Microsoft’s Voluntary Exit Offer and Your Disability Claim

On October 26, 2026, Microsoft offered approximately 60,000 employees a Voluntary Exit Offer (VEO) aimed at encouraging eligible employees to leave the company. While the offer may provide immediate financial incentives, employees who are receiving disability benefits—or considering filing a disability claim—should proceed carefully.

Signing a separation agreement can have long-term consequences that may not be obvious at first glance. For employees dealing with short-term disability (STD), long-term disability (LTD), or pending claims, accepting the VEO may affect ongoing benefits and potentially waive important legal rights.

What Is Included in Microsoft’s Voluntary Exit Offer?

The VEO provides selected employees with incentives that may include:

• Two weeks of base pay for every six months of employment with Microsoft;
• Continued health insurance for 18 months, with the first six months being free;
• Six months of continued stock vesting following the termination date; and
• Career transition services.

In exchange, employees must sign a Voluntary Exit Offer Separation Agreement and Release. That release contains broad language requiring employees to waive many legal claims against Microsoft and related parties.

For employees navigating disability issues, the details of that release matter.

Why Disability Claims May Be at Risk

The agreement language includes waivers related to disability claims and benefits. The basic language of the agreement waives any right to bring suit related to employment or compensation, including wage and hour claims. The agreement specifically carves out any claims for benefits “incurred” under the Microsoft Corporation Welfare Plan prior to termination. It is important to note that only Microsoft’s long-term disability benefits are provided under Microsoft’s Welfare Plan. The short-term disability benefits are not. A claim for STD benefits is considered a claim for compensation or leave of absence under state law, and those claims are explicitly released. STD claims, including approved claims, are therefore waived if you sign the agreement, and there is no carve-out to protect them. It is also not clear how this would affect LTD claims. “Incurred” is not defined in the agreement, and the agreement does not state how the waiver of the STD claim would affect the LTD benefits that would follow after six months if an employee has an active STD claim.

By signing the agreement, you may be waiving:

• Current short-term disability claims
• Long-term disability claims not yet “incurred” because the elimination period has not been met
• Future claims based on medical conditions not yet diagnosed

Employees may assume that active disability claims are automatically preserved, but depending on the situation that is not necessarily correct.

Can Signing the Separation Agreement Impact Future Disability Rights?

Yes.

Employees accepting an exit offer package waive their ability to pursue future disability claims that have not yet been made. This can create significant issues if:

• Symptoms worsen after signing the agreement
• You receive a later diagnosis explaining ongoing symptoms
• Disability becomes apparent after separation
• You sign the agreement with an active STD claim and the LTD claim has not yet met the elimination period

Because disability cases often evolve over time, signing a broad release before understanding your medical situation can create serious complications.

If You Are Receiving LTD Benefits, the Voluntary Exit Program Severance Pays Prudential, Not You

Employees currently receiving long-term disability benefits may face another issue: offsets.

Under Microsoft’s LTD policy administered through Prudential, certain outside income sources can reduce monthly disability payments. Lump-sum severance payments are treated as deductible income under the policy and spread across a period of months.

In practical terms, that means:

• Prudential can offset a severance payment
• Monthly LTD benefits from Prudential to you may be significantly reduced to match what you received in severance
• Benefits could potentially fall to the plan minimum

For some individuals, this reduction could continue for many months depending on the size and structure of the severance package. It also means that you do not ultimately benefit from the severance. Prudential benefits from the severance payments, not you.

Also, severance payments are taxable to you. Your Prudential long term disability benefits may not be taxable. This means that you pay the taxes on money that goes to benefit Prudential, while losing the non-taxable benefits during the time period represented by the severance.

Why Immediate Money May Not Equal Long-Term Value

Severance buyouts can look attractive because they offer immediate compensation. However, disability claims often carry significant long-term value.

Depending on your circumstances, an approved disability claim could provide:

• Ongoing monthly income
• Continued access to benefits
• Financial protection for years
• A buyout of future disability benefits if your claim is ever in litigation

Evaluating a disability claim only by the amount of an upfront retirement package may not provide the full picture.

Microsoft Employees Should Consider Legal Guidance Before Signing

If you are:

• Currently receiving short-term disability
• Receiving long-term disability benefits
• Waiting on claim approval
• Appealing a denied claim
• Considering filing for disability

You may want to fully understand how accepting the Voluntary Exit Offer could affect your rights before signing any agreement.

Severance and disability decisions can carry financial consequences that last years—not weeks.

Speak With Monahan Tucker Law Before Signing Away Important Rights

The interaction between separation agreements, ERISA disability law, and employer-sponsored benefit plans can become complicated quickly. Understanding the value of your disability claim and how retirement decisions affect it can help you make an informed choice for yourself and your family.

Before accepting Microsoft’s Voluntary Exit Offer, consult with Monahan Tucker Law to understand your options and protect your rights.