(Mark One)
☒
☐
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2023
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 1-13998
Insperity, Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Delaware
76-0479645
19001 Crescent Springs Drive
Kingwood, Texas
77339
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code): (281) 358-8986
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
NSP
New York Stock Exchange
Securities registered pursuant to Section 12(b) of the Act:
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Smaller reporting company
☒
☐
☐
Accelerated filer
Emerging growth company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of February 1, 2024, 37,289,427 shares of the registrant’s common stock, par value $0.01 per share, were outstanding. As of the last
business day of the registrant’s most recently completed second quarter, the aggregate market value of the common stock held by non-
affiliates (based upon the June 30, 2023 closing price of the common stock as reported by the New York Stock Exchange) was approximately
$4.3 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Part III information is incorporated by reference from the proxy statement for the 2024 annual meeting of stockholders, which the registrant
intends to file within 120 days of the end of the fiscal year.
TABLE OF CONTENTS
Part I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Item S-K 401(b).
Executive Officers of the Registrant
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Part III
Item 10.
Item 11.
Item 12.
Item 13
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Page
2
19
31
31
33
34
35
36
38
39
40
58
58
59
59
59
59
60
60
60
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
60
60
61
64
BUSINESS
PART I
Unless otherwise indicated, “Insperity,” “we,” “our” and “us” are used in this annual report to refer to Insperity, Inc. and its consolidated
subsidiaries. This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). You can identify such forward-looking
statements by the words “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “could,”
“goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. In the
normal course of business, in an effort to help keep our stockholders and the public informed about our operations, from time to time, we may
issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies; projected
or anticipated benefits or other consequences of such plans or strategies; or projections involving anticipated revenues, earnings, average
number of worksite employees (“WSEEs”), benefits and workers’ compensation costs, or other operating results. We base the forward-
looking statements on our current expectations, estimates and projections. We caution you that these statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based many of these
forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future
events described in such forward-looking statements in this annual report, or elsewhere, could differ materially from those stated in such
forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in
this annual report, including, without limitation, factors discussed in Item 1, “Business,” Item 1A, “Risk Factors,” and Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Item 1. Business.
General
We provide an array of human resources (“HR”) and business solutions designed to help improve business performance. Since our formation
in 1986, we have evolved from being solely a professional employer organization (“PEO”), an industry we pioneered, to our current position
as a comprehensive business performance solutions provider.
Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources
service offering and to leverage our buying power and expertise to provide additional valuable services to clients. Our most comprehensive
HR services offerings are provided through our Workforce Optimization and Workforce Synchronization solutions (together, our “PEO HR
Outsourcing Solutions”), which encompass a broad range of human resources functions, including payroll and employment administration,
employee benefits, workers’ compensation, government compliance, performance management, and training and development services,
along with our cloud-based human capital management platform, our Insperity Premier
comprehensive HR outsourcing solution and is our primary offering. Workforce Synchronization, which generally is offered only to our middle
market client segment, is a lower cost offering with a typically longer commitment that includes the same compliance and administrative
services as Workforce Optimization and allows those clients to select, for an additional fee, from the strategic HR products and services that
are included with Workforce Optimization.
platform. Workforce Optimization is our most
TM
TM
®
In addition to our PEO HR Outsourcing Solutions, we offer a comprehensive traditional payroll and human capital management solution,
known as our Workforce Acceleration solution. We also offer a number of other business performance solutions, including Recruiting
Services, Employment Screening, Retirement Services, and Insurance Services. These other products and services generally are offered
only with our other solutions.
TM
Our PEO HR Outsourcing Solutions are designed to improve the productivity and profitability of small and medium-sized businesses. These
solutions relieve business owners and key executives of many employer-related administrative and regulatory burdens, which enable them to
focus on the core competencies of their businesses. Our PEO HR Outsourcing Solutions also promote employee performance through
human capital management techniques designed to improve employee engagement and satisfaction. We enter into a Client Service
Agreement (“CSA”) with each of our PEO HR Outsourcing Solutions clients under which we and our client act as co-employers of the
employees who work at the client’s worksite, or worksite employees (“WSEEs”). Under the CSA, we assume responsibility for personnel
administration and assist our clients in complying with employment-related governmental regulations, while the client retains the employees’
services in its business and remains the employer for other purposes. We charge a comprehensive service fee (“comprehensive service fee”
or “gross billing”), which is invoiced concurrently with the processing of payroll for the WSEEs of the client. The comprehensive service fee
consists of the payroll of our WSEEs plus an additional amount reflected as a percentage of the payroll cost of the WSEEs.
2
2023 Form 10-K
BUSINESS
We accomplish the objectives of our PEO HR Outsourcing Solutions through a “high-touch/high-tech” approach to service delivery. In
advisory areas, such as recruiting, employee performance management and employee training, we employ a high-touch approach designed
to ensure that our clients receive the personal attention and expertise needed to create a customized human resources solution. We utilize a
variety of information technology capabilities to deliver our PEO HR Outsourcing Solutions, including Insperity Premier through which we,
along with our clients and WSEEs, manage employee administration, payroll, payroll tax, benefits, retirement solutions and other HR-related
information, creating efficiencies for all parties.
As of December 31, 2023, we had 83 physical office locations in 45 markets. To take advantage of economic efficiencies, multiple sales
offices may share a physical location. In addition, we had four regional service centers along with human resources and client service
personnel located in a majority of our 45 sales markets, which serviced an average of 315,072 WSEEs per month in the fourth quarter of
2023. Our service centers coordinate PEO HR Outsourcing Solutions for clients on a regional basis and localized face-to-face human
resources services.
We were organized as a corporation in 1986. Our principal executive offices are located at 19001 Crescent Springs Drive, Kingwood, Texas
77339. Our telephone number at that address is (281) 358-8986, and our website address is www.insperity.com. Our stock is traded on the
New York Stock Exchange under the symbol “NSP.” We file or furnish periodic reports with the Securities and Exchange Commission
(“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and if applicable,
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. Through the investor relations section
of our website, we make available electronic copies of the documents that we file or furnish to the SEC, the charters of the standing
committees of our Board of Directors (“Board”) and other documents related to our corporate governance, including our Code of Conduct.
Access to these electronic filings is available free of charge as soon as reasonably practicable after filing or furnishing them to the SEC.
Printed copies of our committee charters and other governance documents and filings can be requested by writing to our corporate secretary
at the address above. Information on our website is not a part of, and is not incorporated into, this report or any other report we may file with
or furnish to the SEC, whether before or after the date of this report and irrespective of any general incorporation language therein.
PEO Industry
The PEO industry began to evolve in the early 1980s largely in response to the burdens placed on small and medium-sized employers by an
increasingly complex legal and regulatory environment. While various service providers were available to assist these businesses with
specific tasks, PEOs emerged as providers of a more comprehensive range of services relating to the employer/employee relationship. In a
PEO arrangement, the PEO assumes certain aspects of the employer/employee relationship as defined in the contract between the PEO and
its client. Because PEOs provide employer-related services to a large number of employees, they can achieve economies of scale that allow
them to perform employment-related functions more efficiently, provide a greater variety of employee benefits, and devote more attention to
human resources management than a client can individually.
We believe the key factors driving demand for PEO services include:
• the focus on growth and productivity of the small and medium-sized business community in the United States, utilizing outsourcing to
concentrate on core competencies
• the need to provide competitive health care and related benefits to attract and retain employees
• the increasing costs associated with health and workers’ compensation insurance coverage, workplace safety programs, employee-
related complaints and litigation
• complex regulation of payroll, payroll tax and employment issues and the related costs of compliance, including the allocation of time
and effort to such functions by owners and key executives
• the significant costs, time and specialized knowledge required to purchase or develop the technology infrastructure to administer
benefits, HR and payroll processing on an integrated basis
A significant factor in the development of the PEO industry has been increasing recognition and acceptance of PEOs and the co-employer
relationship by federal and state governmental authorities. Insperity and other industry leaders, in concert with the National Association of
Professional Employer Organizations (“NAPEO”), have worked with the relevant governmental entities for the establishment of a regulatory
framework that protects clients and employees, discourages
3
2023 Form 10-K
BUSINESS
unscrupulous and financially unsound PEOs, and promotes further development of the industry. Currently, 42 states have enacted legislation
either recognizing PEOs or requiring licensing, registration, or certification, and several others are considering such regulation. Such laws
vary from state to state but generally provide for monitoring the fiscal responsibility of PEOs. State regulation assists in screening
insufficiently capitalized PEO operations and helps to resolve interpretive issues concerning employer/employee status for specific purposes
under applicable state law. We have actively supported such regulatory efforts and are currently recognized, licensed, registered, certified or
pursuing registration in all of these states. The cost of compliance with these regulations is not material to our financial position or results of
operations.
The Small Business Efficiency Act (“SBEA”) created a federal regulatory framework for the payment of wages to WSEEs and the reporting
and remittance of federal payroll taxes on those wages paid by PEOs certified under the Internal Revenue Code as meeting certain
requirements (“CPEOs”). We actively supported the enactment of this law. The SBEA clarified that a CPEO, rather than the client, is treated
as the employer for purposes of reporting and remitting payroll taxes. It also clarified that a CPEO is treated as a successor employer for
purposes of the wage base of WSEEs on which federal payroll taxes are applied. In addition, the law clarified that clients of a CPEO remain
eligible for specified tax credits for which they would have been eligible absent the CPEO relationship. Following the establishment of the
voluntary certification program by the Internal Revenue Service of the United States (“IRS”) and Treasury Department, our PEO subsidiary,
Insperity PEO Services, L.P., received its designation as a CPEO from the IRS.
Service Offerings
PEO HR Outsourcing Solutions
We serve small and medium-sized businesses by providing our PEO HR Outsourcing Solutions, which encompass a broad range of
services. Both of our PEO HR Outsourcing Solutions offer the following:
• payroll and benefits administration
• general HR advice
• health and workers’ compensation insurance programs
• 401(k) retirement plan sponsored by us
• employer liability management
• assistance with government compliance
• personnel records management
• access to Insperity Premier for employees, managers, and client owners
Our Workforce Optimization solution also provides additional services that our Workforce Synchronization clients can purchase for an
additional fee, including the following:
• employee recruiting and support
• employee performance management
• training and development services
Our PEO HR Outsourcing Solutions are designed to attract and retain high-quality employees, while relieving client owners and key
executives of many employer-related administrative and regulatory burdens. As a co-employer in the PEO relationship, we assume or share
many of the employer-related responsibilities and assist our clients in complying with many employment-related governmental laws and
regulations. Historically, we believe that we have successfully marketed the compliance component of our service offering and that our
compliance-related services have increased the value proposition of our service offering. Among the employment-related laws and
regulations that may affect a client are the following:
4
2023 Form 10-K
BUSINESS
•
Internal Revenue Code (the “Code”)
• Federal Income Contribution Act (FICA)
• Federal Unemployment Tax Act (FUTA)
• Occupational Safety and Health Act (OSHA)
• Worker Adjustment and Retraining Notification Act (WARN)
• Uniformed Services Employment and Reemployment Rights
Act (USERRA)
• Fair Labor Standards Act (FLSA)
• State unemployment and employment security laws
• Employee Retirement Income Security Act, as amended (ERISA)
• State workers’ compensation laws
• Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
• Health Care and Education Reconciliation Act of 2010 (the
“Reconciliation Act”)
•
Immigration Reform and Control Act (IRCA)
• Patient Protection and Affordable Care Act (PPACA)
• Title VII (Civil Rights Act of 1964)
• State and local law equivalents of the foregoing
• Health Insurance Portability and Accountability Act (HIPAA)
• The Families First Coronavirus Response Act (FFCRA)
• Age Discrimination in Employment Act (ADEA)
• The Coronavirus Aid, Relief and Economic Security Act, also
known as the CARES Act
• Americans with Disabilities Act (ADA)
• The Consolidated Appropriations Act, 2021 (CAA)
• The Family and Medical Leave Act (FMLA)
• The American Rescue Plan Act of 2021 (ARPA)
• Genetic Information Nondiscrimination Act of 2008
• Paycheck Protection Program and Healthcare Enhancement
• Drug-Free Workplace Act
Act (PPP)
• SECURE 2.0 Act of 2022, as part of The Consolidated
Appropriations Act, 2023
These laws and regulations are complex, and in some instances overlapping. We assist our PEO HR Outsourcing Solutions clients in
complying with these laws and regulations by providing services in the categories set forth below:
Administrative Functions. Administrative functions encompass a wide variety of processing and recordkeeping tasks, mostly related to payroll
administration and regulatory compliance. Specific examples include:
• payroll processing
• payroll tax deposits
• payroll tax reporting
• employee file maintenance
• unemployment claims processing
• workers’ compensation claims reporting and monitoring
Benefit Plans Administration. We maintain numerous benefit plans for eligible WSEEs including the following:
• a group health plan
• a health savings account program
• a health care flexible spending account plan
• a 401(k) retirement plan
• an employee well-being program
• cafeteria plans for group health and health savings account contributions
• short-term and long-term disability insurance
5
2023 Form 10-K
BUSINESS
• an educational assistance program
• an adoption assistance program
• group term life insurance
• accidental death and dismemberment insurance
• critical illness and accident insurance
The group health plan includes medical, dental, vision and prescription drug coverage. All benefit plans are provided to eligible employees
based on the specific eligibility provisions of each plan. We are the policyholder responsible for the costs and premiums associated with any
group insurance policies that provide benefits under these plans, and we act as plan sponsor and administrator of the plans. We negotiate
the terms and costs of the plans, maintain the plans in accordance with applicable federal and state regulations and serve as liaison for the
delivery of these benefits to WSEEs and corporate employees. COBRA coverage is extended to eligible terminated WSEEs and other
eligible individuals in accordance with applicable law. We believe that the variety and comprehensive nature of our benefit plan offerings are
generally not available to employees in our small and medium-sized business target market and allow our clients to compete with the type
and level of benefits usually offered only by companies with a larger group of employees. As a result, we believe the availability of these
benefit plans provides our clients with a competitive advantage that small and medium-sized businesses are typically unable to attain on their
own.
Insperity Premier. Insperity Premier is our cloud-based human capital management platform for our PEO HR Outsourcing Solutions and is
available to our clients with minimal implementation effort. It is designed to provide our service providers with insight into client and WSEE
HR information to better support their needs. Insperity Premier provides role-based access to a wide range of human capital management
functions, along with personalized content to the managers, owners and WSEEs of our PEO HR Outsourcing Solutions clients, including:
For managers and client owners:
• WebPayroll for the submission, approval, and reporting of payroll data
• mobile access to review and approve payroll transactions and employee time entry
• tools to manage the onboarding of new employees
• employee administration functions such as viewing or changing information about employees
• access to client-specific compliance-related information relevant to many HR areas
• reporting and analytics tools to create, view, save, and export reports and data about employees and to perform more complex analysis
and visualization of their workforce data with the Insperity People Analytics solution
• ability to manage employee time and attendance information, absences, and paid time off
• access to talent management tools in the areas of recruiting, performance management, and learning management
• access to a library of online human resources forms
• access to a wide range of best-practices human resources management content
For WSEEs:
• access to view, edit, and change a range of employee profile information
• online check stubs, pay history, W-2 forms, W-4 forms, and other state forms
• employee-specific benefits content, including summary plan descriptions, enrollment status, and tools to assist with benefits selection
for Insperity-sponsored plans
• access to 401(k) retirement plan information for covered plans
6
2023 Form 10-K
BUSINESS
• e-learning web-based training
• links to benefits providers and other key vendors
• performance management tools including self-reviews and review history, if offered by client
• ability to submit time and attendance information, absences, and paid time off requests, if offered by client
• mobile access to perform a wide range of employee-specific activities such as reporting time and attendance and paid time off, view pay
stubs, insurance coverage and ID cards, view 401(k) balances and other commonly accessed data
People Management. In addition to the services we deliver through Insperity Premier, we provide a wide variety of human capital
management services that give our clients access to HR advisors and additional resources normally found only in the human resources
departments of large companies. All PEO HR Outsourcing Solutions clients have access to our advice concerning personnel policies and
practices, including recruiting, discipline, and termination procedures. Other human capital management services we provide include:
• drafting and reviewing personnel policies and employee handbooks
• designing job descriptions
• performing prospective employee screening and background investigations
• designing performance appraisal processes and tools
• professional development and issues-oriented training
• diversity, equity and inclusion training
• employee coaching and counseling
• substance abuse awareness training
• outplacement services
• compensation guidance
Employer Liability Management. Under the CSA, we assume many of the employment-related responsibilities associated with the
administrative functions, benefit plans administration, and human capital management services we provide. For many of those employment-
related responsibilities that are the responsibility of the client or of both the client and us, we may assist our clients in managing and limiting
liability. This assistance may include safety-related risk management reviews as well as the implementation by our clients of safety programs,
for which our clients are responsible, that are designed to reduce workplace accidents and, consequently, workers’ compensation claims. We
also provide guidance to clients for avoiding discrimination, sexual harassment and civil rights violations, and we assist with termination
decisions when consulted to attempt to minimize liability on those grounds. While we do not provide legal services to our clients, we employ
in-house and external counsel who specialize in several areas of employment law, have broad experience in disputes concerning the
employer/employee relationship, and provide support to our internal human resources professionals. As part of our comprehensive service,
we also maintain employment practice liability insurance coverage for ourselves and our clients, monitor developments in HR-related laws
and regulations, and notify clients of the potential effect of such changes on employer liability.
SM
MarketPlace provided by Insperity . Through our many alliances with best-in-class providers, Insperity’s MarketPlace is an e-commerce
portal that brings a wide range of products and services to our clients, WSEEs and their families. Through MarketPlace, which is provided
through Insperity Premier, our clients also have the opportunity to offer their products and services to other clients and WSEEs.
®
Middle Market Solutions. We believe the middle market sector, which we generally define as those companies with employee populations
ranging from approximately 150 to 5,000 WSEEs, has historically been under-served by the PEO industry. Currently, we have a dedicated
sales management, service personnel and consulting staff who concentrate
7
2023 Form 10-K
BUSINESS
solely on the middle market sector. Our average number of WSEEs per month in our middle market sector in 2023 increased 10.5% from
2022, and the middle market sector as a percentage of our overall WSEE count also increased over this period, representing approximately
26.1% and 24.9% of our total average paid WSEEs during 2023 and 2022, respectively. Clients with an average number of WSEEs
exceeding 1,000 paid WSEEs represented 5.5% and 5.4% of our total average paid WSEEs during 2023 and 2022, respectively.
Other Product and Services Offerings
We offer other product and services offerings on a stand-alone basis and to our PEO HR Outsourcing Solutions clients. We also strive to
leverage our relationships with our customers to enable cross-selling of our various products and services.
During 2023 and 2022, revenues from our other products and services offerings as a percentage of our total revenues were 0.8% and 0.7%,
respectively.
Following are the key components of our other products and services, which are offered separately or as a bundle:
Comprehensive Traditional Payroll and Human Capital Management Solution. Our Insperity Workforce Acceleration solution is a
comprehensive human capital management and payroll services solution for clients that do not choose our PEO HR Outsourcing Solutions.
This solution combines a third-party cloud-based human resources software suite that provides integrated payroll, HR administration and
employee onboarding, benefits administration, performance management, and time and attendance functionality with HR guidance and tools,
as well as reporting and analytics. In addition, through a strategic partner, Workforce Acceleration clients have access to a national, licensed
insurance brokerage that specializes in the insurance needs of small businesses.
Recruiting Services. Our Recruiting Services offer direct hire placement on an as-needed basis and provides outsourced support for
individual requisitions or large-scale hiring projects. In addition, we provide consulting services to assist in the creation and maintenance of
consistent hiring practices and retention strategies. We also provide compensation services, behavior-based interview training and talent
assessment.
Employment Screening. Our Employment Screening services offer a customized approach to background-check reporting for companies.
Services include criminal records checks; verification of employment history or education; driving record, civil record and credit history
checks; and confirmation of extraordinary credentials.
Retirement Services. Our Retirement Services solutions deliver comprehensive 401(k) retirement plan recordkeeping and administrative
services to small and medium-sized businesses, primarily in connection with a 401(k) retirement plan we sponsor for our PEO HR
Outsourcing Solutions clients. Services include employee education and enrollment, participant communications, elective deferral withholding
and transmission, matching contribution calculation, loan and distribution processing, regulatory filing preparation and nondiscrimination
testing.
Insurance Services. Our Insurance Services solutions offer assistance through our licensed insurance agency to small and medium-sized
businesses throughout the United States to secure affordable, customizable business insurance packages and life, health and disability
insurance policies. Insurance Services also assists individuals in obtaining insurance coverages.
Client Service Agreement
All PEO HR Outsourcing Solutions clients execute a CSA with us. The CSA provides for an ongoing relationship between Insperity and the
PEO HR Outsourcing Solutions client. For most clients, the CSA generally establishes pricing for a period of one year and is subject to
termination by Insperity or the client upon 30 days’ written notice or upon shorter notice in the event of default. CSAs for our middle market
clients generally establish pricing for two years and are subject to termination by clients upon payment of a termination fee or otherwise by
the parties upon an event of default. The CSA establishes our comprehensive service fee, which is subject to periodic adjustments to
account for changes in the composition of the client’s workforce, employee benefit election changes, and statutory changes that affect our
costs. Under the CSA, clients are obligated to pay the estimated payroll tax component of the comprehensive service fee in a manner that
reflects the pattern of incurred payroll tax costs. This practice aligns clients’ payments to us with our obligations to make payments to tax
authorities, which are higher in the earlier part of the year and decrease as limits on wages subject to payroll tax are reached.
8
2023 Form 10-K
BUSINESS
The CSA also establishes the division of responsibilities between us and the client as co-employers. Pursuant to the CSA, we are
responsible for personnel administration and for compliance with certain employment-related government regulations. In addition, we assume
liability for payment of salaries and wages (as well as related payroll taxes) of our WSEEs and responsibility for providing specified employee
benefits to such persons. These liabilities are not contingent on the prepayment by the client of the associated comprehensive service fee.
