How to Maximize Your Benefits at Amazon

Amazon, Inc. offers a very robust benefits package that encompasses retirement, health insurance, life insurance, disability insurance and premier access to service professions across various disciplines (legal, retirement, etc.) Are you making the most out of your plan to reach your financial planning and lifestyle goals? In this post we breakdown the key components of the Amazon benefits plan available to employees.
Your ability to participate in each component may vary due to your personal financial and cash flow situation, but it is valuable to know what else you can be using down the road to achieve your goals.

401(k)

Amazon employees are eligible to contribute 1% to 90% of base pay and performance base pay (no restricted stock compensation) to either a pre-tax 401(k) (“traditional”) or post-tax 401(k) (“roth”) up to the annual IRS Limit ($19.5k/yr. for 2020). Employees over the age of 50 are eligible to make an additional “catch-up” contribution of $6.5K/yr. to the account of their choice as well, for a maximum total contribution of $26K/yr. for employees over that age threshold. 

The decision to use either the traditional or roth version of the 401(k) will most likely come down to your personal tax situation. If you are projected to have high taxable income for the year due to base comp and RSU’s vesting, the traditional account may be most beneficial, as the amount contributed to the 401(k) will not be included in your taxable income for the year. These assets will be taxed when withdrawn in retirement, where ideally you would be in a much lower tax bracket than you currently are. 
Amazon offers a match of 50% up to the first 4% of your total compensation (2% total match). No match is provided for catch-up contributions. 

As we’ll discuss below, RSUs tend to be a significant portion of the comp package at Amazon, so one strategy to employ if you can’t afford to maximize your 401(k) contributions due to cash flow restraints is to gradually sell RSUs that have vested in order to fund your cash flow needs while you maximize 401(k) contributions to take advantage of the tax deduction.

Life Insurance

Amazon employees are immediately enrolled in a basic policy that provides coverage up to 2X your base salary, with a cap on $500K. This coverage is free of charge for Amazon employees. Learn more about leveraging a life insurance here.
Employees who would like additional coverage on top of this basic policy may add a supplemental policy of up to 10X your base salary, with a $2M total cap. Pricing for these supplemental policies depend on age and health of the employee as determined by the underwriting company. 
For employees who purchase a supplemental policy, up to $300K of this coverage is portable. If you end up leaving Amazon you would be able to take this portion of life insurance coverage with you, but you would lose the coverage from the basic policy. 
We recommend reviewing the pricing of the supplemental coverage against other life insurance providers (which we can help with) in order to determine if the pricing is favorable or not for you.

Disability Insurance

Amazon employees are eligible for short-term disability insurance that covers 60% of their pre-tax weekly rate. Coverage does not include any RSU compensation or any type of bonuses or pay besides base salary. With how Amazon base salaries are constructed, the max coverage under this plan is typically $90K (taxable).

Employees must wait for a 7-day elimination period to be completed before they are eligible for payments to commence under this plan. 

If an employee is still disabled after 180 days on the short-term disability plan, they will begin utilizing their long-term disability plan instead. The long-term disability insurance pays up to covered eligible monthly pay that includes salary and RSU’s for up to two years. This coverage is maxed out at $25K/mo. ($300K/yr.).
Similar to life insurance, we recommend reviewing coverage options from third party insurance companies as well to see if the rates Amazon is offering are competitive. For what it’s worth, we have found the disability insurance rates more competitive than the life insurance rates.

Restricted Stock Units and Signing Bonuses

Covered in length in some of our other blog posts, Restricted Stock Units (also known as stock grants) allow you to obtain shares of company stock in accordance with the vesting schedule that is provided when the stock award is originally received. A form of variable bonus, RSU’s are considered the Crown Jewel of the Amazon compensation package as salaries for even the higher ups cap out at $160,000/yr.
New hires can typically expect a large initial hire grant that vests over a period of 4 years in the following fashion:

• Year 1: 5%

• Year 2: 15%

• Year 3: 40%

• Year 4: 40%

Because the majority of the stock grants do not vest until Year 3 and 4, Amazon often pays a “signing bonus” that is typically spread out over the first two years to bridge the gap in compensation. Signing bonuses are not paid out at once, but paid out with each regular paycheck over the designated time period. 

As you continue to work and grow at Amazon, managing your initial grant vests and additional annual grants will become an essential aspect of your overall financial planning and tax planning.

In addition, we find many folks needing guidance on what to do with their RSUs after they vest. This is where working with an advisor who can look across your total balance sheet can help you assess the appropriate next move as it relates to cash flow, taxes and concentration.

Health Insurance

Amazon offers a wide range of medical insurance plans to meet your needs, including:
 

• Shared deductible plan through Aetna or Premera Blue Cross

• Health Savings Plan through Aetna or Premera Blue Cross

• Standard Plan through Aetna or Premera Blue Cross

• HMO through Kaiser Permanente

• In-network plan through Premera Blue Cross

Amazon also offers a basic and enhanced dental plan (Delta Dental of Washington) and basic and enhanced vision plan (Vision Service Plan).

Health insurance coverage largely depends on family situation and needs, but one approach that we would like to highlight that Amazon offers is the Health Savings Account if you are under a high deductible health plan. A strategy that we have seen successfully employed is for employees paying current out of pocket expenses with their regular funds and maximizing the contributions to the HSA. Families are able to make a maximum annual contribution of $7.1K to these types of accounts. As part of that $7.1K total contribution, Amazon will contribute up to $1,500 towards that account for the employees benefit.
 
Access to Professional Service Providers

The Amazon benefit plan also offers access to many different service providers, including (but not limited to) the following:

• Home, renters, auto and pet insurance through various insurance providers

• Estate planning and additional legal services through Met Law

• Child care services through Sittercity

• Elder care services through Years Ahead 

Conclusion

Amazon compensation plan offers many components and features that can help you maximize your wealth, save on taxes and plan for retirement. Interested in learning more about how you can optimize your comp plan to meet your goals? Schedule a meeting with one of our trusted advisors today.