Related Article | 5 Things to Know About Your Restricted Stock Unit

Understanding Your Tax Impacts as an Amazon Employee

Generally, RSUs are awarded at no cost without a Section 83(b) election.

Tip: A section 83(b) Election is an IRC provision that allows employees to pay ordinary income taxes on the total fair market value of the restricted stock at the time of granting rather than the time of vesting.

As you can see in the graphic, you are given the shares at no cost. However, once you are vested, it triggers a tax liability and you will pay ordinary income taxes on the amount of gain between fair market value (FMV) at grant and FMV at vesting. Even if Amazon typically withholds 22 percent of the value for taxes, for some (depending on your tax bracket), this may not be enough, so be prepared for a higher tax liability in the higher vested years.

Additionally, when you go to sell the shares, you will pay capital gains taxes for the amount of gain between FMV at vesting and FMV at the sale. Capital gains taxes will vary depending on how long you’ve held the stock, your taxable income, and your filing status. f you sell the stocks right away once vested, you’ll pay ordinary capital gains taxes. If you hold onto the stock for longer than a year, you’ll pay long-term capital gains taxes. So, it’s important to prepare yourself for the liability. 

Related Article | What Is The Difference Between A 401K And An IRA?

Understanding Your Amazon Employer Plan

Amazon 401(k) Plan

Your 401K contributions also have tax liabilities, depending on how you invest. If you choose a standard 401K, Amazon invests your funds pre-tax (before taxes). You get the benefit of a lower tax liability now, which means a slightly higher paycheck. You owe taxes on the contributions and earnings when you withdraw them during retirement. You’ll pay your current tax bracket at the time that you withdraw the funds. 

You may also choose a Roth 401K, which means after-tax contributions. You pay standard taxes on your paycheck and the 401K withdrawals are made after taxes. Your contributions and earnings grow tax-free in this account. You can withdraw the funds without a tax liability during retirement, as long as you wait until you’re 59 ½ years old. 

Amazon 401(k) Match

Amazon helps employees plan for the future by contributing to their 401K. Eligible employees receive $0.50 for every $1 they contribute to their retirement account. Amazon matches contributions totalling up to 4 percent of its employees’ salaries - Amazon contributes a maximum of 2 percent.

Amazon doesn’t match catch-up contributions for those over 50-years old and the employee match is in Amazon stock. You are free to do what you want with the match, whether you stay invested in the company stock or you diversify your portfolio more to reduce its risk. 

Employees aren’t immediately vested in their matching contributions, though. You must have at least 3 years of vesting service. Each year that you work 1,000 hours or more is a vested year. Once you work three of these years, you’re vested, and can keep the matching contributions. 

Employees may contribute up to $19,500 (the 2020 limit for 401K and Roth 401K), or between 1 percent and 90 percent of their eligible pay. Employees may make pre-tax contributions (regular 401K) or after-tax contributions (Roth IRA). The $19,500 limit is a combination of both accounts (if you have both). 

Related Article | Guide To Understanding Your American Pay Stub

Amazon's RSUs and 401(k) Plan Sweeten the Compensation Deal

As you look at your employment options, think of the benefits Amazon RSUs offer. Even if you have a slightly lower salary, the ability to own shares of Amazon stock upon becoming vested is a large benefit, especially given its high stock price today. 

While there’s no guarantee where the Amazon stock prices will be when you become vested, chances are pretty good that it will still be a nice benefit that will help you in your financial future.

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What is a 401(k)?
InvestmentValue ($000) (Company Stock Fund) $     1,467,07218%Vanguard Target Retirement 2050 Trust Select $        846,25110%Vanguard Institutional 500 Index Trust $        821,99010%Vanguard Target Retirement 2045 Trust Select $        798,77310%Vanguard Target Retirement 2055 Trust Select $        671,7898%Vanguard Target Retirement 2040 Trust Select $        604,7097%Vanguard Target Retirement 2035 Trust Select $        471,3976%State Street Russell Large Cap Growth Index Class C $        322,8374%Vanguard Target Retirement 2030 Trust Select$         285,6803%Vanguard Target Retirement 2060 Trust Select $        257,8383%Vanguard Total International Stock Index Fund $        214,4923%Vanguard Explorer Fund Admiral Shares $        214,246 3%All other $      1,305,41816%Total Assets (excluding participant loans) $    8,282,492100%

401k vesting amazon

Getting The Most From Your Amazon Benefits

Amazon provides generous company benefits which can help employees build wealth, manage risk, and secure their future. It’s important to consider how to best integrate the additional compensation, retirement, and health benefits into your financial plan.

Equity Awards

Your grants of Amazon restricted stock units (RSUs) can help you increase cash flow or meet long-term goals, such as saving for college or retirement. However you choose to use the proceeds, you will need to pay income taxes as your shares vest. Amazon will withhold 22% of the value of your shares before they post to your account with your selected broker (either Morgan Stanley or Fidelity). As your compensation increases, you may find yourself in a higher tax bracket, requiring greater withholding. If your income is growing, or if your vested share amount is increasing, see if you need to make estimated tax payments to avoid underpayment penalties.