Instead, as a result of our employment relationship with each of our WSEEs, we are liable for payment of salary and wages to the WSEEs as
reported by the client and are responsible for providing specified employee benefits to such persons regardless of whether the client pays the
associated comprehensive service fee. The client retains the employees’ services and remains liable for complying with certain government
regulations that require control of the worksite or daily supervisory responsibility or is otherwise beyond our ability to assume. A third group of
responsibilities and liabilities are assumed by both Insperity and the client where such concurrent responsibility is appropriate. The specific
division of applicable responsibilities under our CSAs generally is as follows:
Insperity Responsibilities
• Payment of wages and salaries as reported by the client and related tax reporting and remittance (local, state and federal withholding,
FICA, FUTA, state unemployment)
• Workers’ compensation compliance, procurement, management and reporting
• Compliance with the Code, COBRA, ERISA and PPACA for Insperity-sponsored employee benefit plans, as well as monitoring changes
in other governmental laws and regulations governing the employer/employee relationship and updating the client when necessary
• Offering benefits under Insperity-sponsored employee benefit plans
• Administration of Insperity-sponsored employee benefit plans
Client Responsibilities
• Payment, through Insperity, of commissions, bonuses, vacations, paid time off, sick pay, paid leaves of absence, and severance
payments
• Payment and related tax reporting and remittance of non-qualified deferred compensation and equity-based compensation
• Products produced and/or services provided
• Compliance with OSHA regulations, EPA regulations, FLSA, FMLA, WARN, USERRA, and state and local equivalents and compliance
with government contracting provisions
• Compliance with federal, state, and local pay or play health care mandates and all such other similar federal, state and local legislation
• Compliance with the National Labor Relations Act (“NLRA”), including all organizing efforts and expenses related to a collective
bargaining agreement and related benefits
• Professional licensing requirements, fidelity bonding, and professional liability insurance
• Ownership and protection of all client intellectual property rights
• Compliance with the Code, COBRA, PPACA, and ERISA for client-sponsored employee benefit plans
• For clients electing payroll tax deferrals and claiming tax credits under the FFCRA, the CARES Act, PPP, CAA, and ARPA (collectively,
the “COVID Relief Programs”), the client has sole responsibility for determining eligibility under the programs and depositing deferred
payroll tax amounts with the U.S. Treasury as they become due
Concurrent Responsibilities
• Implementation of policies and practices relating to the employee/employer relationship
9
2023 Form 10-K
BUSINESS
• Internal compliance with all federal, state and local employment laws, including Title VII of the Civil Rights Act of 1964, ADEA, Title I of
ADA, the Consumer Credit Protection Act and immigration laws and regulations
We maintain employment practice liability insurance coverages (including coverages for our clients) to manage our exposure for various
employee-related claims. Our incurred costs in excess of annual premiums with respect to this exposure have historically been insignificant
to our operating results.
Because we are a co-employer with the client for some purposes, it is possible that we could incur liability for violations of such laws, even if
we are not responsible for the conduct giving rise to such liability. Our CSA ordinarily addresses this issue by providing that the client will
indemnify us for liability incurred to the extent the liability is attributable to conduct by the client. Notwithstanding this contractual right to
indemnification, it is possible that we could be unable to collect on a claim for indemnification and may therefore be ultimately responsible for
satisfying the liability in question.
In most instances, clients are required to remit their comprehensive service fees no later than the same day as the applicable payroll date by
wire transfer or automated clearinghouse transaction. Although we are ultimately liable, as the employer for payroll purposes, to pay
employees for work previously performed, we retain the ability to terminate immediately the CSA and associated WSEEs or to require
prepayment, letters of credit, or other collateral upon deterioration in a client’s financial condition or upon non-payment by a client. These
rights, the periodic nature of payroll, and the overall quality of our client base have resulted in an excellent overall collections history.
PEO HR Outsourcing Solutions Clients
Insperity’s PEO HR Outsourcing Solutions provide value-added, full-service human resources solutions we believe are most suitable to a
specific segment of the small and medium-sized business community. We target successful businesses with approximately 10 to 5,000
employees that recognize the advantage in the strategic use of high-performance human resources practices. We have set a long-term goal
to serve approximately 10% of the overall small and medium-sized business community in terms of WSEEs. We serve clients and WSEEs
located throughout the United States.
10
2023 Form 10-K
BUSINESS
By region, our revenue distribution for the year ended December 31, 2023, was as follows:
Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information related to the change in
revenues by region.
All prospective PEO HR Outsourcing Solutions clients are evaluated on the basis of a comprehensive analysis of employer-related risks
entailing many factors, including (where permitted) industry and operations, workplace safety and workers’ compensation, unemployment
history, operating stability, group medical information, human resources practices and other employer risks. As part of our client selection
strategy, we strive to minimize offering our PEO HR Outsourcing Solutions to businesses falling within certain specified NAICS (North
American Industry Classification System) codes for those industries that we believe present a higher employer risk such as employee injury,
high turnover or litigation.
11
2023 Form 10-K
BUSINESS
Our PEO HR Outsourcing Solutions client base is broadly distributed throughout a wide variety of industries as follows:
This diverse client base lowers our exposure to downturns or volatility in any particular industry. However, our performance could be affected
by a downturn in one of these industries or by general economic conditions within the small and medium-sized business community.
We focus heavily on client retention. During 2023 and 2022, our retention rate was approximately 83% and 85%, respectively. For all PEO
HR Outsourcing Solutions clients, the average annual retention rate over the last five years was approximately 85%. Client attrition is
attributable to a variety of factors, including: (1) client non-renewal due to price or service factors; (2) client business failure, sale, merger or
disposition; (3) our termination of the CSA resulting from the client’s non-compliance or inability to make timely payments; and (4)
competition from other PEOs or business services firms.
Marketing and Sales
As of December 31, 2023, we had 98 sales offices located in 45 markets. Our sales offices typically consist of seven to nine Business
Performance Advisors (“BPAs”), a district sales manager, and an office administrator. To take advantage of economic efficiencies, multiple
sales offices may share a physical location.
We identify markets using a systematic market evaluation and selection process. We continue to evaluate a broad range of factors in the
selection process, using a market selection model that weighs various criteria that, based on our experience, we believe are reliable
predictors of successful penetration. Among the factors we consider are:
• market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile
• market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers
• existing relationships within a given market, such as vendor or client relationships
12
2023 Form 10-K
BUSINESS
• expansion cost issues, such as advertising and overhead costs
• direct cost issues that bear on our effectiveness in controlling and managing the cost of our services, such as workers’ compensation
and health insurance costs, unemployment risks, and various legal and other factors
• a comparison of the services we offer to alternatives available to small and medium-sized businesses in the relevant market, such as
the cost to the target clients of procuring services directly or through other PEOs
• long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the
market
We develop a mix of national and local advertising media and a placement strategy tailored to each individual market. After selecting a
market and developing our marketing mix, but prior to entering the market, we engage in an organized media and public relations campaign
to prepare the market for our entry and to begin the process of generating sales leads. We market our services through various business
promotions and a broad range of media outlets, including digital marketing, television, radio, newspapers, periodicals and direct mail. We
employ public relations firms for most of our markets as well as advertising consultants to coordinate and implement our marketing
campaigns. We have developed an inventory of television, radio and newsprint advertisements, which are utilized in this effort.
We routinely seek to develop new marketing approaches and campaigns to capitalize on changes in the competitive landscape for our
human resources services and to more successfully reach our target market. We have an agreement with the Professional Golf Association
Champions Tour to be the title sponsor of the Insperity Invitational
annually in The Woodlands, Texas (a suburb of Houston). In addition, we have an arrangement with Jim Nantz, a sports commentator, to
serve as our national spokesperson. Our marketing campaigns use this event and the relationship with Mr. Nantz as a focal point of our
brand marketing efforts.
presented by UnitedHealthcare professional golf tournament held
™
®
Our organic growth model generates sales leads from six primary sources: direct sales efforts, digital advertising, traditional advertising,
third-party channel programs, referrals, and marketing alliances. These leads result in initial presentations to prospective PEO HR
Outsourcing Solutions clients, and ultimately, prospective PEO HR Outsourcing Solutions client business profiles. A prospective PEO HR
Outsourcing Solutions client’s business profile reflects information gathered by the BPA about the prospect’s employees, including base
compensation, level of benefits, coverage options, job classification, state of employment and workers’ compensation classification. This
information is used to generate a bid from our customized bid system, which applies Insperity’s proprietary pricing model to the census data.
Concurrent with this process, we evaluate prospective clients through the previously described comprehensive employer risk analysis. Upon
completion of a favorable employer risk evaluation, the BPA presents the bid and attempts to complete the sale and enroll the prospect. Our
selling process typically takes approximately 90 days for clients with less than 150 employees, and 180 days or longer for middle market
clients. The process can be extended during economic downturns.
We have implemented a sales process that allows our BPAs to offer our PEO HR Outsourcing Solutions or Workforce Acceleration, our
traditional payroll solution, to each prospective client with which they meet. This strategy allows us to leverage the same sales force for all of
our primary offerings and increases the ability of our BPAs to add clients to our Workforce Acceleration solution when the client is not
prepared for PEO HR Outsourcing Solutions. This dual channel approach to selling attempts to reduce barriers to a company becoming a
client and allows us to offer solutions better tailored to the specific needs of the business, including at renewal.
Competition
We provide a value-added, full-service human resources solution through our PEO HR Outsourcing Solutions, which we believe is most
suitable to a specific segment of the small and medium-sized business community. This full-service approach is exemplified by our
commitment to provide a high level of service and technology personnel, which has produced a ratio of corporate staff to WSEEs (the “staff
support ratio”) that is higher than average for the PEO industry. Based on an analysis of the 2020 through 2022 annual NAPEO surveys of
the PEO industry, we have successfully leveraged our full-service approach into significantly higher returns for Insperity on a per WSEE per
month basis. During the three-year period from 2020 through 2022, our staff support ratio averaged 57% higher than the PEO industry
average. During the same three-year period, our gross profit per WSEE and operating income per WSEE exceeded industry averages by
142% and 208%, respectively.
13
2023 Form 10-K
BUSINESS
Competition in the PEO industry revolves primarily around quality of services, scope of services, choice and quality of benefits packages,
reputation, and price. We believe reputation, national presence, regulatory expertise, financial resources, risk management, and information
technology capabilities distinguish leading PEOs from the rest of the industry. We also believe we compete favorably in these areas;
however, other PEOs may offer their PEO services at lower prices than we offer.
Due to the differing geographic regions and market segments in which most PEOs operate, and the relatively low level of market penetration
by the industry, we consider our primary competition for our PEO HR Outsourcing Solutions to be the traditional in-house provision of human
resources services. The PEO industry is highly fragmented and we have seen competition intensify; however, we believe Insperity is one of
the largest PEO service providers in the United States. Our largest national competitors include the PEO divisions of large business services
companies such as Automatic Data Processing, Inc. and Paychex, Inc., and other national PEOs, such as TriNet Group, Inc, Vensure and
Rippling. In addition, we also face competition from: (1) fee-for-service providers such as payroll processors and human resources
consultants; (2) human resources technology solution companies; and (3) large regional PEOs in certain areas of the country.
Vendor Relationships
Insperity provides benefits to its WSEEs under arrangements with a variety of vendors. We consider our contracts with UnitedHealthcare
(“United”) and the Chubb Group of Insurance Companies (“Chubb”) to be the most significant elements of our employee benefits package, as
they would be the most difficult to replace.
We provide group health insurance coverage to our WSEEs through a national network of carriers including United, UnitedHealthcare of
California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts (known as Harvard Pilgrim Health
Care (HPHC) beginning in 2024), all of which provide fully insured policies or service contracts. The health insurance contract with United
provides approximately 87% of our participants’ health insurance coverage and expires on December 31, 2026, subject to cancellation by
either party upon 180 days’ notice. For a discussion of our contract with United, which is accounted for using a partially self-funded insurance
accounting model, please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical
Accounting Policies and Estimates—Benefits Costs.”
Our workers’ compensation coverage (the “Chubb Program”) has been provided through an arrangement with Chubb (formerly ACE) since
2007. The Chubb Program is a fully insured program whereby Chubb has the responsibility to pay all claims incurred under the policies
regardless of whether we satisfy our responsibilities. The current workers’ compensation coverage with Chubb expires on September 30,
2024. In the event we are unable to secure replacement coverage on competitive terms, significant disruption to our business could occur.
For additional discussion of the Chubb Program, which includes terms shifting some of the financial responsibility for claims to us, please
read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and
Estimates—Workers’ Compensation Costs.”
Information Technology
Insperity utilizes a variety of information technology capabilities to provide its PEO HR Outsourcing Solutions and business performance
improvement services to its clients and WSEEs and for its own administrative and management information requirements.
Insperity’s PEO HR Outsourcing Solutions information systems, which include Insperity Premier, are a proprietary mix of applications that
includes both internally developed software, licensed software applications and cloud-based services. These systems manage a wide range
of transactions and information specific to our PEO HR Outsourcing Solutions, to Insperity and to our clients and WSEEs, including:
• WSEE enrollment
• human resources management and employee administration
• benefits and defined contribution plan administration
• time and attendance collection and administration
14
2023 Form 10-K
BUSINESS
• payroll processing
• client invoicing and collection
• management information and reporting
• sales bid calculations
Central to these systems are transaction processing capabilities that allow us to process a high volume of employee enrollment, employee
administration, payroll, invoice and bid transactions that meet the specific needs of our clients and prospects. We administer our employee
benefits through a proprietary application designed to process employee eligibility and enrollments, manage carrier relationships and
maintain a variety of plan offerings. Our retirement services operations are conducted utilizing an industry-leading retirement plan
administration application in a third-party hosted environment. Aspects of all of these components are delivered to our PEO HR Outsourcing
Solutions clients and WSEEs through Insperity Premier. We utilize commercially available software and cloud-based solutions for other
business functions such as finance and accounting, sales force activity management and customer relationship management.
Insperity operates from two separate leased hosting facilities, one of which serves as our primary facility. These facilities host the majority of
our business applications, information security and network infrastructure. Each hosting facility houses a mix of primary production
applications, disaster recovery, replication and back-up applications, and pre-production environments. These hosting facilities have the
capacity to run all of our critical business applications and have sufficient capacity to handle all of our operations on a stand-alone basis, if
required. We have an active Business Continuity Plan, which includes information technology capabilities and we utilize a variety of
measures to ensure our Business Continuity Plan remains effective and available.
Our network infrastructure is designed to ensure appropriate connectivity exists among all of our facilities and provides appropriate Internet
connectivity to conduct business with our clients and WSEEs. The network infrastructure is provided through industry standard core network
hardware and via high-speed network services provided by multiple vendors.
We have incorporated a variety of measures designed to maintain the security and privacy of the information managed through our systems
and applications. These measures include industry standard technologies designed to protect, monitor and assess our data centers and
network environment; best practice security policies and procedures; annual corporate employee training on data security and privacy; SOC-
1 reports prepared by independent firms regarding key systems; and a variety of measures designed to control access to sensitive and
private information.
Industry Laws and Regulations
The operations for our PEO HR Outsourcing Solutions are affected by numerous federal, state, and local laws and regulations relating to tax,
insurance and employment matters. By entering into a co-employer relationship with our WSEEs, we assume certain obligations and
responsibilities of an employer under these federal and state laws and regulations. Because many of these federal and state laws and
regulations were enacted prior to the development of nontraditional employment relationships, such as PEOs, temporary employment and
outsourcing arrangements, many of these laws and regulations do not specifically address the obligations and responsibilities of
nontraditional employers. Currently, the federal government and 42 states have passed laws that either recognize PEOs, require licensing or
registration of PEOs, or provide voluntary certification programs for PEOs, and several others are considering such regulation. The SBEA
established a voluntary certification program and created a federal regulatory framework for the payment of wages to WSEEs and for the
reporting and remittance of federal payroll taxes on those wages paid by CPEOs. Our PEO subsidiary, Insperity PEO Services, L.P., is a
CPEO. Please read Item 1. “Business—PEO Industry” for further information.
As an employer, we are subject to federal statutes and regulations governing the employer/employee relationship. Subject to the issues
discussed below, we believe that our operations are in compliance, in all material respects, with all applicable federal statutes and
regulations.
Employee Benefit Plans
We offer various employee benefits plans to eligible employees, including our WSEEs. These plans include:
• a group health plan, which includes medical, dental, vision and prescription drug coverage
15
2023 Form 10-K
BUSINESS
• a 401(k) retirement plan
• cafeteria plans under Code Section 125
• a health savings account program
• a welfare benefits plan, which includes life, disability, accidental death and dismemberment, critical illness, and accident insurance, as
well as an employee well-being program
• a health care flexible spending account plan
• an educational assistance program
• an adoption assistance program
• a commuter benefits program
Generally, employee benefit plans are subject to provisions of the Code, ERISA, and COBRA. The number and complex nature of federal
and state regulations relating to employer-sponsored health plans has continued to increase over time. We believe that additional regulatory
burdens placed on employers can increase the demand for our services because small and medium-sized businesses are especially
challenged in their efforts to comply with governmental regulations due to limited resources and a lack of expertise.
Employer Status and Employee Benefit Plans. We are the sponsor of the employee benefit plans that we offer to eligible WSEEs. Our plans
are governed by ERISA and the Code. Our ability to sponsor these plans, to have them governed by ERISA, and to receive favorable tax
treatment under the Code is dependent on our status as “employer” of the WSEEs. Employer status is determined under various rules,
regulations, and interpretations. While we believe that we qualify as employer under applicable laws, please read Item 1.A. “Risk Factors – A
determination that we are not the employer of our WSEEs and an inability to offer alternate benefit plans could have a material adverse effect
on our business.”
Patient Protection and Affordable Care Act. For a discussion of the impact of the Patient Protection and Affordable Care Act on our business,
please read Item 1A. “Risk Factors—PEO HR Outsourcing Solutions Risks—Health care reform could affect our health insurance plan and
could lead to a significant disruption in our business.”
401(k) Retirement Plans. Our 401(k) Retirement Plan for WSEEs is operated pursuant to guidance provided by the IRS under Revenue
Procedure 2002-21 and Revenue Procedure 2003-86, each of which provides guidance for the operation of defined contribution plans
maintained by PEOs that benefit WSEEs. This guidance provides qualification standards for PEO plans that, if met, negate the inquiry of
common law employer status for purposes of the exclusive benefit rule. All of Insperity’s 401(k) Retirement Plans have received
determination letters from the IRS confirming the qualified status of the plans.
Employment Taxes
As a co-employer, Insperity generally assumes responsibility and liability for the payment of federal and state employment taxes with respect
to wages and salaries paid to our WSEEs. There are essentially three types of federal employment tax obligations included in Subtitle C —
Employment Taxes of the Code:
• withholding of income tax requirements governed by Code Section 3401, et seq.
• obligations under FICA, governed by Code Section 3101, et seq.
• obligations under FUTA, governed by Code Section 3301, et seq.
Under these Code sections, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee
portion of these taxes.
The SBEA provides a CPEO shall be treated as the employer under Subtitle C – Employment Taxes of the Code and shall be responsible for
reporting federal employment taxes on remuneration paid by the CPEO rather than the CPEO clients.
16
2023 Form 10-K
BUSINESS
For any client CSA that is not a CPEO contract, Code Section 3401, which applies to federal income tax withholding requirements, contains
an exception to the general common law test applied to determine whether an entity is an “employer” for purposes of federal income tax
withholding. Code Section 3401(d)(1) states that if the person for whom services are rendered does not have control of the payment of
wages, the “employer” for this purpose is the person having control of the payment of wages. The Treasury regulations issued under Code
Section 3401(d)(1) state that a third party can be deemed to be the employer of workers under this section for income tax withholding
purposes where the person for whom services are rendered does not have legal control of the payment of wages. While several courts have
examined Code Section 3401(d)(1), its ultimate scope has not been delineated. Moreover, the IRS has to date relied extensively on the
common law test of employment in determining liability for failure to comply with federal income tax withholding requirements.
Accordingly, while we believe that we can assume the withholding obligations for WSEEs, in the event we fail to meet these obligations, the
client may be held ultimately liable for those obligations. While this interpretive issue has not to our knowledge discouraged clients from
enrolling with Insperity, there can be no assurance that a definitive adverse resolution of this issue would not do so in the future. These
interpretive uncertainties may also impact our ability to report employment taxes on our own account rather than the accounts of our clients.
Clients who elected to defer the employer portion of social security under the CARES Act have sole responsibility for reporting and depositing
deferred amounts with the U.S. Treasury.
Unemployment Taxes
We record our state unemployment insurance (“SUI”) tax expense based on taxable wages and tax rates assigned by each state. State
unemployment tax rates vary by state and are determined, in part, based on Insperity’s prior years’ compensation and unemployment
experience in each state. Certain rates are determined, in part, by each client’s own compensation and unemployment experience. In
addition, states have the ability under law to increase unemployment tax rates, including retroactively, to cover deficiencies in the
unemployment tax funds. Rate notices are typically provided by the states during, or prior to, the first quarter of each year; however, some
notices are received later. Until we receive the final tax rate notices, we estimate our expected SUI rate in those particular states.
State Regulation
While some states do not explicitly regulate PEOs, 42 states have adopted provisions for licensing, registration, certification or recognition of
PEOs, and several others are considering such regulation. Such laws vary from state to state but generally provide for monitoring the fiscal
responsibility of PEOs, and in some cases codify and clarify the co-employment relationship for unemployment, workers’ compensation and
other purposes under state law. We believe that we are in compliance with the material requirements in all 42 states that have such laws.
Regardless of whether a state has licensing, registration or certification requirements for PEOs, we must comply with a number of other state
and local regulations that could impact our operations.
Human Capital
We believe that our ability to attract and retain highly motivated and skilled corporate employees with diverse backgrounds and experiences
is critical to our continued success. Our human capital management objective is to attract, develop, and retain qualified corporate employees
as appropriate to support our growth, client service initiatives, and technology investments, while furthering our commitment to our culture,
mission, and values.
We had approximately 4,400 corporate employees as of December 31, 2023. We believe our relations with our corporate employees are
good. None of our corporate employees are covered by a collective bargaining agreement. The number of BPAs and trained BPAs impacts
our ability to grow our customer base. We refer to BPAs who have been employed for two months and completed initial sales training as
“trained BPAs.” During 2023 and 2022, the average number of BPAs were 748 and 669, respectively, while the average number of trained
BPAs were 685 and 601, respectively.
We offer numerous programs and benefits in furtherance of our human capital management objective, including: competitive compensation
and benefits; corporate 401(k) retirement plan with a matching component; employee stock purchase program; leadership development
programs; the Insperity MVP (Mission Values Performance) employee recognition program; flexible remote working arrangements; and
employee benevolence programs to provide additional assistance to corporate employees in times of need.
17
2023 Form 10-K
BUSINESS
We monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our
corporate employees, including periodic surveys of our corporate employees to obtain their opinions on key topics.
Intellectual Property
Insperity currently has registered trademarks, copyrights and other intellectual property. We believe that our trademarks as a whole are of
considerable importance to our business.
18
2023 Form 10-K
RISK FACTORS
Item 1A. Risk Factors.
The statements in this section describe the known material risks to our business and should be considered carefully.
Economic Risks
Adverse economic conditions could negatively affect our industry, business, and results of operations.
The small and medium-sized business market is sensitive to changes in economic activity levels as well as the credit markets. As a result,
the demand for the outsourced HR services we provide clients could be adversely impacted by weak economic conditions or difficulty
obtaining credit. Current and prospective clients may respond to such conditions by reducing employment levels, compensation levels,
employee benefit levels and outsourced HR services. In addition, during periods of weak economic conditions, current clients may have
difficulty meeting their financial obligations to us and may select alternative HR services at more competitive rates than we offer. Further, our
growth is partially dependent on hiring of new employees by our existing clients, which may be negatively impacted during periods of tight
labor markets, such as the low unemployment environment experienced during 2022 and 2023, and during economic slowdowns, such as
the high unemployment levels experienced during 2020. Such developments could adversely impact our financial condition, results of
operations and future growth rates.
If we are unable to comply with or meet client expectations regarding certain COVID-19 relief programs, our business, financial
condition, and results of operations could be materially adversely affected.
A number of governmental programs and incentives were created to assist businesses and individuals during the COVID-19 pandemic.
Certain of these programs and incentives have required us to make changes to our systems that manage leave, payroll and payroll-related
tax calculation, invoicing and collection of service fees, COBRA participation, and client reporting. For example, the CARES Act allowed
companies to defer certain payroll taxes, which were reflected in the payrolls we processed for those clients. Client companies are liable for
repaying the deferred amounts to the IRS; however, the IRS has not yet clarified how such deferred amounts will be properly applied to
companies utilizing a PEO and, if and when issued, such guidance may require further revisions to our systems or processes. In addition,
further legislation may be enacted at the federal, state or local level that may require further changes to our processes and systems or that
may expand the coverage afforded to WSEEs under our health and workers’ compensation insurance programs.
Further, PEO clients are dependent on their PEO to process Employee Retention Tax Credits (“ERC”) on a consolidated basis, including
through amending previously filed payroll tax forms with the IRS. The IRS has experienced significant backlogs in processing amended tax
forms from employers seeking ERC refunds and we are currently awaiting IRS review of a number of ERC claims with respect to our PEO
clients. Currently, the deadline to submit any ERC claims for relevant periods in 2020 is April 2024, and the deadline for relevant periods in
2021 is April 2025. A pending federal bill, The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), however, would
retroactively accelerate the deadline for all claims to January 31, 2024. If any of the ERC claims that we made on behalf of our clients were
denied or otherwise deemed insufficient, we may not be able to perfect our filings on a timely basis. Further, eligibility for the ERC is
dependent on certain operational information of our clients. If the IRS were to determine that any of our clients were not eligible for the ERC
requested on their behalf and conclude that we are responsible for those claims, or if the IRS were to otherwise challenge the claims we
requested, we could face penalties or other liabilities. In either of those events, our clients may seek recourse against us or choose not to
renew.
If we experience rejection of any COVID-19 relief program claims on behalf of clients, are unable to timely make system changes needed to
comply with other regulations, incur substantial additional costs in doing so, or are otherwise adversely affected by these requirements, then
we may face fines, penalties, other regulatory action, or litigation relating to such failure, and we may not have insurance coverage for all or
some of these liabilities. These events could further adversely impact our PEO state licenses or registrations, or our CPEO status, as well as
our ability to attract and retain clients. As a result of the foregoing, our business, results of operations and financial condition could be
materially adversely affected.
Bank failures or other events affecting financial institutions could have a material adverse effect on our business, results of
operations or financial condition, or have other adverse consequences.
We use a U.S.-based global systemically important bank (or G-SIB) for our PEO operations, including our cash balances associated with that
portion of our business. All of our cash deposits are held by Federal Deposit Insurance Corporation
19
2023 Form 10-K
RISK FACTORS
(“FDIC”) insured banks, which amounts exceed the FDIC insurance limits. Through various overnight “sweep account” programs, we also
invest a significant portion of our cash balances in U.S. Treasury-based funds, which are invested through brokerage firms affiliated with the
banks at which our deposits are held. The failure of a bank or related brokerage firm that we use, or events involving limited liquidity, non-
performance or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, or
concerns or rumors about such events, may lead to disruptions in access to our cash balances, adversely impact our liquidity, including our
ability to borrow under our credit facility, or limit our ability to process transactions related to our clients. In the event of a failure of a bank or
other financial institution that holds our cash deposits, there can be no assurance that our deposits in excess of the FDIC or other
comparable insurance limits will be recoverable or, even if ultimately recoverable, there may be significant delays in our ability to access
those funds. Furthermore, bank failures, non-performance, or other adverse developments that affect financial institutions could impair the
ability of one or more of the banks participating in our credit facility from honoring their commitments. Such events could have a material
adverse effect on our financial condition or results of operations.
Similarly, our clients may be adversely affected by any bank failure or other event affecting financial institutions. For example, in early 2023,
some of our clients had deposits with banks that were placed into receivership. If those clients had been unable, or if our clients in the future
are unable, to meet their obligations to us as a result of a bank failure or other event affecting financial institutions, we may be exposed to
potential risks that could impact our financial condition or results of operations. If we were to fail to pay the liabilities that we have assumed
associated with our WSEEs, we may be subject to fines or other penalties.
Labor shortages, increasing competition for highly skilled workers, and evolving employee expectations regarding the workplace
could have a material adverse effect on our business, financial condition or results of operations.
The success of our business is heavily dependent on our ability to attract and retain a skilled workforce, including in our service and sales
positions. Several factors may limit the labor force available to us or increase our labor costs, including high employment levels, strong
macroeconomic conditions, federal unemployment subsidies, and other governmental regulation. As macroeconomic conditions improved
from 2021 through 2023, the labor market tightened, resulting in increased employee turnover and skilled labor shortages. Increasing
competition for highly skilled and talented workers may make it increasingly difficult and expensive for us to attract and retain a service team
capable of supporting our clients or a sales team that is effective in selling our complex service offerings to clients. An overall or prolonged
labor shortage, increased turnover, or labor inflation could have a material adverse impact on our growth plans, client service delivery, results
of operations and financial condition.
In addition, following the remote work environment that we implemented during the COVID-19 pandemic and a resulting shift in the
expectations of our employees, many of our departments have now switched to a “hybrid” mode in which remote work is permitted one or
more days per week. These changes may impact productivity or have other material impacts on our operations.
Inflation may reduce our profitability.
Inflationary pressure could adversely impact our profitability. Our operating costs have increased, and may continue to increase, due to the
recent growth in inflation. We may not be able to fully offset these cost increases by raising prices for our services, particularly because our
client agreements generally fix our pricing for a period of time, which could result in downward pressure on our profit margins. Further, our
clients may choose to reduce their business with us if we increase our pricing.
Geographic market concentration makes our results of operations vulnerable to regional economic factors.
Our New York, California and Texas markets accounted for approximately 10%, 15% and 18% (including 7% in Houston), respectively, of our
WSEEs for the year ended December 31, 2023. Accordingly, unless we are successful in expanding in our current markets and into new
markets, which we believe will take additional time, for the foreseeable future, a significant portion of our revenues may be subject to
economic, statutory, and regulatory factors specific to New York, California, and Texas.
We are subject to covenants under our credit facility that may restrict our business and financing activities. Our failure to comply
with these covenants may result in an acceleration of our indebtedness, which could have a material adverse effect on our
business, financial condition or results of operations.
20
2023 Form 10-K
RISK FACTORS
Our credit facility contains, and any future indebtedness of ours likely would contain, covenants that, subject to certain exceptions, impose
significant operating and financial restrictions, including restricting our ability to:
• incur additional indebtedness,
• sell material assets,
• retire, redeem or otherwise reacquire our capital stock,
• acquire the capital stock or assets of another business,
• enter into new lines of business,
• make investments, and
• pay dividends.
In addition, we are required to maintain certain financial covenants. Our ability to comply with the financial covenants may be affected by
financial, business, economic, regulatory and other factors beyond our control.
Our failure to comply with these covenants, or any other terms of our indebtedness, could result in a default that may limit our ability to
borrow additional amounts under our credit facility, which may adversely affect our liquidity. In addition, a default may allow our lenders to
accelerate our obligation to repay the outstanding amounts under our credit facility. If we were unable to repay or refinance the accelerated
indebtedness on favorable terms, then our business, financial condition and results of operations would be materially adversely affected.
A future outbreak of highly infectious or contagious diseases could have a material and adverse impact on our business, results of
operations, financial condition and cash flows.
The spread of a highly infectious or contagious disease could create significant volatility, uncertainty and economic disruption, including as a
result of actions taken by businesses and governments in response to such a pandemic that may result in a significant reduction in
commercial activity, such as occurred during the COVID-19 pandemic that began in 2020. The extent to which future pandemics impact our
business, operations, financial results and financial condition will depend on numerous evolving factors that are highly uncertain and that we
may not be able to accurately predict. While such a pandemic is continuing and even after it has subsided, we may experience material
adverse impacts to our business, operations and financial results due to any existing or continuing negative economic impact, including a
recession, depression, or periods of supply shortages or high inflation, such as experienced in 2022 following the COVID-19 pandemic.
Additionally, future pandemics may change how and when we incur health insurance costs under our health insurance contract with United,
such as changes in quarterly levels and timing of both medical and pharmaceutical health insurance claims and processing payment
patterns. Accordingly, future pandemics may present, material uncertainty and risk with respect to our business, and may have a material
adverse effect on our financial condition, results of operations, cash flows and business.
PEO HR Outsourcing Solutions Risks
We assume liability for WSEE payroll, payroll taxes, benefits costs and workers’ compensation costs and are responsible for their
payment regardless of the amount billed to or paid by our clients.
Under the CSA, we become a co-employer of WSEEs and assume the obligations to pay the salaries, wages and related benefits costs and
payroll taxes of such WSEEs. We assume such obligations as a principal, not as an agent of the client. Our obligations include responsibility
for the following even if our costs to provide such benefits exceed the fees the client pays us and the amounts collected from WSEEs:
• payment of the salaries and wages for work performed by WSEEs, regardless of whether the client timely pays us the associated
service fee
• withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity
• providing benefits to WSEEs
21
2023 Form 10-K
RISK FACTORS
• providing workers’ compensation coverage to WSEEs
Further, the increase in remote work, including by WSEEs, has complicated the calculation of payroll and unemployment taxes applicable to
those individuals. We are dependent on our PEO Outsourcing Solutions clients to properly report the locations in which WSEEs perform
services. If a regulatory authority were to determine that we did not properly calculate or transmit these amounts, then we could be subject to
fines, penalties, or other liabilities, which we may not be able to recover from our clients. We may also need to devote additional resources
and incur additional costs to modify our systems to address any such compliance issues.
If a client does not pay us, if the costs of services we provide to WSEEs exceed the fees a client pays us, or if we incur fines and penalties as
a result of an adverse determination related to our payroll and unemployment tax calculations, our ultimate liability for WSEE payroll, payroll
taxes, workers’ compensation and/or benefits costs, as well as any fines or penalties, could have a material adverse effect on our financial
condition or results of operations.
Increases in health insurance costs or our inability to secure replacement health insurance coverage on competitive terms could
have a material adverse effect on our business, financial condition or results of operations.
Maintaining health insurance plans that cover WSEEs is a significant part of our business. Our primary health insurance contract expires on
December 31, 2026, subject to cancellation by either party upon 180 days’ notice. In the event we are unable to secure replacement
contracts on competitive terms, significant disruption and harm to our business could occur.
Health insurance costs are in part determined by our plans’ claims experience and comprise a significant portion of our direct costs. Our
health insurance coverage is provided under policies or service contracts that are fully insured. United is the carrier that insures the majority
of our coverage. Although all of our carriers remain responsible to pay all covered claims, under our health insurance contract with United,
we retain an obligation to United to fund the cost of the plan. The profitability of our PEO HR Outsourcing Solutions is affected by the overall
expenses associated with the cost of delivering our services, one of the largest of which is the cost of our health insurance. Our ability to
accurately anticipate the expenses associated with the plans, including claims costs on a quarterly or annual basis, can impact our results of
operations. If the plans experience an unexpected increase in the number or severity of claims, our associated health insurance costs could
increase beyond anticipated levels, as we experienced in 2021 and 2023. These costs are further impacted by a number of factors, including
coverage options elected by employees, macro-economic changes, proposed and enacted regulatory changes and wide-spread health-
related outbreaks. Contractual arrangements and competitive market conditions may limit or delay our ability to increase service fees to
offset any associated potential increased costs associated with the plans, which could substantially impair our financial condition or results of
operations. Further, if the overall pricing of our services includes cost assumptions based on inaccurate forecasts of plan expenses, our
profitability or our ability to attract and retain clients may be adversely impacted. As a result, if we do not accurately forecast the costs of our
plans, our business, financial condition or results of operations may be materially adversely affected. For additional information related to our
health insurance costs, please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Critical Accounting Policies and Estimates—Benefits Costs.”
Health care reform could affect our health insurance plan and could lead to a significant disruption in our business.
Many of our clients select a PEO Outsourcing Solution pursuant to which we offer the health and welfare benefit plans sponsored by us to
the WSEEs co-employed by those clients. The future impact and direction of healthcare reform, including future legislative actions, is
unknown and, if any such developments were to reduce our ability to make health care benefits available to WSEEs or were to make our
offerings less attractive to our clients, then our business, financial condition, and results of operations may be materially adversely affected.
Supporters in various states have advocated and continue to advocate for adoption of health care-related reforms at the state level, which
has the potential to significantly change the insurance marketplace for small and medium-sized businesses and how employers provide
insurance to employees. Additionally, guidance by the IRS and the U.S. Department of Health and Human Services (“HHS”) has not
addressed or in some instances is unclear as to the application of certain aspects of federal health care reform laws in the PEO relationship
or whether such provisions should be applied at the PEO or client level.
Various states have adopted or are considering reforms that may impact the requirements for or availability of PEO-sponsored health plans.
At this time, the insurance market reforms have not had a material adverse impact on our
22
2023 Form 10-K
RISK FACTORS
business operations, and if any future changes impact our ability to attract and retain clients, or our ability to increase service fees to offset
any increased costs, then our business may be materially adversely affected.
Subsequent changes resulting from action that may be taken at the federal or state level may impact our benefit plans, business model and
future results of operations, including repeal or repeal and replacement of current healthcare reform provisions as has been advocated by
some Congressional leaders. In future periods, changes may result in increased costs to us and could affect our ability to attract and retain
clients. Additionally, contractual arrangements and competitive market conditions may limit or delay our ability to increase service fees to
offset any associated potential increased costs. We are currently unable to determine whether potential future healthcare reform changes or
other regulatory action, including at the state level, may adversely affect our business or market conditions.
A determination that we are not the employer of our WSEEs and an inability to offer alternate benefit plans could have a material
adverse effect on our business.
In order to qualify for favorable tax treatment under the Code, employee benefit plans must be established and maintained by an employer
for the exclusive benefit of its employees. Generally, an entity is an “employer” of individuals for federal employment tax purposes if an
employment relationship exists between the entity and the individuals under the common law test of employment. In addition, the officers of a
corporation are deemed to be employees of that corporation for federal employment tax purposes. The common law test of employment, as
applied by the IRS, involves an examination of approximately 20 factors to ascertain whether an employment relationship exists between a
worker and a purported employer. Generally, the test is applied to determine whether an individual is an independent contractor or an
employee for federal employment tax purposes and not to determine whether each of two or more companies is a “co-employer.” Substantial
weight is typically given to the question of whether the purported employer has the right to direct and control the details of an individual’s
work. Among the factors that appear to have been considered more important by the IRS are:
• the employer’s degree of behavioral control (the extent of instructions, training and the nature of the work)
• the financial control or the economic aspects of the relationship
• the intended relationship of the parties (whether employee benefits are provided, whether any contracts exist, whether services are
ongoing or for a project, whether there are any penalties for discharge/termination, and the frequency of the business activity)
Employee retirement and welfare benefit plans are also governed by ERISA. ERISA defines “employer” as “any person acting directly as an
employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.” ERISA defines the term “employee” as “any
individual employed by an employer.” The United States Supreme Court has held that the common law test of employment must be applied
to determine whether an individual is an employee or an independent contractor under ERISA. A definitive judicial interpretation of
“employer” in the context of a PEO or employee leasing arrangement has not been established.
If Insperity were found not to be an employer with respect to WSEEs for ERISA purposes, its plans would not comply with ERISA and/or the
Code. Further, as a result of such finding, Insperity and its plans would not enjoy, with respect to WSEEs, the preemption of state laws
provided by ERISA and could be subject to varying state laws and regulations as well as to claims based upon state common laws. In
addition, if Insperity were found not to be the employer sponsoring a single-employer plan under ERISA for purposes of its health benefits
plan, we could be subject to additional requirements under state and federal laws that could restrict our ability to provide benefits to our
WSEEs in the same manner that we do today, which could negatively impact our business. In the case of any such events, we would
endeavor to make available similar benefits at comparable costs in a manner that complied with applicable state laws. However, if we were
unable to promptly transition our benefit plans to a compliant structure with terms that were acceptable to our clients and at a comparable
cost to us, then our business, financial condition, and results of operations could be materially adversely affected.
Increases in workers’ compensation costs or inability to secure replacement coverage on competitive terms could lead to a
significant disruption and harm to our business.
Our workers’ compensation coverage has been provided through an arrangement with Chubb since 2007. Under our current arrangement
with Chubb for claims incurred on or before September 30, 2019, we have a financial responsibility to Chubb for the first $1 million layer of
claims per occurrence and for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed
the first $1 million. Effective for claims incurred on or after
23
2023 Form 10-K
RISK FACTORS
October 1, 2019, our financial responsibility increased as we have financial responsibility to Chubb for the first $1.5 million layer of claims per
occurrence and for claims over $1.5 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5
million. Chubb bears the financial responsibility for all claims in excess of these levels. The Chubb Program is a fully insured program
whereby Chubb has the responsibility to pay all claims incurred under the policies regardless of whether we satisfy our responsibilities. For
additional discussion of our policy with Chubb, please read Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Critical Accounting Policies and Estimates—Workers’ Compensation Costs.”
Workers’ compensation costs are a significant portion of our direct costs and contractual arrangements and competitive market conditions
may limit or delay our ability to increase service fees to offset any associated potential increased costs. If we were to experience an
unexpected large increase in the number or severity of claims, our workers’ compensation costs could increase, which could have a material
adverse effect on our results of operations or financial condition. Further, if the overall pricing of our services includes cost assumptions
based on inaccurate forecasts of our workers’ compensation costs, our profitability or our ability to attract and retain clients may be adversely
impacted.
The current workers’ compensation coverage with Chubb expires on September 30, 2024. In the event we are unable to secure replacement
coverage on competitive terms, significant disruption to our business could occur.
Our ability to adjust and collect service fees for increases in unemployment tax rates may be limited.
We record our SUI expense based on taxable wages and tax rates assigned by each state. SUI tax rates vary by state and are determined,
in part, based on prior years’ compensation experience in each state. Prior to the receipt of final rate notices, we estimate our expected SUI
rate in those states for which rate notices have not yet been received for purposes of forecasting and pricing. In a period of adverse
economic conditions, state unemployment funds may experience a significant increase in the number of unemployment claims. Accordingly,
SUI rates would likely increase substantially. Some states have the ability under law to increase SUI rates retroactively to cover deficiencies
in the unemployment fund. In addition, FUTA may be retroactively increased in certain states in the event the state fails to timely repay
federal unemployment loans, as we recently experienced with California and New York in 2023.
Generally, our contractual agreements allow us to incorporate such statutory increases into our service fees upon the effective date of the
rate change. However, our ability to fully adjust service fees in our billing systems and collect such increases over the remaining term of the
clients’ contracts could be limited, resulting in a potential increase not being fully recovered. As a result, such increases could have a material
adverse effect on our financial condition or results of operations.
Many of our contracts for our PEO HR Outsourcing Solutions may be canceled on short notice. Our inability to renew client
contracts or attract new clients could materially and adversely affect our financial conditions or results of operations.
Our standard CSA can generally be canceled by us or the client with 30 days’ notice. Accordingly, the short-term nature of the CSA makes us
vulnerable to potential cancellations by existing PEO HR Outsourcing solution clients, which could materially and adversely affect our
financial condition or results of operations. Our middle market sector, which we generally define as those companies with employees ranging
from approximately 150 to 5,000 WSEEs, represented 26% of our average paid WSEEs and clients with an average number of WSEEs that
exceed 1,000 WSEEs represented 6% during 2023. In the event we have large clients that terminate or an increase in terminating clients
from our middle market client base, the financial impact of such an event could be significant. Also, our results of operations are dependent in
part upon our ability to retain or replace our clients upon the termination or cancellation of the CSA. Our client attrition rate was approximately
17% in 2023. There can be no assurance that the number of contract cancellations will continue at these levels and such cancellations may
increase in the future due to various factors, including economic conditions in the markets we operate. Clients electing to purchase our
services or electing an alternative solution often do so at the beginning of the calendar year. As a result, we typically experience our largest
concentration of new client additions and attrition in the first quarter of each year.
Our loss of insurance coverage, the failure of our insurance carriers or increased insurance costs or deductibles could have a
material adverse effect on us.