Vesting schedules vary, but are often over a four-year period and may be weighted more heavily to the last half of the vesting period.  If you are subject to trading windows, a 10b5-1 trading plan can automatically sell shares upon vest, simplifying the process and ensuring you comply with insider trading guidelines.  Note that any unvested Amazon RSUs are terminated and forfeited upon voluntary or involuntary termination of your employment for any reason (including as a result of death or disability).

Retirement Savings

Your 401(k) plan allows you to choose either pre-tax contributions, which are taxed at withdrawal, or Roth contributions, which are funded with after-tax dollars and then withdrawn tax-free. You can also contribute an additional 10% of your salary each year to the after-tax 401(k) and then convert that amount to a Roth inside the 401(k) plan with little to no tax impact where it will grow tax-free.

Each option offers financial benefits that impact your current and expected future tax situation in different ways. The Roth option reduces your taxes at withdrawal, while the traditional 401(k) reduces your current taxable income. In general, if you expect your tax rate to be higher in retirement, it may be best to choose the Roth now, or fund both types of 401(k) plans to provide tax diversification.  Whichever plan (or combination) that you choose, we recommend that you make the maximum annual contribution of $19,500.

Amazon matches up to 4% of your eligible pay at the rate of 50%.  Think of this as a 2% annual raise.  (Based on typical salaries and other eligible compensation, most Amazon employees can receive an annual match of about $3,200).  Employer matching contributions become 100% vested after three years of service.  Employees over age 50 can also make annual catch-up contributions to their retirement accounts (up to $6,500 of additional contributions).  If you are a highly-compensated employee, your contributions to the plan may be limited.  

The Amazon 401(k) plan is administered by Fidelity, which provides a selection of investments with low fees, as well as self-directed investment options.  The default investment is the Vanguard Target Retirement Fund nearest the year you would reach age 65.  You may want to select a different target date fund depending on your goals and risk tolerance.

Health Insurance

You may choose from five comprehensive plans, including a Shared Deductible Plan, Standard Plan, Health Savings Account (HSA), HMO, and In-Network Only Plan. These options include a variety of deductibles, out-of-pocket maximum costs, and prescription costs.  The HSA has the highest deductible, but it features a medical savings account, which you can fund with pre-tax income plus contributions from Amazon.  For 2021 you can contribute up to $3,600 for yourself and $7,200 for a family.  The annual limit is inclusive of the employer contribution made on your behalf, which is currently $500 for employee-only health coverage, $1,000 for employee plus spouse/domestic partner or employee plus children, and $1,500 for an employee plus spouse/domestic partner with children.  HSA funds grow tax-free, and withdrawals to pay for qualified expenses are also tax-free.  The money is yours to keep, even if you leave Amazon. Given their unique tax treatment, and the option to invest contributions, HSAs can also be used to supplement your retirement savings.

Flexible Spending Account (FSA)

An FSA allows you to save for health and dependent care costs using pre-tax income. If you do not have an HSA, you may contribute up to $2,750 per year to a general-purpose Health Care FSA in 2021. You may also contribute up to $5,000 a year to a Dependent Care FSA (subject to income limitations), which can be used for certain childcare expenses or to care for senior citizens who live with you and are claimed as a dependent on your federal tax return. Unlike an HSA, FSA funds must be spent by March 31st for the Dependent Care FSA or May 31st for the Healthcare FSA following the calendar year in which you contributed to the plan to avoid forfeiting any of the savings. You may submit claims for reimbursement until June 30th. An FSA is best used for large pre-planned medical or dental expenses, such as orthodontics.

Life Insurance

Amazon offers a life insurance benefit of twice an employee’s annual base salary at no cost up to $500k. Another $500k of AD&D coverage applies for death or injuries resulting from a covered accident. Employees may purchase additional coverage for up to 10 times their salary, with a maximum of $2 million. Premiums are age-based. Typically, health exams are not required for basic coverage, but the insurance company may require an exam for higher benefit levels. The policy is not portable, so you might consider buying separate life insurance if you think you may leave the company. Additional coverage is available for purchase for spouses (up to $250k) and children (up to $20k).

Disability Insurance

Amazon provides coverage for 60% of an employee’s salary (up to certain limits) in the event of a disability. Short-term benefits have a seven-day waiting period and cover the first 26 weeks. After this, long-term benefits begin.

Disability insurance paid under this plan are considered taxable income to the employee. Benefits may be paid up until age 65 (possibly longer if the disability occurs after age 60). Note that the disability plan covers salary, but not RSUs and bonus payments. Employees might consider purchasing a supplemental disability policy to cover a higher percentage of their income.

Reviewing Your Amazon Benefits

As you can see, Amazon provides a wide range of financial benefits, including some which require careful consideration. If you have questions about which options are right for you, or how they best fit with your tax and financial planning, your Paracle advisor can help.

About Paracle

Paracle Personal Financial Management is an independent financial planning firm founded in 2004 with an honest desire to help people optimize their finances by providing unbiased financial planning and investment advice that puts their clients first. Paracle specializes in delivering expert, comprehensive wealth management services to busy families. Their expertise integrates financial planning with investment management to ensure their clients experience confidence in every aspect of their plan so they can focus on what matters most. To learn more about Paracle, connect with them on LinkedIn.


Filed Under: Company Benefits, Financial Planning

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