As part of our PEO HR Outsourcing Solutions, in addition to our health insurance carriers, we contract with other insurance carriers to
provide workers’ compensation insurance and employment practices liability insurance. In addition, we obtain insurance coverage for various
commercial risks in our business such as property insurance, errors and
24
2023 Form 10-K
RISK FACTORS
omissions insurance, cyber liability insurance, general liability insurance, fiduciary liability insurance and ERISA bond coverage, automobile
liability insurance, and directors’ and officers’ liability insurance. The failure of any insurance carrier, such as occurred in 2001 with respect to
a previous workers’ compensation insurance provider, providing such coverage could leave us exposed to uninsured risk and could have a
material adverse effect on our business and results of operations. In addition, in the event that our primary health carriers in any key market
make material changes to their network of health care providers or facilities, such as the discontinuation of prominent hospital networks in
key markets on occasion by a carrier in connection with their ongoing negotiations with those networks, then our ability to attract and retain
clients in that market may be adversely affected, which could have a material adverse effect on our business and results of operations.
Further, we have experienced an increase in insurance premiums for our corporate policies as well as an increase in the deductible amounts
for which we retain liability and a decrease in coverage limits. If these premiums or deductible amounts continue to increase, or coverage
limits continue to decrease we would have increased exposure with respect to costs and insurance claims, which could have a material
adverse effect on our business and results of operations.
A determination that a client is liable for employment taxes not paid by a PEO may discourage clients from contracting with us in
the future.
Under the CSA, we assume sole responsibility and liability for paying federal employment taxes imposed under the Code with respect to
wages and salaries we pay our WSEEs. There are essentially three types of federal employment tax obligations:
• income tax withholding requirements
• FICA
• FUTA
Under the Code, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee portion of
these taxes. The SBEA clarifies that a CPEO is treated as the employer for purposes of federal payroll taxes on wages it pays to WSEEs.
Most states impose similar employment tax obligations on the employer. While the CSA provides that we have sole legal responsibility for
making these tax contributions, the applicable state taxing authority could conclude that such liability cannot be completely transferred to us.
Accordingly, in the event that we fail to meet our tax withholding and payment obligations, the client may be held jointly and severally liable
for those obligations. While this interpretive issue has not, to our knowledge, discouraged clients from enrolling with Insperity, a definitive
adverse resolution of this issue may discourage clients from enrolling in the future.
New and higher federal, state and local taxes could have a material adverse impact on our financial condition and results of
operations.
In times of economic slowdowns, the federal government and states and municipalities in which we operate may experience reductions in tax
revenues and corresponding budget deficits. In response to budget shortfalls, such as those being experienced as a result of the COVID-19
pandemic, the federal government and many states and municipalities have in the past and may in the future increase or enact new taxes on
businesses operating within their tax jurisdiction, including business activity taxes and income taxes. In addition, federal, state and local
taxing agencies may increase their audit activity in an effort to identify additional tax revenues. New tax assessments on our operations could
result in increased costs. Further, the Biden Administration and Congressional leaders have expressed support for reviewing federal taxes
and potential increases in federal tax rates for businesses. Our ability to adjust our service fees and incorporate additional tax assessments
into our billing system could be limited. As a result, such higher taxes could have a material adverse impact on our financial condition or
results of operations.
We may be subject to liabilities for client and employee actions.
As a co-employer in the PEO relationship, we assume or share many of the employer-related responsibilities and assist our clients in
complying with many employment-related governmental regulations. A number of legal issues remain unresolved with respect to the co-
employment arrangement between a PEO and its WSEEs, including questions concerning the ultimate liability for violations of employment,
payroll, discrimination, and workplace safety laws. Our CSA establishes the contractual division of responsibilities between Insperity and our
clients for various human capital management matters, including compliance with and liability under various governmental regulations.
25
2023 Form 10-K
RISK FACTORS
Because we act as a co-employer, we may be subject to liability for violations of various employment, payroll, discrimination, and workplace
safety laws despite these contractual provisions, even if we do not participate in such violations. Although the CSA generally requires the
client to indemnify us for certain liabilities attributable to the client’s conduct, we may not be able to collect on such a contractual
indemnification claim and thus may be responsible for satisfying such liabilities to the extent that such liabilities are not covered or insured
against under our insurance policies. In addition, WSEEs may be deemed to be our agents, which may subject us to liability for the actions of
such WSEEs.
Changes in federal, state and local regulation or our inability to obtain licenses under new regulatory frameworks could have a
material adverse effect on our results of operations or financial condition.
As a major employer, our operations are affected by numerous federal, state and local laws and regulations relating to labor, tax, benefit,
insurance and employment matters. By entering into a co-employer relationship with employees assigned to work at client locations, we
assume certain obligations and responsibilities of an employer under these laws. However, many of these current laws (such as the Act,
ERISA, and some state insurance codes and employment tax laws) do not specifically address the obligations and responsibilities of non-
traditional employers such as PEOs, and the definition of “employer” under these laws is not uniform despite the SBEA having provided
clarification under federal employment tax laws for CPEOs. In addition, many of the states in which we operate have not addressed the PEO
relationship for purposes of compliance with applicable state laws governing the employer/employee relationship or PEO health insurance
plans. Any adverse application of, or adverse legislative/regulatory response to, new or existing federal or state laws to the PEO relationship
with our WSEEs and client companies could have a material adverse effect on our results of operations or financial condition.
While some states do not explicitly regulate PEOs, 42 states have passed laws that have recognition, licensing, certification or registration
requirements for PEOs and several other states are considering such regulation. Such laws vary from state to state, but generally provide for
monitoring the fiscal responsibility of PEOs, and in some cases codify and clarify the co-employment relationship for unemployment, workers’
compensation and other purposes under state law. In addition, the SBEA provides certain benefits for companies that qualify as a CPEO.
While we generally support licensing regulation because it serves to validate the PEO relationship, we may not be able to satisfy licensing
requirements or other applicable regulations for all states. In addition, there can be no assurance that we will be able to renew our licenses in
all states or that we will be able to maintain our CPEO designation.
Certain state and federal regulators are more closely evaluating the existing regulatory framework governing money services businesses and
money transmitters in their jurisdictions, particularly following the high-profile failures in 2019 of several national payroll companies. While we
maintain that we are not a money services business or money transmitter, the adoption of new, or changes in interpretations of existing, state
and federal money transmitter or money services business statutes, or disagreements by regulatory authorities with our interpretation of such
statutes or regulations, could subject us to registration or licensing or result in limitations on our business activities until we are appropriately
licensed, and such additional regulation and the actions of the regulatory authorities could have a material adverse effect on our results of
operations or financial condition. These occurrences could also require changes to the manner in which we conduct some aspects of our
business. In addition, should any state or federal regulators make a determination that we have operated as an unlicensed money services
business or money transmitter, we could be subject to civil and criminal fines, penalties, costs, legal fees, reputational damage or other
negative consequences, which could be material.
Further, if we were to be deemed to be subject to other regulatory requirements applicable to other businesses, such as rules or regulations
applicable to new services that we may offer such as earned wage access, then we may need to hire additional personnel, incur additional
costs in order to maintain compliance, or be subjected to fines, penalties, or other liabilities, which could be material.
26
2023 Form 10-K
RISK FACTORS
Competition and other developments in the HR services industry may impact our growth and/or profitability.
The human resources services industry, including the PEO industry, is highly fragmented. Many PEOs have limited operations and fewer
than 2,500 WSEEs, but there are several industry participants that are comparable to our size or larger. We also encounter competition from
“fee for service” companies such as payroll processing firms, insurance companies, human resources consultants and human resources
technology solutions as well as cloud-based self-service bundled human resources offerings. Our competitors include the PEO divisions of
large business services companies, such as Automatic Data Processing, Inc. and Paychex, Inc., and other national PEOs such as TriNet
Group, Inc., Vensure, and Rippling. In many cases, these competitors offer a reduced service PEO offering at a lower price than our PEO HR
Outsourcing Solutions. We expect that as the PEO industry grows and its regulatory framework becomes better established, well organized
competition with greater resources than we have may enter the PEO market, possibly including large “fee for service” companies currently
providing a more limited range of services. In addition, competitors may be able to offer or develop new technology-based lower service
models that may require us to make substantial investments in order to effectively compete.
We offer a lower priced reduced service level PEO offering referred to as Workforce Synchronization in response to certain middle market
client needs and the evolving PEO marketplace. As of December 2023, approximately 14% of our WSEEs were co-employed by Workforce
Synchronization clients. In the event we were to experience a significant increase in the number of clients using the Workforce
Synchronization offering or increased pricing pressures in the PEO marketplace without corresponding reductions in operating costs, our
operating margins may decline, which could have a material adverse impact on our financial condition or results of operations.
Technology Risks
Evolving regulations, market trends and client expectations require us to constantly enhance and expand our service and
technology offerings.
The HR services industry is experiencing rapid technological advances to meet client expectations and expanding regulations. As new
regulations are adopted, we must modify our systems to address these changes in the law, such as our recent efforts to implement the
assistance provided to businesses and employees under the Covid Relief Programs and Secure 2.0 Act of 2022. In order to make these
types of modifications, we may be required to reallocate resources, potentially resulting in delays to planned competitive improvements to our
systems. If we do not successfully or timely deploy these types of modifications, we may be unable to comply with regulations, which could
subject us to penalties, damage our reputation or result in decreased sales. Further, in order to effectively compete in this environment, we
must identify and predict trends, and adapt our technology and service offerings accordingly. In addition, as a larger portion of our client base
falls within the middle market segment, we must also develop different technology and services to meet the more complex needs and
demands of this key group. These efforts require us to devote substantial resources to develop new functionality, or to integrate third-party
solutions, into our offerings. If we fail to respond successfully to these developments or we make investments in enhancements that are not
accepted by the market, then the demand for our solutions and services may diminish.
Disruptions of our information technology systems could damage our reputation and materially disrupt our business operations.
Many of the HR services offerings we provide to clients are conducted through a technology infrastructure using both internally developed
and purchased commercial software, a wide variety of hardware infrastructure technologies, and a multi-carrier wide area network. The
processing of payroll, benefits and other transactions is dependent upon this complex infrastructure, some of which is provided by third-party
vendors. We must manage all of these systems, and are dependent on third parties to manage the systems that we obtain from them,
including any upgrades, replacements or enhancements, to ensure that they continue to support our services. For example, we are currently
working on a multi-year project to replace our sales force automation system and our customer relationship management (“CRM”) system
with a single CRM solution to be used widely across the company. We continue to monitor and make changes to our proprietary system for
our PEO HR Outsourcing Solutions for compliance and modernization. Any delays or failures resulting from network outages; planned
upgrades, enhancements, or replacements of software, hardware, or other systems, including in connection with our CRM replacement
project or any updated for compliance and modernization of systems; or other data processing disruptions, even for a brief period of time,
could result in our inability to timely process transactions. The speed with which we, or third-party vendors, are able to address significant
cybersecurity incidents may be influenced by the cooperation of certain government agencies. We may also incur significant costs in the
future to
27
2023 Form 10-K
RISK FACTORS
protect against damage or disruptions that could be caused by cybersecurity incidents. If such failures cause us to not meet client service
expectations or to breach our obligations to our clients, we may lose existing clients, have difficulty attracting new clients, incur regulatory
penalties or liability to our clients, or suffer other financial losses, which may have a material adverse effect on our business and financial
condition.
We could be subject to reduced revenues, increased costs, liability claims, or harm to our competitive position as a result of data
theft, cyberattacks or other security vulnerabilities.
In connection with our offerings, we collect, use, transmit and store large amounts of personal and business information about our WSEEs,
employees paid under our traditional payroll solution, and clients, including payroll information, personal and business financial data, social
security numbers, bank account numbers, tax information and other sensitive personal and business information. Attacks on information
technology systems continue to grow in frequency and sophistication, and we and our third-party vendors are targeted by unauthorized
parties using malicious tactics, code and viruses. Hardware or applications we develop or procure from third-party vendors may contain
defects in design or other problems that could unexpectedly compromise the confidentiality, integrity or availability of data or our systems.
Because the techniques used to obtain unauthorized access and disable or sabotage systems change frequently and may be difficult to
detect for long periods of time, we and our third-party vendors may be unable to anticipate these techniques or implement adequate
preventive measures. Further, our increased reliance on remote access to our information systems as our employees work remotely impacts
our control over cybersecurity protection and service stability and performance, which increases our exposure to cybersecurity and privacy
issues. As these threats continue to evolve, we may be required to invest significant additional resources to modify and enhance our
information security and controls or to investigate and remediate any security vulnerabilities. We have limited ability to monitor the
implementation of similar safeguards by our vendors and do not have the ability to monitor such implementation by our clients or their
employees, including WSEEs.
In addition, our services also involve the use and disclosure of personal and business information to us that could be used by a malicious
party to commit identity theft or otherwise gain access to the data or funds of our clients or their employees, including WSEEs. If any person,
including any corporate employee, misappropriates or misuses such funds, documents or data, we may have liability for damages, and our
reputation could be substantially harmed and we may have other liabilities that could have a material adverse effect on our business.
Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service attack, ransomware attack,
corruption of data, theft of private or other sensitive information, or similar malicious act by a party (including our employees), or inadvertent
acts or omissions by our vendors or our own employees, could result in the loss, disclosure or misuse of confidential or proprietary
information, and could have a material adverse effect on our business operations or that of our clients, result in liability or regulatory sanction,
or cause a loss of confidence in our ability to serve clients. We may not have adequate insurance coverage to compensate us for losses from
a security incident. Accordingly, the impact of a data security incident could have a material adverse effect on our business, results of
operations and financial condition.
Failure to comply with privacy, data protection and cybersecurity laws and regulations could have a material adverse effect on our
reputation, results of operations or financial condition, or have other adverse consequences.
We are subject to various laws, rules and regulations relating to the collection, use, transmission and security and privacy of personal and
business information. Most states and the District of Columbia have enacted notification rules that may require notification to regulators,
clients or employees in the event of a privacy breach. In addition, new laws and regulations governing data privacy and the unauthorized
disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate our costs. It is possible that
these laws and regulations may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the
possibility of fines, this could result in an order requiring that we change our data practices, which could have a material adverse effect on our
business. Complying with these various laws and regulations could cause us to incur substantial costs or require us to change our business
practices in a manner adverse to our business. For example, we incurred additional costs and reallocated internal resources in order to
comply with the requirements of the California Privacy Rights Act (“CPRA”), which amended the California Consumer Privacy Act of 2018
(“CCPA”) and became effective on January 1, 2023, which has required us to reallocate additional resources in order to manage compliance
in light of the changes implemented by the CPRA. Other states have adopted or are currently contemplating additional privacy requirements.
Generally, these laws do not address the coemployment relationship, which requires us to make determinations as to the requirements
applicable to our
28
2023 Form 10-K
RISK FACTORS
WSEEs and our PEO Outsourcing Solutions clients. The future enactment of similar laws, rules or regulations, or an adverse determination
as to the applicability of these laws, rules, or regulations to us, could have a material adverse impact on us through increased costs or
restrictions on our businesses and noncompliance could result in regulatory penalties and significant liability. Additionally, any failure by us to
comply with these laws and regulations, including as a result of a security or privacy breach, could result in significant penalties and liabilities
for us.
The failure of third-party providers, such as financial institutions, data centers, or cloud-service providers, could have a material
adverse effect on us.
In conjunction with providing services to clients, we communicate and rely on financial institutions to electronically transfer funds for the
collection of our comprehensive service fee as well as the payment of wages and associated payroll tax withholdings. Communication
failures or other failures involving these financial institutions, for any reason, could cause material interruptions to our operations, impact
client retention, and result in significant penalties or liabilities to us.
We lease hosting facilities for our data centers at two separate facilities with one facility acting as our primary data center. These facilities
host the majority of our business applications, telecommunications equipment, information security infrastructure, and network equipment. If
our data centers experience any interruptions or outages, and our business continuity plan is delayed or fails, then our operations may be
materially impacted, which could result in our failure to meet our obligations to our clients, WSEEs, tax authorities, and/or other vendors,
which could damage our reputation, subject us to liability, and have a material adverse effect on our business and financial condition.
In addition, some of our systems and services rely upon third-party technology. Examples include, the human capital management system on
which our Workforce Acceleration solution is based, the data analytics solution on which our Insperity People Analytics solution is based, and
the payroll tax calculation and reporting tools that provide the rates used to calculate payroll taxes for our PEO HR Outsourcing Solutions,
among others. Any failure by these service providers to deliver their services in a timely manner and in compliance with applicable laws could
result in material interruptions to our operations; subject us to substantial fines, penalties, and other liabilities; damage our reputation; and
result in a loss of clients.
Other Operational Risks
We may not fully realize the anticipated benefits of our strategic partnership and plans to develop a joint solution with Workday,
Inc., which could have a material adverse impact on our financial condition or results of operations.
We have announced a strategic partnership and plans to develop a joint solution with Workday, Inc. (“Workday”). The success of the strategic
partnership and joint solution will depend on many factors, and we may not realize all, or any, of the anticipated benefits. We expect to
devote substantial resources and incur significant costs to develop the joint solution. The strategic partnership and plans to develop a joint
solution involve numerous risks, including that we may be unable to complete the development and implementation of the joint solution, or
that development and implementation of the joint solution may be more difficult, time-consuming, or costly than expected. We may also not
receive the expected sales, marketing, and other benefits from the strategic partnership. The full benefit of the strategic partnership requires
the cooperation of the two companies on sales, marketing, and technology matters, as well as our ability to successfully integrate and
implement the Workday-based solution with our other processes and systems in a manner that allows us to maintain compliance as a
professional employer organization and incorporate appropriate financial and management systems and controls. In addition, we may fail to
effectively market or sell the joint solution, or there may be less demand than anticipated for the joint solution. The initiatives related to the
strategic partnership, including the development of the joint solution, may divert the attention of our technology, service, compliance,
marketing, sales, management, and other teams away from our existing business solutions, which could result in the loss of existing or
prospective clients or fines, penalties, or other liabilities if our existing business solutions and compliance are disrupted. We may also have
conflicts or disagreements with Workday, which could disrupt the strategic partnership, could impact the development of the joint solution,
and could lead to termination of the strategic partnership. The occurrence of one or more of these events could result in our failure to achieve
anticipated growth or revenues, or require us to devote additional resources to the strategic partnership or the development of the joint
solution, any of which could result in a material adverse effect on our business, financial condition, and results of operations.
29
2023 Form 10-K
RISK FACTORS
Failure to integrate or realize the expected return on future product offerings, including through acquisitions, strategic
partnerships, and investments, could have a material adverse impact on our financial condition or results of operations.
We have adopted a strategy to market and sell additional solutions within and outside of our PEO HR Outsourcing Solutions. As part of this
strategy, periodically we make strategic long-term decisions to partner with, invest in and/or acquire new companies, business units or assets
in order to offer new or enhanced solutions. Offering new solutions involves a number of risks such as entering markets or businesses in
which we have no prior experience and that may be highly regulated; failing to integrate the new solution into our product and service
offerings; diversion of technology, service, compliance, marketing, sales, management and other teams from other business concerns; in the
case of an investment or acquisition, over-valuation of the targeted business; and litigation or government action resulting from the activities
of an acquired company or from offering the new solution in a non-compliant manner. The occurrence of one or more of these events could
result in the loss of existing or prospective clients or employees, not achieving anticipated revenues or profitability, impairment of acquired
assets, and substantial liability. Such developments could have a material impact to our financial condition, results of operations, and future
growth rates.
30
2023 Form 10-K
OTHER INFORMATION
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We recognize the critical importance of developing, implementing, and maintaining a robust cybersecurity risk management, strategy, and
governance program in order to safeguard the confidentiality, integrity, and availability of our systems and information.
Board Oversight of Cybersecurity Matters
Our Board has established oversight mechanisms to help ensure effective governance in managing risks associated with cybersecurity
threats.
In addition to the updates that our Board receives on cybersecurity matters, the Board’s Finance, Risk Management and Audit Committee
(the “FRMA Committee”) is tasked with overseeing enterprise risk management. The FRMA Committee reviews and discusses major risk
exposures with management, including cybersecurity risks, and steps management has taken to monitor and control such exposures,
including our guidelines and policies concerning risk assessment and management.
Management of and Reporting on Cybersecurity Matters
Our management assumes responsibility for assessing, identifying, and managing cybersecurity risks, threats, and incidents.
In particular, our Senior Vice President of Innovative Technology Solutions (“SVP-ITS”) is responsible for our overall technology strategy,
including overseeing our information security function and plays a pivotal role in assessing and managing all cybersecurity risks, threats, and
incidents. The SVP-ITS reports directly to our President and Chief Operating Officer (“President and COO”) and maintains regular dialogue
with our President and COO and other key members of our senior management to ensure these individuals are appropriately apprised of our
latest cybersecurity posture and developments, such as new threats, incidents, risks, and risk management solutions. Our SVP-ITS prepares
reports for each regular Board meeting regarding significant developments in these topics to support the Board in its efforts to have
appropriate information to exercise oversight on critical cybersecurity issues. Our current SVP-ITS has decades of experience overseeing
leading systems and software development efforts with critical cybersecurity components.
The SVP-ITS is supported by dedicated information technology and security personnel and resources, including team members that have
numerous cybersecurity certifications. Collectively, these personnel and resources allow us to strategically integrate cybersecurity into our
broader risk management framework and decision-making process.
We also have an Enterprise Risk Management Steering Committee (the “ERM Steering Committee”), which is responsible for formally
identifying and evaluating risks that may affect our ability to execute our corporate strategy and fulfill our business objectives, including
cybersecurity risks. The ERM Steering Committee is chaired by the Company’s chief financial officer and includes the Company’s SVP-ITS,
general counsel, internal audit director, and other members of management. The ERM Steering Committee conducts an annual
comprehensive risk review of our overall risk profile and analyzes any significant identified risks, including consideration of risks relating to
cybersecurity matters, which the ERM Steering Committee then presents and discusses with the FRMA Committee and the entire Board. In
addition to the formal annual review, members of the ERM Steering Committee review and provide periodic updates as appropriate regarding
our overall risk profile and any significant identified risks to both the FRMA Committee and the entire Board.
We have processes in place that we believe are designed to allow our information security team and management to be informed of and
monitor the prevention, detection, mitigation, and remediation of cybersecurity risks. These processes include establishing a formal incident
response team, penetration testing, system vulnerability scanning, phishing simulations, tabletop exercises, employee security and
compliance training, disaster recovery planning, and other exercises to evaluate the effectiveness of our information security program and
improve our security measures and planning.
31
2023 Form 10-K
OTHER INFORMATION
Engagement of Third Parties on Risk Management
Recognizing the complexity and evolving nature of cybersecurity threats, we engage with a range of external experts, including cybersecurity
consultants and systems auditors, in evaluating and testing our risk management systems. Our collaboration with these third parties includes
regular audits, threat and vulnerability assessments, incident response plan design and testing, penetration testing, and consultation on
improving our defense-in-depth security posture.
Overseeing Third-Party Risk
We have processes in place designed to help us identify and oversee cybersecurity risks associated with our use of vendors, service
providers, business partners, and other third parties that process our data on our behalf or have access to our systems. These processes
include a vendor management policy designed to identify and consider potential risks from third parties as part of the vendor section process,
which considers vendor cybersecurity standards and other factors based on the nature of the services that the vendor will provide.
Impact on the Company
We have experienced, and may continue to experience, cyber incidents in the normal course of our business. However, prior cybersecurity
incidents have not had a material adverse effect on our business, financial condition, results of operations, or cash flows. For further
discussion, see Item 1A. “Risk Factors – Disruptions of our information technology systems could damage our reputation and materially
disrupt our business operations” and Item 1A. “Risk Factors - We could be subject to reduced revenues, increased costs, liability claims, or
harm to our competitive position as a result of data theft, cyberattacks or other security vulnerabilities.”
32
2023 Form 10-K
PROPERTIES
Item 2. Properties.
We believe our current real estate and facilities are adequate for the purposes for which they are intended and provide for further expansion
to accommodate our long-term growth and expansion goals. We believe that short-term leased facilities are readily available if needed to
accommodate near-term needs if they arise. We will continue to evaluate the need for additional facilities based on the extent of our product
and service offerings, the rate of client growth, the geographic distribution of our client base and our long-term service delivery requirements.
Corporate Facilities
Our corporate headquarters is located in Kingwood, Texas, in a campus-style facility. This 33-acre company-owned office campus includes
700,000 square feet of office space and approximately 6 acres of undeveloped land for future expansion. Development and support
operations are located in the Kingwood facility.
We currently lease three hosting facilities, totaling approximately 2,300 square feet, that are in different locations. The hosting facilities house
the majority of our business applications, telecommunications equipment and network equipment. The facilities, located in Allen, Texas,
Austin, Texas, and Bryan, Texas, are under lease until 2028, 2030, and 2024, respectively.
Service Centers
We currently have four regional service centers located in Atlanta, Dallas, Houston and Los Angeles.
The Atlanta service center, which currently services approximately 35% of our WSEE base, is located in a 47,800 square foot facility under
lease until 2035.
The Dallas service center, which currently services approximately 22% of our WSEE base, is located in a 45,000 square foot facility under
lease until 2031. In addition to the service center operations, the facility also contains sales operations.
The Houston service center, which currently services approximately 22% of our WSEE base, is located on our corporate campus.
The Los Angeles service center, which currently services approximately 21% of our WSEE base, is located in a 39,000 square foot facility
under lease until 2029. In addition to the service center operations, the facility also contains sales operations.
Sales and Service Offices
As of December 31, 2023, we had sales and service personnel in 83 facilities located in 45 sales markets throughout the United States. All of
the facilities are leased and some are shared by multiple sales offices and/or client service personnel. As of December 31, 2023, we had 98
sales offices in these 45 markets. To take advantage of economic efficiencies, multiple sales offices may share a physical location. Each
sales office is typically staffed by seven to nine BPAs, a district sales manager and an office administrator. In addition, we have placed certain
client service personnel in a majority of our sales markets to provide high-quality, localized service to our clients in those major markets. We
expect to continue placing client service personnel in sales markets as a critical mass of clients is attained in each market.
33
2023 Form 10-K
LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business that we believe
would not have a material adverse effect on our financial condition or results of operations, except as discussed in Note 12 to the
Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference.
34
2023 Form 10-K
MINE SAFETY DISCLOSURES
Item 4. Mine Safety Disclosures.
Not applicable.
35
2023 Form 10-K
EXECUTIVE OFFICERS
Item S-K 401 (b). Executive Officers of the Registrant.
The following table sets forth the names, ages (as of February 1, 2024) and positions of Insperity’s executive officers:
Name
Paul J. Sarvadi
A. Steve Arizpe
Douglas S. Sharp
James D. Allison
Christian P. Callens
Age
Position
67
66
62
55
52
Chairman of the Board & Chief Executive Officer
President & Chief Operating Officer
Executive Vice President of Finance, Chief Financial Officer & Treasurer
Executive Vice President of Comprehensive Benefits Solutions & Chief Profitability
Officer
Senior Vice President of Legal, General Counsel & Secretary
Paul J. Sarvadi has served as Chairman of the Board & Chief Executive Officer since August 2003. Mr. Sarvadi co-founded Insperity in 1986
and served as Vice President and Treasurer of Insperity from its inception in 1986 through April 1987, as Vice President from April 1987
through 1989 and as President and Chief Executive Officer from 1989 to August 2003. Prior to founding Insperity, Mr. Sarvadi started and
operated several small businesses. Mr. Sarvadi has served as President of NAPEO and was a member of its Board of Directors for five
years. Mr. Sarvadi was selected as the 2001 National Ernst & Young Entrepreneur Of The Year for service industries. In 2004, he received
the Conn Family Distinguished New Venture Leader Award from Mays Business School at Texas A&M University. In 2007, he was inducted
into the Texas Business Hall of Fame.
®
A. Steve Arizpe was promoted to President & Chief Operating Officer in May 2019 from the position of Executive Vice President of Client
Services and Chief Operating Officer, which he had held since August 2003. He joined Insperity in 1989 and has served in a variety of roles
prior to those positions, including Houston Sales Manager, Regional Sales Manager and Vice President of Sales. Prior to joining Insperity,
Mr. Arizpe served in sales and sales management roles for NCR Corporation and Clarke-American. He has also served as a director of the
Texas Chapter of NAPEO, on the board of CultureShapers, an organization devoted to area high school students pursuing their interests in
the visual and performing arts, and on the board of the Cynthia Woods Mitchell Pavilion. Mr. Arizpe graduated from Texas A&M University in
1979, earning his degree in Business Management. he currently serves as director of Somebody Cares America, a nonprofit organization
that engages in disaster response, compassionate outreach and leadership development.
Douglas S. Sharp has served as Executive Vice President of Finance, Chief Financial Officer & Treasurer since May 2022. He served as
Senior Vice President of Finance, Chief Financial Officer and Treasurer from May 2008 to May 2022. He served as Vice President of
Finance, Chief Financial Officer and Treasurer from August 2003 until May 2008. Mr. Sharp joined Insperity in January 2000 as Vice
President of Finance and Controller. From July 1994 until he joined Insperity, he served as Chief Financial Officer for Rimkus Consulting
Group, Inc. Prior to that, he served as Controller for a small publicly held company; as Controller for a software company; and as an Audit
Manager for Ernst & Young LLP. Mr. Sharp has served as a member of the Accounting Practices Committee of NAPEO. Mr. Sharp is also a
certified public accountant.
James D. Allison has served as Executive Vice President of Comprehensive Benefits Solutions & Chief Profitability Officer since May 2023.
Mr. Allison joined Insperity in 1997 and has held positions of increased responsibility, including Manager of Financial Reporting, Director of
Accounting, Managing Director of Planning and Analysis, Managing Director of Finance, and Senior Vice President of Pricing and Cost
Analysis. In May 2018, he was promoted to Senior Vice President of Gross Profit Operations and served in such capacity until his
subsequent promotion to Executive Vice President of Gross Profit Operations in May 2022. Mr. Allison has served on the Accounting
Practices Committee of NAPEO and, prior to joining Insperity, he worked in the audit practice of Ernst & Young LLP. Mr. Allison earned his
Bachelor of Business Administration and Master in Professional Accounting degrees from the University of Texas and is a certified public
accountant.
Christian P. Callens has served as Senior Vice President of Legal, General Counsel & Secretary since January 2024. Mr. Callens joined
Insperity in January 2014 as Managing Counsel and Assistant Secretary, in which role he led the Transactions and Corporate Law Practice
Group. He was promoted to Deputy General Counsel, Managing Counsel & Assistant Secretary in October 2022. Prior to joining Insperity in
2014, Mr. Callens was counsel in the corporate practice of Skadden, Arps, Slate, Meagher & Flom LLP. He also previously held an executive
position at a privately-held technology company. Mr. Callens began his legal career as a law clerk for the Honorable John Minor Wisdom of
the United States Fifth Circuit Court of Appeals. He holds a Bachelor of Arts degree from The University of Texas at Austin and a Juris
36
2023 Form 10-K
EXECUTIVE OFFICERS
Doctor degree from Tulane University Law School, where he was senior managing editor of the Tulane Law Review and a member of The
Order of the Coif.
37
2023 Form 10-K
STOCK ACTIVITIES
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
PART II
Securities.
Common Stock
Our common stock is traded on the New York Stock Exchange under the symbol “NSP.” As of February 1, 2024, there were 61 holders of
record of our common stock. This number does not include stockholders for whom shares were held in “nominee” or “street name.”
Dividend Policy
During 2023, we paid dividends of $84.2 million. The payment of dividends is made at the discretion of our Board and depends upon our
operating results, financial condition, capital requirements, general business conditions and such other factors as our Board deems relevant.
Issuer Purchases of Equity Securities
The following table provides information about purchases by Insperity during the three months ended December 31, 2023 of equity securities
that are registered by Insperity pursuant to Section 12 of the Exchange Act:
Total Number of
Shares
Purchased
(1)(2)
Average Price Paid
per Share
Total Number of Shares
Purchased Under
Announced Program
(2)
Maximum Number of
Shares Available for
Purchase under
Announced Program
(2)
120
—
287
407
$
$
98.29
—
116.80
111.34
—
—
—
—
1,969,562
1,969,562
1,969,562
Period
10/01/2023 — 10/31/2023
11/01/2023 — 11/30/2023
12/01/2023 — 12/31/2023
Total
____________________________________
(1)
(2)
During the three months ended December 31, 2023, 407 shares of stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of
restricted stock units. The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable
vesting date. These shares are not subject to the repurchase program.
Our Board of Directors has approved a program to repurchase shares of our outstanding common stock. During the three months ended December 31, 2023, no shares
were repurchased under the program. As of December 31, 2023, we were authorized to repurchase an additional 1,969,562 shares under the program. Unless
terminated earlier by resolution of our Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase
program.
38
2023 Form 10-K
STOCK ACTIVITIES
Performance Graph
The following graph compares our cumulative total stockholder return since December 31, 2018, with the S&P Smallcap 600 Index, the S&P
Midcap 400 Index, and the S&P Composite 1500 – Human Resource & Employment Services Index. The graph assumes that the value of
the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2018.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Insperity, Inc., the S&P Smallcap 600 Index, the S&P Midcap 400 Index and the S&P Composite 1500 – Human Resource and Employment
Services Index
*$100 invested on 12/31/18 in Insperity stock or in the specified index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2024 Standard & Poor's, a division of S&P Global. All rights reserved.
Insperity, Inc.
S&P Smallcap 600
S&P Midcap 400
S&P Composite 1500 – Human Resource &
Employment Services
12/18
12/19
12/20
12/21
12/22
12/23
100.00
100.00
100.00
100.00
93.25
122.78
126.20
122.79
90.31
136.64
143.44
123.83
135.62
173.29
178.95
187.16
133.02
145.39
155.58
139.81
139.98
168.73
181.15
148.84
This graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section,
nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, regardless of any general
incorporation language in such filing.
Item 6. [Reserved].
39
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in
this annual report. Historical results are not necessarily indicative of trends in operating results for any future period.
The statements contained in this annual report that are not historical facts are forward-looking statements that involve a number of risks and
uncertainties. The actual results of the future events described in such forward-looking statements in this annual report could differ materially
from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and
uncertainties discussed in Item 1A. Risk Factors and the uncertainties set forth from time to time in our other public reports and filings and
public statements.
Executive Summary
Overview
Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources
service offering and to leverage our buying power and expertise to provide additional valuable services to clients. Our most comprehensive
HR services offerings are provided through our Workforce Optimization and Workforce Synchronization solutions (together, our “PEO HR
Outsourcing Solutions”), which encompass a broad range of human resources functions, including payroll and employment administration,
employee benefits, workers’ compensation, government compliance, performance management and training and development services,
along with our cloud-based human capital management solution, our Insperity Premier
measured in terms of revenues, gross profit or adjusted EBITDA per WSEE per month. We often use the average number of WSEEs paid
during a period as our unit of measurement in analyzing and discussing our results of operations.
platform. Our overall operating results can be
TM
TM
®
In addition to our PEO HR Outsourcing Solutions, we offer a comprehensive traditional payroll and human capital management solution,
known as our Workforce Acceleration
solutions, including Recruiting Services, Employment Screening, Retirement Services, and Insurance Services. These other products or
services generally are offered only with our other solutions.
solution, our traditional payroll solution. We also offer a number of other business performance
TM
2023 Highlights
• Average number of WSEEs paid per month increased 5.8% to 312,102. Revenues increased 9.2% on the 5.8% WSEE growth and a
3.2% increase in revenue per WSEE.
• We ended 2023 averaging 315,072 paid WSEEs in the fourth quarter of 2023, which represents a 2.5% increase over the fourth quarter
of 2022. We expect the average number of paid WSEEs per month to be between 318,350 and 321,500 for the full year 2024, an
increase of 2% to 3%.
• Approximately 26.1% and 24.9% of our average paid WSEEs were in our middle market sector for the years ended December 31, 2023
and 2022, respectively, which is generally defined as companies with 150 to 5,000 WSEEs.
• Gross profit increased 2.5% to $1.0 billion. The increase was primarily due to the 5.8% growth in the average number of WSEEs paid
per month, which was partially offset by a 3.1% decrease in gross profit per WSEE. Gross profit per WSEE paid per month reflected, in
part, a 3.2% pricing increase offset by a 4.5% increase in direct costs per WSEE. The increase in direct costs per WSEE was primarily
attributable to a 6.6% increase in benefits costs per participant.
• Operating expenses increased 7.5% in 2023 to $818.3 million, and included increases in travel and event costs, salary and wages, and
the implementation of a CRM solution. On a per WSEE per month basis, operating expenses increased from $215 in 2022 to $219 in
2023.
• Net income and diluted earnings per share (“Diluted EPS”) decreased 4.4% and 3.7% to $171.4 million and $4.47, respectively.
• Adjusted EBITDA increased 0.4% to $353.6 million.
40
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• Adjusted net income decreased 2.0% to $211.7 million.
• Adjusted EPS decreased 1.3% to $5.52.
• Our adjusted EBITDA per WSEE per month decreased 6.0% from $100 in 2022 to $94 in 2023.
• We ended 2023 with working capital of $159.0 million.
• During 2023, we paid $84.2 million in dividends, repurchased approximately 1,259,000 shares of our common stock at a cost of $131.5
million and paid $40.1 million in capital expenditures.
Please read “Non-GAAP Financial Measures” for a reconciliation of adjusted EBITDA, adjusted net income and adjusted EPS to their most
directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United
States (“GAAP”).
Revenues
We account for our revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.
Our PEO HR Outsourcing Solutions gross billings to clients include the payroll cost of each WSEE at the client location and a markup
computed as a percentage of each WSEEs payroll cost. We invoice the gross billings concurrently with each periodic payroll of our WSEEs.
Revenues, which exclude the payroll cost component of gross billings, and therefore, consist solely of the markup, are recognized ratably
over the payroll period as WSEEs perform their service at the client worksite. This markup includes pricing components associated with our
estimates of payroll taxes, benefits and workers’ compensation costs, plus a separate component related to our HR services. Revenues that
have been recognized but not invoiced represent unbilled accounts receivable included in accounts receivable, net on our Consolidated
Balance Sheets.
Our revenues are primarily dependent on the number of clients enrolled, the resulting number of WSEEs paid each period and the number of
WSEEs enrolled in our benefit plans. Because our total markup is computed as a percentage of payroll cost, certain revenues are also
affected by the payroll cost of WSEEs, which may fluctuate based on the composition of the WSEE base, inflationary effects on wage levels
and differences in the local economies of our markets.
Direct Costs
The primary direct costs associated with revenue-generating activities for our PEO HR Outsourcing Solutions are:
• employment-related taxes (“payroll taxes”)
• costs of employee benefit plans
• workers’ compensation costs
Payroll taxes consist of the employer’s portion of Social Security and Medicare taxes under FICA, federal unemployment taxes and state
unemployment taxes. Payroll taxes are generally paid as a percentage of payroll cost. The federal unemployment tax rates are defined by
federal regulations. State unemployment tax rates are subject to claim histories and vary from state to state.
Employee benefits costs are comprised primarily of health insurance premiums and claims costs (including dental and pharmacy costs), but
also include costs of other employee benefits such as life insurance, vision care, disability insurance, education assistance, adoption
assistance, a flexible spending account program and an employee well-being program.
Workers’ compensation costs include administrative and risk charges paid to the insurance carrier, and claims costs, which are driven
primarily by the frequency and severity of claims.
Gross Profit
Our gross profit per WSEE is primarily determined by our ability to accurately estimate and control direct costs and our ability to incorporate
changes in these costs into the gross billings charged to PEO HR Outsourcing Solutions clients, which are subject to pricing arrangements
that are typically renewed annually. We use gross profit per WSEE per month as our principal measurement of relative performance at the
gross profit level.
41
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
• Salaries, wages and payroll taxes — Salaries, wages and payroll taxes (“salaries”) are primarily a function of the number of corporate
employees, their associated average pay and any additional cash incentive compensation. Our corporate employees include client
services, sales and marketing, benefits, legal, finance, information technology, administrative support personnel and those associated
with our other products and services.
• Stock-based compensation — Our stock-based compensation relates to the recognition of non-cash compensation expense over the
requisite service period of time-vested and performance-based incentive plan awards.
• Commissions — Commissions expense consists primarily of amounts paid to sales managers and other sales personnel, including
BPAs as well as channel referral fees. Commissions are based on new accounts sold and a percentage of revenue generated by such
personnel.
• Advertising — Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated
sales markets, including the Insperity Invitational™ presented by UnitedHealthcare® sponsorship.
• General and administrative expenses — Our general and administrative expenses primarily include:
◦
◦
◦
◦
◦
◦
rent expenses related to our service centers and sales offices
outside professional service fees related to legal, consulting and accounting services
administrative costs, such as postage, printing and supplies
employee travel and training expenses
facility costs, including repairs and maintenance
technology costs, including software-as-a-service (“SaaS”) subscription costs and amortization of SaaS implementation costs
• Depreciation and amortization — Depreciation and amortization expense is primarily a function of our capital investments in corporate
facilities, service centers, sales offices, software development and technology infrastructure.
Other Income (Expense)
Other income (expense) includes interest charges incurred in connection with borrowings under our credit facility and interest income earned
on our cash, cash equivalents, marketable securities, restricted cash and deposits. Please read “—Liquidity and Capital Resources” for
additional information.
Income Taxes
Our provision for income taxes typically differs from the U.S. statutory rate of 21%, due primarily to state income taxes, non-deductible
expenses, vesting of equity awards and various tax credits. Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes.
Significant items resulting in deferred income taxes include prepaid assets, accruals for workers’ compensation expenses, stock-based
compensation, software development costs, accrued incentive compensation, operating lease assets and liabilities and depreciation.
Changes in these items are reflected in our financial statements through a deferred income tax provision. Please read Note 7 to the
Consolidated Financial Statements, “Income Taxes,” for additional information.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which
have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and
42
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates, including those
related to health and workers’ compensation insurance claims experience, client bad debts, income taxes, property and equipment, goodwill
and other intangibles, and contingent liabilities. We base these estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
We believe the following accounting policies are critical and/or require significant judgments and estimates used in the preparation of our
Consolidated Financial Statements:
• Benefits costs — We provide group health insurance coverage under a single-employer plan that covers both our WSEEs in our PEO
HR Outsourcing Solutions and our corporate employees and utilizes a national network of carriers including United, UnitedHealthcare of
California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts (known as Harvard Pilgrim
Health Care (HPHC) beginning in 2024), all of which provide fully insured policies or service contracts.
The health insurance contract with United provides the majority of our health insurance coverage. As a result of certain contractual
terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model. Accordingly, we
record the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan
Costs”), as benefits expense in the Consolidated Statements of Income and Comprehensive Income. The estimated incurred but not
reported claims are based upon: (1) the level of claims processed during the quarter; (2) estimated completion rates based upon recent
claim development patterns under the plan; and (3) the number of participants in the plan, including both active and COBRA enrollees.
Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant
demographics and other factors are incorporated into the benefits costs.
Effective January 1, 2020, we entered into an arrangement whereby our financial responsibility is limited to the first $1 million of paid
claims per claimant per year. Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding
rates 90 days in advance of the beginning of a reporting quarter. If the Plan Costs for a reporting quarter are greater than the premiums
paid and owed to United, a deficit in the plan would be incurred and we would accrue a liability for the excess costs on our Consolidated
Balance Sheets. On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a
surplus in the plan would be incurred and we would record an asset for the excess premiums in our Consolidated Balance Sheets. The
terms of the arrangement with United require us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported
as long-term prepaid insurance. As of December 31, 2023, Plan Costs were more than the net premiums paid and owed to United by
$23.5 million. As this amount is less than the agreed-upon $9.0 million surplus maintenance level, the $32.5 million difference is
included in accrued health insurance costs, a current liability, in our Consolidated Balance Sheets. In addition, the premiums owed to
United at December 31, 2023, were $6.5 million, which is also included in accrued health insurance costs, a current liability, on our
Consolidated Balance Sheets.
We believe that recent claim development patterns are representative of incurred but not reported claims costs during the reporting
period. The estimated completion rate used to compute incurred but not reported claims involves a significant level of judgment.
Accordingly, an increase (or decrease) in the completion rate used to estimate the incurred claims would result in an increase (or
decrease) in benefits costs and net income would decrease (or increase) accordingly.
The following table illustrates the sensitivity of changes in the completion rate on our estimate of total benefits costs of $3.0 billion in
2023:
Change in
Completion Rate
Change in
Benefits Costs
(in thousands)
Change in
Net Income
(in thousands)
$
(2.5)%
(1.0)%
1.0%
2.5%
$
22,744
9,098
(9,098)
(22,744)
(29,871)
(11,948)
11,948
29,871
43
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• Workers’ compensation costs — Since 2007, our workers’ compensation coverage has been provided through an arrangement with
Chubb. The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of
whether we satisfy our responsibilities. Under the Chubb Program for claims incurred on or before September 30, 2019, we have
financial responsibility to Chubb for the first $1 million layer of claims per occurrence and, for claims over $1 million, up to a maximum
aggregate amount of $6 million per policy year for claims that exceed $1 million. Effective for claims incurred on or after October 1,
2019, we have financial responsibility to Chubb for the first $1.5 million layer of claims per occurrence and, for claims over $1.5 million,
up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5 million.
Because we bear the financial responsibility for claims up to the levels noted above, such claims, which are the primary component of
our workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care
and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related
incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore
requires judgment.
We utilize a third-party actuary to estimate our loss development rate, which is primarily based upon the nature of WSEEs’ job
responsibilities, the location of WSEEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future
cost trends. Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other
trends are incorporated into our workers’ compensation claims cost estimates. During the years ended December 31, 2023 and 2022,
we reduced accrued workers’ compensation costs by $33.5 million and $42.2 million, respectively, for changes in estimated losses
related to prior reporting periods. Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S.
Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate was 4.3% in 2023
and 2.9% in 2022) and are accreted over the estimated claim payment period and included as a component of direct costs in our
Consolidated Statements of Income and Comprehensive Income.
Our claim trends could be greater than or less than our prior estimates, in which case we would revise our claims estimates and record
an adjustment to workers’ compensation costs in the period such determination is made. If we were to experience any significant
changes in actuarial assumptions, our loss development rates could increase (or decrease), which would result in an increase (or
decrease) in workers’ compensation costs and a resulting decrease (or increase) in net income reported in our Consolidated
Statements of Income and Comprehensive Income.
The following table illustrates the sensitivity of changes in the loss development rate on our estimate of workers’ compensation costs
totaling $74.1 million in 2023:
Change in Loss
Development Rate
Change in Workers’
Compensation Costs
(in thousands)
Change in
Net Income
(in thousands)
$
(5.0)%
(2.5)%
2.5%
5.0%
$
(3,926)
(1,963)
1,963
3,926
2,987
1,494
(1,494)
(2,987)
At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of
premium costs and funds to be set aside for payment of future claims (“claim funds”). The level of claim funds is primarily based upon
anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into
the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder
of claim funds are included in deposits, a long-term asset in our Consolidated Balance Sheets. In 2023, we received $46.3 million for the
return of excess claim funds related to the workers’ compensation program, which decreased deposits – workers’ compensation. As of
December 31, 2023, we had restricted cash of $57.4 million and deposits – workers’ compensation of $198.2 million. We have estimated and
accrued $220.3 million in incurred workers’ compensation claim costs as of December 31, 2023. Our estimate of incurred claim costs
expected to be paid within one year is recorded as accrued workers’ compensation costs and is included in short-term liabilities, while our
estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities in our Consolidated Balance Sheets.
44
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
New Accounting Pronouncements
We believe that we have implemented the accounting pronouncements with a material impact on our financial statements and do not believe
there are any new or pending pronouncements that will materially impact our financial position or results of operations. Please read Note 1 to
the Consolidated Financial Statements, “Accounting Policies,” for additional information.
45
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Key Financial and Statistical Data
(in thousands, except per share, WSEE, and
statistical data)
2023
2022
2021
2023 v
2022
2022 v
2021
Year Ended December 31,
% Change
Financial data:
Revenues
(1)
Gross profit
Operating expenses
Operating income
Other income (expense), net
Net income
Diluted EPS
(2)
Non-GAAP financial measures :
Adjusted net income
Adjusted EBITDA
Adjusted EPS
$
6,485,871 $
5,938,818 $
4,973,070
1,036,803
1,011,233
818,254
218,549
6,529
171,382
760,994
250,239
(4,814)
179,350
820,102
646,773
173,329
(5,011)
124,080
9.2 %
2.5 %
7.5 %
(12.7)%
235.6 %
(4.4)%
19.4 %
23.3 %
17.7 %
44.4 %
(3.9)%
44.5 %
4.47
4.64
3.18
(3.7)%
45.9 %
$
211,735 $
215,947 $
353,630
352,295
154,026
254,946
5.52
5.59
3.95
(2.0)%
0.4 %
(1.3)%
5.8 %
40.2 %
38.2 %
41.5 %
17.7 %
Average WSEEs paid
312,102
295,005
250,745
Statistical data (per WSEE per month):
Revenues
(3)
Gross profit
Operating expenses
Operating income
Net income
Adjusted EBITDA
(2)
$
1,732 $
277
1,678 $
286
1,653
273
3.2 %
(3.1)%
1.5 %
4.8 %
219
215
215
1.9 %
—
58
46
94
71
51
100
58
41
85
(18.3)%
(9.8)%
22.4 %
24.4 %
(6.0)%
17.6 %
____________________________________
(1)
Revenues are comprised of gross billings less WSEE payroll costs as follows:
(in thousands)
Gross billings
Less: WSEE payroll cost
Revenues
Year Ended December 31,
2023
2022
2021
$
$
43,141,366 $
40,126,910 $
36,655,495
34,188,092
6,485,871 $
5,938,818 $
33,318,693
28,345,623
4,973,070
(2)
(3)
Please read “Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and
presented in accordance with GAAP.
Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows:
(per WSEE per month)
Gross billings
Less: WSEE payroll cost
Revenues
Year Ended December 31,
2023
2022
2021
$
$
11,519 $
9,787
1,732 $
11,335 $
9,657
1,678 $
11,073
9,420
1,653
46
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Key Operating Metrics
We monitor certain key metrics to measure our performance, including:
• WSEEs
• Adjusted EBITDA
• Adjusted EPS
Our growth in the number of WSEEs paid is affected by three primary sources: new client sales, client retention and the net change in
WSEEs paid at existing clients through new hires and employee terminations.
• During 2023, the average number of WSEEs paid from new client sales and the net gain (loss) in our client base declined compared to
2022. Average client retention also declined from 85% in 2022 to 83% in 2023.
• During 2022, the average number of WSEEs paid from new client sales increased 16.4% from 2021. Average client retention improved
from 82% in 2021 to 85% in 2022, while the net gain in our client base continued, at higher than historical levels, although lower than
2021, a period when many clients were rehiring employees as the pandemic conditions improved.
Average WSEEs Paid and
Year-over-Year Growth Percentage
(in thousands)
Adjusted EBITDA and
Year-over-Year Growth Percentage
(in thousands)
Adjusted EPS and
Year-over-Year Growth Percentage
(amounts per share)
Revenues
2023 Compared to 2022
Our revenues for 2023 were $6.5 billion, an increase of 9.2%, primarily due to the following:
• Average WSEEs paid increased 5.8%.
• Revenues per WSEE per month increased 3.2%, or $54.
47
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2022 Compared to 2021
Our revenues for 2022 were $5.9 billion, an increase of 19.4%, primarily due to the following:
• Average WSEEs paid increased 17.7%.
• Revenues per WSEE per month increased 1.5%, or $25.
We provide our PEO HR Outsourcing Solutions to small and medium-sized businesses throughout the United States. PEO HR Outsourcing
Solutions revenue distribution by region follows:
PEO HR Outsourcing Solutions Revenue by Region
(in thousands)
____________________________________
Note: Texas is included in the Southwest region.
The percentage of total PEO HR Outsourcing Solutions revenues in our significant markets include the following:
Significant Markets
48
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross Profit
In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly
associated with our WSEEs, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin. As a
result, our operating results are significantly impacted by our ability to accurately estimate our direct costs relative to the revenues derived
from the markup component of our gross billings.
Our gross profit per WSEE is primarily determined by our ability to accurately estimate direct costs and our ability to incorporate changes in
these costs into the gross billings charged to PEO HR Outsourcing Solutions clients, which are subject to pricing arrangements that are
typically renewed annually. We use gross profit per WSEE per month as our principal measurement of relative performance at the gross
profit level.
Gross Profit and
Year-over-Year Growth Percentage
(in thousands)
Gross Profit per WSEE per Month and
Year-over-Year Growth Percentage
(per WSEE per month)
2023 Compared to 2022
Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and
operating expenses. Our revenues per WSEE per month increased $54 due to higher average pricing of 3.2%.
The net decrease in direct costs between 2023 and 2022 attributable to the changes in cost estimates for benefits and workers’
compensation totaled $16.4 million as discussed below. The $63 per WSEE per month increase in direct costs is due primarily to the direct
cost components changes as follows:
Benefits costs
• The cost of group health insurance and related employee benefits increased $44 per WSEE per month, or 6.6% on a cost per covered
employee basis.
• The percentage of WSEEs covered under our health insurance plans was 65.0% in 2023 compared to 65.4% in 2022.
• Reported results include changes in estimated claims run-off related to prior periods, which was a decrease in costs of $13.0 million, or
$3 per WSEE per month, in 2023 compared to an increase in costs of $12.1 million, or $3 per WSEE per month, in 2022.
Please read “—Critical Accounting Policies and Estimates—Benefits Costs” for a discussion of our accounting for health insurance costs.
49
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Workers’ compensation costs
Our continued discipline around our client selection, workplace safety and claims management contributed to the small increase in our cost
per WSEE and, as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates.
• Workers’ compensation costs increased 12.1%, or $1 per WSEE per month, in 2023 compared to 2022.
• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in both 2023 and 2022.
• We recorded a reduction in workers’ compensation costs of $33.5 million, or 0.11% of non-bonus payroll costs, in 2023 compared to a
reduction of $42.2 million, or 0.14% of non-bonus payroll costs, in 2022, primarily as a result of closing out claims at lower than
expected costs.
Please read “—Critical Accounting Policies and Estimates—Workers' Compensation Costs” for a discussion of our accounting for workers’
compensation costs.
Payroll tax costs
• Payroll taxes increased 8.9% on a 7.2% increase in payroll costs, or $18 per WSEE per month.
• Payroll taxes as a percentage of payroll costs increased to 6.5% in 2023 compared to 6.4% in 2022.
2022 Compared to 2021
The net increase in direct costs between 2022 and 2021 attributable to the changes in cost estimates for benefits and workers’ compensation
totaled $6.7 million as discussed below. The $12 per WSEE per month increase in direct costs is due primarily to the direct cost component
changes as follows:
Benefits costs
• The cost of group health insurance and related employee benefits decreased $9 per WSEE per month, but increased 1.2% on a per
covered employee basis.
• The percentage of WSEEs covered under our health insurance plans was 65.4% in 2022 compared to 67.0% in 2021.
• Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $12.1 million, or
$3 per WSEE per month, in 2022 compared to an increase in costs of $4.9 million, or $2 per WSEE per month, in 2021.
Please read “—Critical Accounting Policies and Estimates—Benefits Costs” for a discussion of our accounting for health insurance costs.
Workers’ compensation costs
Our continued discipline around our client selection, safety and claims management contributed to the reduction in our cost per WSEE and,
as a result, has allowed for claims within our policy periods to be closed out at amounts below our original cost estimates.
• Workers’ compensation costs decreased 4.1%, or $4 per WSEE per month, in 2022 compared to 2021.
• As a percentage of non-bonus payroll cost, workers’ compensation costs in 2022 were 0.23% compared to 0.29% in 2021.
• As a result of closing out claims incurred in prior periods at lower than expected costs, we recorded a reduction in workers’
compensation costs of $42.2 million, or 0.14% of non-bonus payroll costs, in 2022 compared to a reduction of $41.7 million, or 0.18% of
non-bonus payroll costs, in 2021. The 2022 period costs include the impact of a 2.9% discount rate used to accrue workers’
compensation loss claims, compared to a 0.6% discount rate used in the 2021 period.
50
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Please read “—Critical Accounting Policies and Estimates—Workers' Compensation Costs” for a discussion of our accounting for workers’
compensation costs.
Payroll tax costs
• Payroll taxes increased 23.0% on an 20.6% increase in payroll costs, or $27 per WSEE per month.
• Payroll taxes as a percentage of payroll costs increased to 6.4% in 2022 compared to 6.3% in 2021.
51
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
2023 Compared to 2022
The following table presents certain information related to our operating expenses:
Year Ended December 31,
per WSEE
(in thousands, except per WSEE)
2023
2022
% Change
2023
2022
% Change
Salaries
Stock-based compensation
Commissions
Advertising
General and administrative
Depreciation and amortization
$
460,715 $
52,996
46,847
37,324
177,664
42,708
Total operating expenses
$
818,254 $
430,945
50,080
45,672
37,503
156,134
40,660
760,994
6.9 % $
5.8 %
2.6 %
(0.5)%
13.8 %
5.0 %
7.5 % $
123 $
14
13
10
48
11
219 $
122
14
13
11
44
11
215
0.8 %
—
—
(9.1)%
9.1 %
—
1.9 %
Operating expenses for 2023 increased 7.5% to $818.3 million compared to $761.0 million in 2022. Operating expenses per WSEE per
month for 2023 increased 1.9% to $219 compared to $215 in 2022.
• Salaries of corporate and sales staff for 2023 increased 6.9% to $460.7 million, or $1 per WSEE per month, compared to 2022. The
increase was primarily due to an increase in BPA, service and support headcount and staff compensation levels, which was partially
offset by lower incentive compensation expense in 2023 compared to 2022.
• Stock-based compensation expense for 2023 increased 5.8% to $53.0 million, but remained flat on a per WSEE per month basis,
compared to 2022. The increase was primarily due to awards issued under our restricted stock unit program, partially offset by a
decrease in the number of stock awards anticipated to be earned related to performance-based awards granted under our long-term
incentive plans based on our lower than expected operating results in 2023.Please read Note 1 “Accounting Policies” and Note 9
“Incentive Plans,” to the Consolidated Financial Statements for additional information.
• Commissions expense for 2023 increased 2.6% to $46.8 million, but remained flat on a per WSEE per month basis, compared to 2022.
The increase was primarily due to commissions associated with our PEO HR Outsourcing Solutions, as well as an increase in the
amount of sales channel referral fees paid during 2023.
• General and administrative expenses for 2023 increased 13.8% to $177.7 million, or $4 per WSEE per month, compared to 2022. The
increase was primarily due to increased travel and event costs, software licensing and maintenance costs, and amortization of SaaS
implementation costs.
• Depreciation and amortization expense for 2023 increased 5.0% to $42.7 million, but remained flat on a per WSEE per month basis,
compared to 2022. The increase was primarily due to increased capital expenditures related to computer hardware and software and
software development costs.
52
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2022 Compared to 2021
The following table presents certain information related to our operating expenses:
Year Ended December 31,
per WSEE
(in thousands, except per WSEE)
2022
2021
% Change
2022
2021
% Change
Salaries
Stock-based compensation
Commissions
Advertising
General and administrative
Depreciation and amortization
Total operating expenses
$
$
430,945 $
50,080
45,672
37,503
156,134
40,660
760,994 $
379,171
40,623
34,922
29,097
124,413
38,547
646,773
13.7 % $
23.3 %
30.8 %
28.9 %
25.5 %
5.5 %
17.7 % $
122 $
14
13
11
44
11
215 $
126
14
12
10
40
13
215
(3.2)%
—
8.3 %
10.0 %
10.0 %
(15.4)%
—
Operating expenses for 2022 increased 17.7% to $761.0 million compared to $646.8 million in 2021. Operating expenses remained flat on a
per WSEE per month basis compared to 2021.
• Salaries of corporate and sales staff for 2022 increased 13.7% to $430.9 million, but decreased $4 on a per WSEE per month basis,
compared to 2021 on a 17.7% increase in WSEEs paid per month. The increase was primarily due to a 7.9% increase in corporate
headcount, as well as higher incentive compensation accruals in 2022.
• Stock-based compensation expense for 2022 increased 23.3% to $50.1 million, but remained flat on a per WSEE per month basis,
compared to 2021. The increase was primarily due to awards issued under our long-term incentive and restricted stock unit programs.
Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional
information.
• Commissions expense for 2022 increased 30.8% to $45.7 million, or $1 per WSEE per month, compared to 2021. The increase was
primarily due to commissions associated with our PEO HR Outsourcing Solutions, including a new incentive program for our BPAs and
sales managers, as well as an increase in the amount of sales channel referral fees paid during 2022.
• Advertising expense for 2022 increased 28.9% to $37.5 million, or $1 per WSEE per month, compared to 2021. The increase was
primarily due to increases in radio, print and digital advertising and sponsorship costs.
• General and administrative expenses for 2022 increased 25.5% to $156.1 million, or $4 per WSEE per month, compared to 2021. The
increase was primarily due to increased travel, event and software licensing costs.
• Depreciation and amortization expense for 2022 increased 5.5% to $40.7 million, but decreased $2 on a per WSEE per month basis,
compared to 2021. The increase was primarily due to the completion of a new facility on our corporate campus during 2021 and
increased capital expenditures related to software development costs.
Other Income (Expense)
Other income (expense) was a net income of $6.5 million in 2023 and net expense of $4.8 million and $5.0 million in 2022 and 2021,
respectively.
In 2023 and 2022, the increase in other income was due to an increase in interest rates on our marketable securities investments and
workers’ compensation deposits, which was partially offset by an increase in interest expense related to higher average interest rates on
borrowings under our credit facility. Please read Note 2 to the Consolidated Financial Statements, “Other Balance Sheet Information,” for
additional information.
Income Tax Expense
Our effective income tax rate was 23.9% in 2023, 26.9% in 2022 and 26.3% in 2021. Our provision for income taxes differed from the U.S.
statutory rate of 21% primarily due to state income taxes and non-deductible expenses, offset by
53
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
excess tax benefits associated with the vesting of equity compensation of $4.9 million, $0.2 million and $2.6 million, in 2023, 2022 and 2021,
respectively. Please read Note 1 “Accounting Policies” and Note 7 “Income Taxes,” to the Consolidated Financial Statements for additional
information.
Non-GAAP Financial Measures
Non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by
other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of the non-GAAP financial measures
used to their most directly comparable GAAP financial measures as provided in the tables below.
Non-GAAP Measure
Definition
Non-bonus payroll cost
Non-bonus payroll cost is a non-GAAP financial measure that
excludes the impact of bonus payrolls paid to our WSEEs.
Bonus payroll cost varies from period to period, but has no
direct impact to our ultimate workers’ compensation costs
under the current program.
Benefit of Non-GAAP Measure
Our management refers to non-bonus payroll cost in
analyzing, reporting and forecasting our workers’
compensation costs.
We include these non-GAAP financial measures
because we believe they are useful to investors in
allowing for greater transparency related to the costs
incurred under our current workers’ compensation
program.
Adjusted cash, cash
equivalents and marketable
securities
Excludes funds associated with:
• federal and state income tax withholdings,
• employment taxes,
• other payroll deductions, and
• client prepayments.
EBITDA
Represents net income computed in accordance with GAAP,
plus:
• interest expense,
• income tax expense,
• depreciation and amortization expense, and
• amortization of SaaS implementation costs.
Adjusted EBITDA
Represents EBITDA plus:
• non-cash stock-based compensation.
Adjusted net income
Adjusted EPS
Represents net income computed in accordance with GAAP,
excluding:
• non-cash stock-based compensation.
Represents diluted net income per share computed in
accordance with GAAP, excluding:
• non-cash stock-based compensation.
We believe that the exclusion of the identified items
helps us reflect the fundamentals of our underlying
business model and analyze results against our
expectations, against prior periods, and to plan for
future periods by focusing on our underlying
operations. We believe that the adjusted results
provide relevant and useful information for investors
because they allow investors to view performance in a
manner similar to the method used by management
and improves their ability to understand and assess
our operating performance. Adjusted EBITDA is used
by our lenders to assess our leverage and ability to
make interest payments.
Following is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP):
2023
2022
2021
Year Ended December 31,
(in thousands, except per WSEE per month)
Per WSEE
Per WSEE
Per WSEE
Payroll cost
$
36,655,495 $
9,787
$
34,188,092 $
9,657
$
28,345,623 $
9,420
Less: Bonus payroll cost
Non-bonus payroll cost
4,978,439
1,329
4,959,987
1,401
4,719,217
1,568
% Change year over year
8.4 %
2.4 %
23.7 %
5.1 %
14.5 %
6.9 %
$
31,677,056 $
8,458
$
29,228,105 $
8,256
$
23,626,406 $
7,852
54
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable
securities (non-GAAP):
(in thousands)
Cash, cash equivalents and marketable securities
Less:
Amounts payable for withheld federal and state income taxes, employment
taxes and other payroll deductions
Client prepayments
Adjusted cash, cash equivalents and marketable securities
$
$
December 31, 2023
December 31, 2022
708,778
$
765,896
510,092
504,817
27,592
171,094
$
36,800
224,279
Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):
2023
2022
2021
Year Ended December 31,
(in thousands, except per WSEE per
month)
Net income
Income tax expense
Interest expense
Amortization of SaaS
implementation costs
Depreciation and amortization
EBITDA
Stock-based compensation
$
171,382
$
53,696
27,137
5,711
42,708
300,634
52,996
Adjusted EBITDA
$
353,630
$
Per WSEE
Per WSEE
Per WSEE
46
14
7
2
11
80
14
94
$
179,350
$
66,075
14,207
1,923
40,660
302,215
50,080
$
352,295
$
51
19
4
1
11
86
14
100
$
124,080
$
44,238
7,458
—
38,547
214,323
40,623
$
254,946
$
41
15
2
—
13
71
14
85
% Change year over year
0.4 %
(6.0)%
38.2 %
17.6 %
(11.7)%
(17.5)%
Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP):
(in thousands)
Net income
Non-GAAP adjustments:
Stock-based compensation
Tax effect
Total non-GAAP adjustments, net
Adjusted net income
% Change year over year
Year Ended December 31,
2023
2022
2021
$
171,382
$
179,350
$
124,080
52,996
(12,643)
40,353
50,080
(13,483)
36,597
$
211,735
$
215,947
$
40,623
(10,677)
29,946
154,026
(2.0)%
40.2 %
(15.1)%
55
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):
(amounts per share)
Diluted EPS
Non-GAAP adjustments:
Stock-based compensation
Tax effect
Total non-GAAP adjustments, net
Adjusted EPS
% Change year over year
Liquidity and Capital Resources
Year Ended December 31,
2023
2022
2021
4.47
$
4.64
$
3.18
1.38
(0.33)
1.05
5.52
$
(1.3)%
1.30
(0.35)
0.95
5.59
$
41.5 %
1.04
(0.27)
0.77
3.95
(14.9)%
$
$
We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of, among other things, our expansion
plans, stock repurchases, potential acquisitions, debt service requirements and other operating cash needs. To meet short-term liquidity
requirements, which are primarily the payment of direct costs and operating expenses, we rely primarily on cash from operations. Longer-
term projects, large stock repurchases or significant acquisitions may be financed with public or private debt or equity. We have a revolving
credit facility (“Facility”) with a syndicate of financial institutions with a current borrowing capacity of $650 million. The Facility is available for
working capital and general corporate purposes, including acquisitions and stock repurchases. We have in the past sought, and may in the
future seek, to raise additional capital or take other steps to increase or manage our liquidity and capital resources.
We had $708.8 million in cash, cash equivalents and marketable securities at December 31, 2023, of which approximately $510.1 million was
payable in early January 2024 for withheld federal and state income taxes, employment taxes and other payroll deductions, and
approximately $27.6 million represented client prepayments that were payable in January 2024. At December 31, 2023, we had working
capital of $159.0 million compared to $158.5 million at December 31, 2022. We currently believe that our cash on hand, marketable
securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for 2024. We
intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital
needs.
As of December 31, 2023, we had outstanding letters of credit and borrowings totaling $370.4 million under the Facility. Please read Note 6
to the Consolidated Financial Statements, “Long-Term Debt,” for additional information.
Cash Flows from Operating Activities
Net cash provided by operating activities in 2023 was $198.5 million. Our primary source of cash from operations is the comprehensive
service fee and payroll funding we collect from our clients. Our cash and cash equivalents, and thus our reported cash flows from operating
activities, are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet
accounts. These include the following:
• Timing of client payments / payroll taxes — We typically collect our comprehensive service fee, along with the client’s payroll funding,
from clients no later than the same day as the payment of WSEE payrolls and associated payroll taxes. Therefore, the last business day
of a reporting period has a substantial impact on our reporting of operating cash flows. For example, many WSEEs are paid on Fridays;
therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday. In the year ended December 31,
2023, the last business day of the reporting period was a Friday, client prepayments were $27.6 million and employment taxes and
other deductions were $510.1 million. In the year ended December 31, 2022, the last business day of the reporting period was also a
Friday, client prepayments were $36.8 million and employment taxes and other deductions were $504.8 million.
• Workers’ compensation plan funding — During 2023 and 2022, we received $46.3 million and $30.2 million, respectively, for the return
of excess claim funds related to the workers’ compensation program, which resulted in an increase in working capital.
56
2023 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• Medical plan funding — Our health care contract with United establishes participant cash funding rates 90 days in advance of the
beginning of a reporting quarter. Therefore, changes in the participation level of the United plan have a direct impact on our operating
cash flows. In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history
and anticipated cost trends, also have a significant impact on our operating cash flows. As of December 31, 2023, Plan Costs were
more than the net premiums paid and owed to United by $23.5 million, which is $32.5 million less than our agreed-upon $9.0 million
surplus maintenance level. The $32.5 million difference is therefore reflected as a current liability and $9.0 million is reflected as a long-
term asset on our Consolidated Balance Sheets at December 31, 2023. In addition, the premiums owed to United at December 31,
2023, were $6.5 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.
• Operating results — Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income decreased
2.0% to $211.7 million in 2023, compared to $215.9 million in 2022. Please read “Results of Operations.”
Cash Flows from Investing Activities
Net cash flows used in investing activities were $21.7 million for the year ended December 31, 2023, primarily due to property and equipment
purchases of $40.1 million, partially offset by $18.4 million of marketable securities maturities and dispositions, net of purchases.
Cash Flows from Financing Activities
Net cash flows used in financing activities were $155.0 million for the year ended December 31, 2023. We paid $84.2 million in dividends and
repurchased or withheld $131.5 million in stock. In addition, client funds liability and other financing activities increased by $60.7 million.
Seasonality, Inflation and Quarterly Fluctuations
Our quarterly earnings are impacted by the seasonal nature of our medical claims costs and payroll taxes. Typically, medical claims costs
tend to increase throughout the year with the fourth quarter being the period with the highest costs, which has a negative impact on our
fourth quarter earnings. This trend is primarily the result of many WSEEs’ medical plan deductibles being fully met by the fourth quarter,
which increases our liability with respect to those claims. We have also experienced variability on a quarterly basis in medical claims costs
based on the unpredictable nature of large claims . Payroll taxes and associated billings are computed based on an employee’s annual
taxable wage base. The annual payroll tax wage bases are frequently met in the first two quarters of each year depending on the employee’s
compensation levels. As a result, the gross profit contribution from payroll taxes is typically higher in the first two quarters and declines in the
latter half of each year. These historical trends may change and other seasonal trends may develop in the future. For further information
related to our health insurance costs, please read “—Critical Accounting Policies and Estimates—Benefits Costs.”
We believe the effects of inflation have not had a significant impact on our results of operations or financial condition; however, inflationary
pressure could adversely impact our profitability in the future.
57
2023 Form 10-K
QUANTITATIVE AND QUALITATIVE DISCLOSURES
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our
cash equivalent short-term investments and our available-for-sale marketable securities. In addition, borrowings under our Facility bear
interest at a variable market rate. As of December 31, 2023, we had outstanding letters of credit and borrowings totaling $370.4 million under
the Facility. Please read Note 6 to the Consolidated Financial Statements, “Long-Term Debt,” for additional information. Our cash equivalent
short-term investments consist primarily of overnight investments, which are not significantly exposed to interest rate risk, except to the
extent that changes in interest rates will ultimately affect the amount of interest income earned on these investments. Our available-for-sale
marketable securities are subject to interest rate risk because these securities generally include a fixed interest rate. As a result, the market
values of these securities are affected by changes in prevailing interest rates.
We attempt to limit our exposure to interest rate risk primarily through diversification and low investment turnover. Our investment policy is
designed to maximize after-tax interest income while preserving our principal investment. As a result, our marketable securities consist of
tax-exempt short and intermediate-term debt securities, which are primarily U.S. Treasury bills, as well as pre-refunded municipal bonds that
are secured by escrow funds containing U.S. Government Securities.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is contained in a separate section of this Annual Report. See “Index to Consolidated Financial
Statements.”
58
2023 Form 10-K
DISCLOSURE CONTROLS AND PROCEDURES
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In accordance with Exchange Act Rules 13a-15 and 15a-15, we carried out an evaluation, under the supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of December 31, 2023.
Design and Evaluation of Internal Control over Financial Reporting
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we included a report of management’s assessment of the design and
effectiveness of our internal controls as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Ernst & Young
LLP, our independent registered public accounting firm, also audited our internal control over financial reporting. Management’s report and
the independent registered public accounting firm’s audit report are included in our 2023 Consolidated Financial Statements under the
captions entitled “Management’s Report on Internal Control” and “Report of Independent Registered Public Accounting Firm,” and are
incorporated herein by reference.
There has been no change in our internal control over financial reporting that occurred during the three months ended December 31, 2023,
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Trading Plans
During the fourth quarter of 2023, none of our directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a
“non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
59
2023 Form 10-K
MANAGEMENT AND CERTAIN SECURITY HOLDERS
Item 10. Directors, Executive Officers and Corporate Governance.
Some of the information required by this item is incorporated by reference to the Insperity Proxy Statement.
Code of Business Conduct and Ethics
PART III
Our Board adopted our Code of Business Conduct and Ethics (the “Code of Ethics”), which meets the requirements of Rule 303A.10 of the
New York Stock Exchange Listed Company Manual and Item 406 of Regulation S-K. You can access our Code of Ethics on the Corporate
Governance page of our website at insperity.com. Changes in and waivers to the Code of Ethics for our directors, executive officers and
certain senior financial officers will be posted on our website within five business days and maintained for at least 12 months.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to the Insperity Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The information required by this item is incorporated by reference to the Insperity Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference to the Insperity Proxy Statement.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference to the Insperity Proxy Statement.
60
2023 Form 10-K
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(a)
1.
Financial Statements of the Company
PART IV
The Consolidated Financial Statements listed by the Registrant on the accompanying Index to
Consolidated Financial Statements are filed as part of this Annual Report.
Financial Statement Schedules
The required information is included in the Consolidated Financial Statements or Notes thereto.
List of Exhibits
(a)
(a)
2.
3.
Exhibit No.
Exhibit
3.1
3.2
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
10.4
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K filed on May 29, 2018).
Amended and Restated Bylaws of Insperity, Inc. dated November 15, 2023 (incorporated by reference to Exhibit 3.1 to
the Registrant’s Current Report on Form 8-K filed on November 17, 2023).
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement
on Form S-1 (No. 33-96952)).
Description of Registrant’s Common Stock (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 10-K for the
year ended December 31, 2019).
Rights Agreement dated as of May 21, 2020 between Insperity, Inc. and Computershare Trust Company, N.A., as Rights
Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on May 22, 2020).
Certificate of Designations of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to
the Registrant’s Current Report on Form 8-K filed on May 22, 2020).
Certificate of Elimination with Respect to Series A Junior Participating Preferred Stock of Insperity, Inc. (incorporated by
reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 26, 2021).
†
†
†
†
Insperity, Inc. 2001 Incentive Plan, as amended and restated (incorporated by reference to Appendix A to the
Registrant’s definitive proxy statement on Schedule 14A filed on March 18, 2009 (No. 1-13998)).
Form of Restricted Stock Unit Agreement for awards granted to executive officers on or after December 30, 2019
(incorporated by reference to Exhibit 10.18 to the Registrant’s Form 10-K for the year ended December 31, 2019).
Form of Restricted Stock Unit Agreement for awards granted to certain senior personnel on or after December 30, 2019
(incorporated by reference to Exhibit 10.19 to the Registrant’s Form 10-K for the year ended December 31, 2019).
Form of Restricted Stock Unit Agreement for awards granted to other employees on or after December 30, 2019
(incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-K for the year ended December 31, 2019).
10.5
*†
Form of Restricted Stock Unit Agreement for awards granted to executive officers on or after January 29, 2024.
10.6
*†
Form of Restricted Stock Unit Agreement for awards granted to certain senior personnel on or after January 29, 2024.
10.7
10.8
10.9
*†
†
*†
Form of Restricted Stock Unit Agreement for awards granted to certain other employees on or after January 29, 2024.
Form of Employee Award Notice and Agreement under LTIP granted on or after December 30, 2019 (incorporated by
reference to Exhibit 10.22 to the Registrant’s Form 10-K for the year ended December 31, 2019).
Form of Employee Award Notice and Agreement under LTIP granted on or after January 29, 2024.
61
2023 Form 10-K
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No.
Exhibit
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
†
†
†
†
*
†
†
10.26
(+)
10.27
(+)
Directors Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter
ended September 30, 2012).
Amendment to the Directors Compensation Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Current
Report on Form 8-K filed on February 22, 2013).
First Amendment and Appendix A to Directors Compensation Plan (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on February 25, 2015).
Directors Compensation Plan (as amended and restated April 1, 2017) (incorporated by reference to Exhibit 10.2 to the
Registrant’s Form 10-Q for the quarter ended June 30, 2017).
Insperity, Inc. 2008 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s
Registration Statement on Form S-8 (No. 333-151275)).
Insperity, Inc. 2012 Incentive Plan (incorporated by reference to the Registrant’s definitive proxy statement on Schedule
14A filed on March 29, 2012 (No. 1-13998)).
First Amendment to the Insperity, Inc. 2012 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed on February 22, 2013).
Second Amendment to Insperity, Inc. 2012 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed on February 25, 2015).
Third Amendment to Insperity, Inc. 2012 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed on April 1, 2016).
Insperity, Inc. 2012 Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed on June 21, 2017).
First Amendment to the Insperity Inc. 2012 Incentive Plan, as amended and restated (incorporated by reference to
Exhibit 10.34 to the Registrant’s Form 10-K filed for the year ended December 31, 2019).
Insperity, Inc. Incentive Plan (incorporated by reference to the Registrant’s definitive proxy statement on Schedule 14A
filed on April 14, 2023 (No. 1-13998)).
Insperity, Inc. Long-Term Incentive Program (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K filed on April 2, 2015).
Insperity, Inc. Long-Term Incentive Program, as amended and restated January 29, 2024.
Insperity, Inc. Executive Severance Plan (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on
Form 8-K filed on January 3, 2020).
Form of Participant Agreement under the Insperity, Inc. Executive Severance Plan (incorporated by reference to Exhibit
99.2 to the Registrant’s Current Report on Form 8-K filed on January 3, 2020).
Minimum Premium Financial Agreement, amended and restated effective January 1, 2005, by and between Insperity
Holdings, Inc. (fka Administaff of Texas, Inc.) and United Healthcare Insurance Company (incorporated by reference to
Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2005).
Minimum Premium Administrative Services Agreement, amended and restated effective January 1, 2005, by and
between Insperity Holdings Inc (fka Administaff of Texas Inc ) and United Healthcare Insurance Company (incorporated
between Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and United Healthcare Insurance Company (incorporated
by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2005).
10.28
(+)
10.29
(+)
(+)
10.30
Amendment to Minimum Premium Financial Agreement, as amended effective January 1, 2009, by and between
Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and United Healthcare Insurance Company (incorporated by
reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2013).
Amendment to Minimum Premium Financial Agreement, as amended effective January 1, 2013, by and between
Insperity Holdings, Inc. and United Healthcare Insurance Company (incorporated by reference to Exhibit 10.2 to the
Registrant’s Form 10-Q for the quarter ended September 30, 2015).
Amendment to Minimum Premium Administrative Services Agreement, as amended effective January 1, 2008, by and
between Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and UnitedHealthcare Insurance Company (incorporated
by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2013).
62
2023 Form 10-K
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No.
Exhibit
10.31
(+)
10.32
(+)
10.33
(+)
10.34
(+)
10.35
(+)
10.36
(+)
10.37
(+)
10.38
(+)
10.39
(+)
Amendment to Minimum Premium Administrative Services Agreement, as amended effective January 1, 2013, by and
between Insperity Holdings, Inc. and UnitedHealthcare Insurance Company, effective as of January 1, 2015
(incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended September 30, 2015).
Amendment to Minimum Premium Financial Agreement, as amended effective January 1, 2011, by and between
Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and UnitedHealthcare Insurance Company, effective as of January
1, 2013 (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended September 30,
2014).
Amendment to Minimum Premium Administrative Services Agreement, as amended effective January 1, 2011, by and
between Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and UnitedHealthcare Insurance Company, effective as
of January 1, 2013 (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended
September 30, 2014).
Amendment to the Minimum Premium Financial Agreement, as amended effective January 1, 2015, by and between
Insperity Holdings, Inc. and UnitedHealthcare Insurance Company, effective as of January 1, 2016 (incorporated by
reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2016).
Amendment to the Minimum Premium Administrative Services Agreement, as amended effective January 1, 2015, by
and between Insperity Holdings, Inc. and UnitedHealthcare Insurance Company, effective as of January 1, 2016
(incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2016).
Amendment to the Minimum Premium Financial Agreement, as amended effective January 1, 2016, by and between
Insperity Holdings, Inc. and UnitedHealthcare Insurance Company, effective as of January 1, 2017 (incorporated by
reference to Exhibit 10.39 to the Registrant’s Form 10-K for the year ended December 31, 2016).
Amendment to Minimum Premium Administrative Services Agreement (as previously amended effective January 1,
2016) by and between Insperity Holdings, Inc., and United Healthcare Insurance Company entered into as of January 1,
2019 (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2019).
Amendment to Minimum Premium Financial Agreement (as previously amended effective January 1, 2017) by and
between Insperity Holdings, Inc., and United Healthcare Insurance Company entered into as of January 1, 2019
(incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended March 31, 2019).
Letter Agreement by and between Insperity Holdings, Inc. and United Healthcare Insurance company entered into as of
February 7, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended March
31, 2020).
10.40
10.41
10.42
10.43
10.44
10.45
(+)
Letter Agreement by and between Insperity Holdings, Inc. and United Healthcare Insurance company entered into as of
December 28, 2021.
Amended and Restated Credit Agreement dated February 6, 2018 (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed on February 12, 2018).
First Amendment to Amended and Restated Credit Agreement dated September 13, 2019 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 17, 2019).
Second Amendment to Amended and Restated Credit Agreement dated March 9, 2021 (incorporated by reference to
Exhibit 10.2 of the Registrant’s Form 10-Q for the quarter ended March 31, 2021).
Third Amendment to Amended and Restated Credit Agreement dated April 28, 2021 (incorporated by reference to Exhibit
10.3 of the Registrant’s Form 10-Q for the quarter ended March 31, 2021).
Fourth Amendment to the Amended and Restated Credit Agreement dated June 30, 2022 (incorporated by reference to
Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on July 6, 2022).
10.46
Fifth Amendment to the Amended and Restated Credit Agreement dated September 28, 2023 (incorporated by reference
to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarter ended September 30, 2023).
21.1
*
Subsidiaries of Insperity, Inc.
63
2023 Form 10-K
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No.
Exhibit
23.1
24.1
31.1
31.2
32.1
32.2
97
101.INS
*
*
*
*
**
**
*
*
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Insperity, Inc. Policy for Recovery of Erroneously Awarded Compensation Applicable to Executive Officers.
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document.
101.SCH *
Inline XBRL Taxonomy Extension Schema Document.
*
*
*
101.CAL
101.DEF
101.LAB
101.PRE
104
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Extension Definition Linkbase Document.
Inline XBRL Taxonomy Extension Label Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File (embedded with the Inline XBRL document).
*
**
Filed herewith.
Furnished with this report.
† Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
(+) Certain portions of the exhibit have been omitted pursuant to an order granting confidential treatment or Item 601(b)(10)
of Regulation S-K. The omitted information is (i) not material and (ii) the type of information the Company treats as
private or confidential.
ITEM 16. FORM 10-K SUMMARY.
None.
64
2023 Form 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Insperity, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on February 8, 2024.
SIGNATURES
INSPERITY, INC.
By:
/s/ Douglas S. Sharp
Douglas S. Sharp
Executive Vice President of Finance,
Chief Financial Officer & Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
65
2023 Form 10-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of
Insperity, Inc. in the capacities indicated on February 8, 2024:
Signature
Title
/s/ Paul J. Sarvadi
Paul J. Sarvadi
/s/ Douglas S. Sharp
Douglas S. Sharp
Timothy Clifford
Eli Jones
Carol R. Kaufman
John L. Lumelleau
Ellen H. Masterson
Randall Mehl
John Morphy
Latha Ramchand
Richard G. Rawson
*
*
*
*
*
*
*
*
*
*By: /s/ Christian P. Callens
Christian P. Callens, attorney-in-fact
Chairman of the Board, Chief Executive Officer
and Director
(Principal Executive Officer)
Executive Vice President of Finance,
Chief Financial Officer & Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
66
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
INSPERITY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Management’s Report on Internal Control
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Stockholders’ Equity and (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-11
F-1
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Insperity, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Insperity, Inc. (the Company) as of December 31, 2023 and 2022, the
related consolidated statements of income and comprehensive income, stockholders' equity and (deficit), and cash flows for each of the
three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
February 8, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit
matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
F-2
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
Description of
the Matter
Estimation of the Cost of Incurred but Not Reported Health Insurance Claims
As discussed in Note 1 of the consolidated financial statements under “Health Insurance Costs”, the Company provides the
majority of its health insurance coverage to its employees through a fully insured health insurance policy with
UnitedHealthcare (“United”). While the policy with United is a fully insured plan, as a result of certain contractual terms, the
Company accounts for this plan using a partially self-funded insurance accounting model. Accordingly, the Company
records the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees, as benefits
expense, which is a component of Payroll taxes, benefits and workers’ compensation costs in the consolidated statement
of income and comprehensive income. The estimated incurred but not reported claims under the Company’s United
insurance policy are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates
based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan.
Auditing management’s estimate of the cost of incurred but not reported health insurance claims was subjective and
judgmental due to the significant estimation required in determining the medical reserve. Estimating incurred but not
reported claims is subjective due to the large number of plan participants and the possibility that the number, nature,
magnitude, and the timing of processing of current period claims may not be comparable to historical results experienced
by the Company.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the estimation
process, including, among others, controls over the completeness and accuracy of the data used to estimate the cost of
incurred health insurance claims and the review and approval processes that management has in place for the
assumptions applied and the calculation of the cost of incurred health insurance claims.
Our audit procedures included, among others, assessing (i) the Company’s health insurance cost estimation methodology,
(ii) significant assumptions used to develop the medical completion rates, which includes the incurred but not reported
component, (iii) the accuracy and completeness of the claims processed data used in the Company’s computation, as well
as (iv) the historical accuracy of management’s estimates of the cost of incurred health insurance claims. Our testing of the
medical completion rate assumptions included comparing the completion rate assumptions used by management to the
completion rates experienced in historical periods and assessing whether contrary evidence exists with respect to the
completion rate assumptions utilized by the Company to estimate the cost of incurred health insurance claims.
Furthermore, we involved our actuarial specialists to assist in our evaluation of the Company’s methodology and compared
the Company’s estimate to a range developed by our actuarial specialists based on the historical claim data and
independently selected assumptions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1991.
Houston, Texas
February 8, 2024
F-3
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S REPORT ON INTERNAL CONTROL
The Company has assessed the effectiveness of its internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) (2013 framework). The Company’s management is responsible for establishing and maintaining adequate internal controls over
financial reporting. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, has been audited
by the Company’s independent registered public accounting firm, as stated in their report that is included herein.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal
control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate.
The Company’s assessment of the effectiveness of its internal control over financial reporting included testing and evaluating the design and
operating effectiveness of its internal controls. In management’s opinion, the Company has maintained effective internal control over financial
reporting as of December 31, 2023, based on criteria established in the COSO 2013 framework.
/s/ Paul J. Sarvadi
Paul J. Sarvadi
Chairman of the Board &
Chief Executive Officer
/s/ Douglas S. Sharp
Douglas S. Sharp
Executive Vice President, Finance,
Chief Financial Officer & Treasurer
F-4
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Insperity, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Insperity, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria). In our opinion, Insperity, Inc. (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income and
comprehensive income, stockholders’ equity and (deficit), and cash flows for each of the three years in the period ended December 31, 2023,
and the related notes and our report dated February 8, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Houston, Texas
February 8, 2024
F-5
2023 Form 10-K
December 31, 2023
December 31, 2022
CONSOLIDATED FINANCIAL STATEMENTS
INSPERITY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
Assets
Cash and cash equivalents
Restricted cash
Marketable securities
Accounts receivable, net
Prepaid insurance and related assets
Funds held for clients and other current assets
Total current assets
Property and equipment, net of accumulated depreciation
Right-of-use (“ROU”) leased assets
Deposits and prepaid health insurance
Goodwill and other intangible assets, net
Deferred income taxes, net
Other assets
Total assets
Liabilities and stockholders' equity
Accounts payable
Payroll taxes and other payroll deductions payable
Accrued worksite employee payroll costs
Accrued health insurance costs
Accrued workers’ compensation costs
Accrued corporate payroll and commissions
Client funds liability and other accrued liabilities
Total current liabilities
Accrued workers’ compensation costs, net of current
Long-term debt
Operating lease liabilities, net of current
Total noncurrent liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock ($0.01 per share par value; 20,000 shares authorized; no
shares issued and outstanding)
Common stock ($0.01 per share par value; 120,000 shares authorized; 55,489
shares issued and 37,281 shares and 37,881 shares outstanding, respectively)
Additional paid-in capital
Treasury stock, at cost (18,208 and 17,608 shares held in treasury,
respectively)
Accumulated other comprehensive income (loss), net of tax
Retained earnings
Total stockholders' equity
$
692,873
$
$
$
$
$
57,403
15,905
693,878
7,013
128,220
1,595,292
197,424
57,438
215,070
12,707
20,347
21,381
2,119,659
10,693
566,373
559,194
46,460
60,475
64,286
128,808
1,436,289
162,852
369,400
57,494
589,746
—
555
185,031
(830,524)
9
738,553
93,624
Total liabilities and stockholders’ equity
$
2,119,659
$
See accompanying notes.
732,828
49,779
33,068
622,764
11,706
61,728
1,511,873
199,992
56,532
213,270
12,707
15,533
29,354
2,039,261
7,732
556,085
513,397
53,402
53,485
89,147
80,122
1,353,370
179,629
369,400
55,587
604,616
—
555
151,144
(725,532)
(82)
655,190
81,275
2,039,261
F-6
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
INSPERITY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
Revenues
Payroll taxes, benefits and workers’ compensation costs
Gross profit
Salaries, wages and payroll taxes
Stock-based compensation
Commissions
Advertising
General and administrative expenses
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense):
Interest income
Interest expense
Income before income tax expense
Income tax expense
Net income
Unrealized gain (loss) on available-for-sale securities, net of tax
Comprehensive income
Net income per share of common stock
Basic
Diluted
Year Ended December 31,
2023
2022
2021
$
6,485,871 $
5,938,818 $
4,973,070
5,449,068
1,036,803
460,715
4,927,585
1,011,233
430,945
52,996
46,847
37,324
177,664
42,708
818,254
218,549
33,666
(27,137)
225,078
53,696
50,080
45,672
37,503
156,134
40,660
760,994
250,239
9,393
(14,207)
245,425
66,075
171,382 $
179,350 $
91
(73)
4,152,968
820,102
379,171
40,623
34,922
29,097
124,413
38,547
646,773
173,329
2,447
(7,458)
168,318
44,238
124,080
(14)
171,473 $
179,277 $
124,066
4.53 $
4.47 $
4.70 $
4.64 $
3.22
3.18
$
$
$
$
See accompanying notes.
F-7
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
INSPERITY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND (DEFICIT)
(in thousands)
Common Stock
Issued
Shares
Amount
Additional
Paid-In
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Balance at December 31, 2020
55,489 $
555 $
95,528 $
(626,984) $
5 $
575,028 $
44,132
Purchase of treasury stock, at cost
Issuance of equity-based incentive
awards and dividend equivalents
Stock-based compensation expense
Exercise of stock options
Other
Dividends paid
Unrealized loss on marketable securities,
net of tax
Net income
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(69,725)
(25,140)
37,381
(329)
1,739
—
—
—
26,479
3,242
569
1,330
—
—
—
—
—
—
—
—
—
—
(69,725)
(1,339)
—
—
—
—
40,623
240
3,069
(144,179)
(144,179)
(14)
—
—
(14)
124,080
124,080
Balance at December 31, 2021
55,489 $
555 $
109,179 $
(665,089) $
(9) $
553,590 $
(1,774)
Purchase of treasury stock, at cost
Issuance of equity-based incentive
awards and dividend equivalents
Stock-based compensation expense
Other
Dividends paid
Unrealized loss on marketable securities,
net of tax
Net income
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(73,285)
(9,285)
49,124
2,126
—
—
—
10,443
956
1,443
—
—
—
—
—
—
—
—
(73)
—
—
(73,285)
(1,158)
—
—
—
50,080
3,569
(76,592)
(76,592)
—
(73)
179,350
179,350
Balance at December 31, 2022
55,489 $
555 $
151,144 $
(725,532) $
(82) $
655,190 $
81,275
Purchase of treasury stock, at cost
Issuance of equity-based incentive
awards and dividend equivalents
Stock-based compensation expense
Other
Dividends paid
Unrealized gain on marketable
securities, net of tax
Net income
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(132,063)
(21,285)
52,678
2,494
—
—
—
25,085
318
1,668
—
—
—
—
—
—
—
—
91
—
—
(132,063)
(3,800)
—
—
—
52,996
4,162
(84,219)
(84,219)
—
91
171,382
171,382
Balance at December 31, 2023
55,489 $
555 $
185,031 $
(830,524) $
9 $
738,553 $
93,624
See accompanying notes.
F-8
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
INSPERITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Year Ended December 31,
2023
2022
2021
$
171,382 $
179,350 $
124,080
Depreciation and amortization
Stock-based compensation
Deferred income taxes
Changes in operating assets and liabilities:
Accounts receivable
Prepaid insurance and related assets
Other current assets
Other assets and ROU assets
Accounts payable
Payroll taxes and other payroll deductions payable
Accrued worksite employee payroll costs
Accrued health insurance costs
Accrued workers’ compensation costs
Accrued corporate payroll, commissions and other accrued liabilities
Income taxes payable/receivable
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities
Marketable securities:
Purchases
Proceeds from maturities
Proceeds from dispositions
Property and equipment purchases
Net cash used in investing activities
Cash flows from financing activities
Purchase of treasury stock
Dividends paid
Client funds liability and other
Net cash used in financing activities
42,708
52,996
(4,814)
(71,114)
4,693
(14,215)
23,523
2,961
10,288
45,797
(6,942)
(9,787)
(44,620)
(4,368)
27,106
198,488
(47,983)
38,635
27,735
(40,117)
(21,730)
(131,519)
(84,219)
60,726
40,660
50,080
(10,641)
38,547
40,623
4,711
(109,458)
(120,560)
(421)
(5,206)
2,600
1,320
88,193
103,744
3,401
(10,114)
(5,179)
19,362
168,341
347,691
(46,748)
44,955
—
(30,329)
(32,122)
(73,285)
(76,592)
8,727
(1,121)
(13,851)
5,240
209
89,932
74,817
17,316
(197)
14,716
(14,307)
136,075
260,155
(58,202)
60,045
—
(32,856)
(31,013)
(69,725)
(144,179)
5,831
(155,012)
(141,150)
(208,073)
Net increase in cash, cash equivalents, restricted cash and funds held for clients
21,746
174,419
21,069
Cash, cash equivalents, restricted cash and funds held for clients beginning of year
Cash, cash equivalents, restricted cash and funds held for clients end of year
1,013,919
839,500
786,699
$
1,035,665 $
1,013,919 $
807,768
See accompanying notes.
F-9
2023 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
INSPERITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
Supplemental cash flow information:
Income taxes, net
Cash paid for interest
ROU assets obtained in exchange for lease obligations
Excise tax liability accrued for common stock repurchases
Year Ended December 31,
2023
2022
2021
$
62,879 $
57,354 $
22,067
22,177
544
13,402
9,736
—
53,835
7,268
19,572
—
See accompanying notes.
F-10
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies
Description of Business
Insperity, Inc. (“Insperity” or “we”, “our”, and “us”) provides an array of human resources (“HR”) and business solutions designed to help
improve business performance. Since our formation in 1986, we have evolved from being solely a professional employer organization
(“PEO”), an industry we pioneered, to our current position as a comprehensive business performance solutions provider. We were organized
as a corporation in 1986 and have provided PEO services since inception.
Our most comprehensive HR services offerings are provided through our Workforce Optimization and Workforce Synchronization
solutions (together, our “PEO HR Outsourcing Solutions”), which encompass a broad range of human resources functions, including payroll
and employment administration, employee benefits, workers’ compensation, government compliance, performance management and training
and development services, along with our cloud-based human capital management platform, known as Insperity Premier
TM
.
TM
®
In addition to our PEO HR Outsourcing Solutions, we offer a comprehensive traditional payroll and human capital management solution,
known as our Workforce Acceleration
solution (our “Traditional Payroll Solution”). We also offer a number of other business performance
solutions, including Recruiting Services, Employment Screening, Retirement Services, and Insurance Services. These other products and
services generally are offered only with our other solutions.
TM
We provide our PEO HR Outsourcing Solutions by entering into a co-employment relationship with our clients, under which Insperity and its
clients each take responsibility for certain portions of the employer-employee relationship. Insperity and its clients designate each party’s
responsibilities through its Client Service Agreement (“CSA”), under which Insperity becomes an employer of the employees who work at the
client’s location (“WSEE”) for most administrative and regulatory purposes.
As a co-employer of our WSEEs, we assume many of the rights and obligations associated with being an employer. We enter into an
employment agreement with each WSEE, thereby maintaining a variety of employer rights, including the right to hire or terminate employees,
the right to evaluate employee qualifications or performance, and the right to establish employee compensation levels. Typically, Insperity
only exercises these rights in consultation with its clients or when necessary to ensure regulatory compliance. The responsibilities associated
with our role as employer include the following obligations with regard to our WSEEs: (1) to compensate our WSEEs through wages and
salaries; (2) to pay the employer portion of payroll-related taxes; (3) to withhold and remit (where applicable) the employee portion of payroll-
related taxes; (4) to provide employee benefit programs; and (5) to provide workers’ compensation insurance coverage.
In addition to our assumption of employer status for our WSEEs, our PEO HR Outsourcing Solutions also includes other human resources
functions for our clients to support the effective and efficient use of personnel in their business operations. To provide these functions, we
maintain a significant staff of professionals trained in a wide variety of HR functions, including employee training, employee recruiting,
employee performance management, employee compensation and employer liability management. These professionals interact and consult
with clients on a daily basis to help identify each client’s service requirements and to ensure that we are providing appropriate and timely
human capital management services.
Revenue and Direct Cost Recognition
We enter into contracts with our customers for human resources services based on a stated rate and price in the contract. Our contracts
generally establish pricing for a period of 12 months and are generally cancellable at any time by either party with 30-days’ notice. Our
performance obligations are satisfied as services are rendered each month. The term between invoicing and when our performance
obligations are satisfied is not significant. Our payment terms typically require payment concurrently with the invoicing of our PEO services.
We do not have significant financing components or significant payment terms.
Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite in accordance with
Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Customers are invoiced concurrently with each
periodic payroll of its WSEEs. Revenues that have been recognized but not invoiced
F-11
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
represent unbilled accounts receivable of $668.9 million and $600.4 million at December 31, 2023 and December 31, 2022, and are included
in accounts receivable, net on our Consolidated Balance Sheets.
Pursuant to the “practical expedients” provided under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers, we
expense sales commissions when incurred because the terms of our contracts are cancellable by either party with a 30-day notice. These
costs are recorded in commissions in our Consolidated Statements of Income and Comprehensive Income.
Our revenue for our PEO HR Outsourcing Solutions by geographic region and for our other products and services offerings are as follows:
(in thousands)
Northeast
Southeast
Central
Southwest
West
Other revenue
Total revenue
Year Ended December 31,
2023
2022
2021
1,756,884 $
1,624,556 $
906,712
1,170,491
1,249,922
1,337,294
6,421,303
64,568
796,219
1,045,043
1,163,088
1,251,186
5,880,092
58,726
6,485,871 $
5,938,818 $
1,390,156
630,342
867,914
993,747
1,033,996
4,916,155
56,915
4,973,070
$
$
Our PEO HR Outsourcing Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our
WSEEs; and (2) a markup computed as a percentage of the payroll cost. The gross billings are invoiced concurrently with each periodic
payroll of our WSEEs. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of the markup, are
recognized ratably over the payroll period as WSEEs perform their service at the client worksite.
In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly
associated with our WSEEs, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin. As a
result, our operating results are significantly impacted by our ability to accurately estimate our direct costs relative to the revenues derived
from the markup component of our gross billings.
Revenues are comprised of gross billings less WSEE payroll costs as follows:
(in thousands)
Gross billings
Less: WSEE payroll cost
Revenues
Year Ended December 31,
2023
2022
2021
$
$
43,141,366 $
36,655,495
6,485,871 $
40,126,910 $
34,188,092
5,938,818 $
33,318,693
28,345,623
4,973,070
Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our WSEEs. Our direct costs associated with
our revenue generating activities are primarily comprised of all other costs related to our WSEEs, such as the employer portion of payroll-
related taxes, employee benefit plan premiums and workers’ compensation insurance costs.
Segment Reporting
We operate one reportable segment under ASC 280, Segment Reporting.
F-12
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Insperity, Inc. and its wholly owned subsidiaries. Intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”) requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that could potentially subject us to concentration of credit risk include accounts receivable and marketable securities.
Cash, Cash Equivalents and Marketable Securities
We invest our excess cash in federal government and municipal-based money market funds and debt instruments of U.S. municipalities. All
highly liquid investments with stated maturities of three months or less from date of purchase are classified as cash equivalents. Liquid
investments with stated maturities of greater than three months are classified as marketable securities in current assets.
We account for marketable securities in accordance with ASC 320, Investments — Debt and Equity Securities. We determine the appropriate
classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time of purchase, and re-evaluate such
classification as of each balance sheet date. At December 31, 2023 and 2022, all of our investments in marketable securities were classified
as available-for-sale, and as a result, were reported at fair value. Unrealized gains and losses are reported as a component of accumulated
other comprehensive income (loss) in stockholders’ equity (deficit). The amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts from the date of purchase to maturity. Such amortization is included in interest income as an addition to
or deduction from the coupon interest earned on the investments. We use the specific identification method of determining the cost basis in
computing realized gains and losses on the sale of our available-for-sale securities. Realized gains and losses are included in other income.
Property and Equipment
Property and equipment are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line
method.
Property and equipment, net consisted of the following:
(in thousands)
Land
Buildings and improvements
Computer hardware and software
Software development costs
Furniture, fixtures and other
Property and equipment, gross
Accumulated depreciation and amortization
Property and equipment, net
December 31, 2023
December 31, 2022
$
$
6,215 $
217,274
145,206
137,337
51,849
557,881
(360,457)
197,424 $
6,215
207,740
141,856
123,967
50,835
530,613
(330,621)
199,992
F-13
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:
Buildings and improvements
Computer hardware and software
Software development costs
Furniture, fixtures and other
Useful Life
5 — 30 years
2 — 5 years
3 — 5 years
5 — 7 years
Software development costs relate primarily to software code development, systems integration and testing of our proprietary professional
employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Capitalized software
development costs are amortized using the straight-line method over the estimated useful lives of the software, generally three years. We
recognized $13.8 million, $13.2 million and $10.9 million in amortization of capitalized software development costs in 2023, 2022 and 2021,
respectively. Unamortized software development costs were $33.3 million and $33.7 million at December 31, 2023 and 2022, respectively.
We periodically evaluate our long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment. ASC 360-10
requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed
to not be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess
recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset or asset group. In addition,
we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset. Fair value is
generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset.
Cloud Computing Arrangements
We incur costs to implement cloud computing arrangements that are hosted by third party vendors. SaaS implementation costs associated
with cloud computing arrangements are capitalized when incurred during the application development phase. The capitalized costs are
recorded in our short-term and long-term other assets on our Consolidated Balance Sheets. Amortization is calculated on a straight-line basis
over the contractual term of the cloud computing arrangement, typically a two to five year period. We recognized $5.7 million and $1.9 million
in amortization of SaaS implementation costs in 2023 and 2022, respectively. Unamortized SaaS implementation costs were $23.7 million
and $20.2 million at December 31, 2023 and 2022, respectively.
Leases
We determine if an arrangement is a lease at inception of a contract in accordance with ASC 842, Leases, as well as the Financial
Accounting Standards Board issued Accounting Standards Updates clarifying the lease guidance. ROU assets represent our right to use an
underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets
and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As
most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at
commencement date in determining the present value of lease payments. The lease terms used to calculate the ROU asset and related
lease liability include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense
for operating leases is recognized on a straight-line basis over the lease term as an operating expense. We have lease agreements which
require payments for lease and non-lease components and have elected to account for these as a single lease component related to our
other operating facilities. Please read Note 11, “Leases,” for additional information.
Goodwill and Other Intangible Assets
Our goodwill is not amortized, but is tested for impairment on an annual basis or when there is an indication that there has been a potential
decline in the fair value of a reporting unit. Annually, we perform a qualitative analysis to determine if it is more likely than not that the fair
value has declined below its carrying value. This analysis considers various qualitative factors. Due to the nature of our business, all of our
goodwill is associated with one reporting unit. We perform our annual impairment testing during the fourth quarter. Based on the results of
our analysis, no impairment loss was recognized in 2023, 2022 or 2021.
F-14
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Health Insurance Costs
We provide group health insurance coverage under a single-employer plan that covers both our WSEEs in our PEO HR Outsourcing
Solutions and our corporate employees and utilizes a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of
California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Tufts (known as Harvard Pilgrim Health
Care (HPHC) beginning in 2024), all of which provide fully insured policies or service contracts.
Approximately 87% of our costs related to health insurance coverage are provided under our policy with United. While the policy with United
is a fully insured plan, as a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded
insurance accounting model. Effective January 1, 2020, under the amended agreement with United, we no longer have financial
responsibilities for a participant’s annual claim costs that exceed $1 million (“Pooling Limit”). Accordingly, we record the cost of the United
plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”), as benefits expense, which is
a component of direct costs, in our Consolidated Statements of Income and Comprehensive Income. The estimated incurred but not reported
claims are based upon: (1) the level of claims processed during each quarter; (2) estimated completion rates based upon recent claim
development patterns under the plan; and (3) the number of participants in the plan, including both active and COBRA enrollees. Each
reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics,
and other factors are incorporated into the benefits costs, which requires a significant level of judgment.
Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the
beginning of a reporting quarter. If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in
the plan would be incurred and a liability for the excess costs would be accrued in our Consolidated Balance Sheets. On the other hand, if
the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we
would record an asset for the excess premiums in our Consolidated Balance Sheets. The terms of the arrangement require us to maintain an
accumulated cash surplus in the plan of $9.0 million, which is reported as long-term prepaid health insurance. In addition, United requires a
deposit equal to approximately one day of claims funding activity, which was $6.5 million at December 31, 2023, and is included in deposits -
health insurance as a long-term asset on our Consolidated Balance Sheets. As of December 31, 2023, Plan Costs were more than the net
premiums paid and owed to United by $23.5 million. As this amount is less than the agreed-upon $9.0 million surplus maintenance level, the
$32.5 million difference is included in accrued health insurance costs, a current liability, in our Consolidated Balance Sheets. The premiums,
including the additional quarterly premiums, owed to United at December 31, 2023 were $6.5 million, which is included in accrued health
insurance costs, a current liability in our Consolidated Balance Sheets. Our benefits costs incurred in 2023 included a decrease of $13.0
million for changes in estimated run-off related to prior periods, net of Pooling Limit. Our benefits costs incurred in 2022 included an increase
of $12.1 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in 2021 included an increase of $4.9
million for changes in estimated run-off related to prior periods.
Workers’ Compensation Costs
Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing Solutions has been provided through an arrangement with
the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”) since 2007. The Chubb Program is fully insured in that
Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Under the
Chubb Program, for claims incurred on or before September 30, 2019, we have financial responsibility to Chubb for the first $1 million layer
of claims per occurrence and, for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that
exceed $1 million. Chubb bears the financial responsibility for all claims in excess of these levels. Effective for claims incurred on or after
October 1, 2019, we have financial responsibility to Chubb for the first $1.5 million layer of claims per occurrence and, for claims over $1.5
million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5 million.
Because we bear the financial responsibility for claims up to the levels noted above, such claims, which are the primary component of our
workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and
indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred
costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a
significant level of judgment.
F-15
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We utilize a third-party actuary to estimate our loss development rate, which is primarily based upon the nature of WSEEs’ job
responsibilities, the location of WSEEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost
trends. Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are
incorporated into our workers’ compensation claims cost estimates. During the years ended December 31, 2023, 2022, and 2021, we
reduced accrued workers’ compensation costs by $33.5 million, $42.2 million and $41.7 million, respectively, for changes in estimated losses
related to prior periods. Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S. Treasury rates
that correspond with the weighted average estimated claim payout period (the average discount rate utilized in 2023 was 4.3% and in 2022
was 2.9%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated
Statements of Income and Comprehensive Income.
The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:
(in thousands)
Beginning balance, January 1,
Accrued claims
Present value discount, net of accretion
Paid claims
Ending balance
Current portion of accrued claims
Long-term portion of accrued claims
Total accrued claims
Year Ended December 31,
2023
2022
$
$
$
$
229,408
$
61,720
(13,430)
(57,443)
220,255
57,403
162,852
220,255
$
$
$
239,623
49,121
(9,517)
(49,819)
229,408
49,779
179,629
229,408
The current portion of accrued workers’ compensation costs on our Consolidated Balance Sheets at December 31, 2023 and 2022 includes
$3.1 million and $3.7 million, respectively, of workers’ compensation administrative fees.
The undiscounted accrued workers’ compensation costs were $250.0 million as of December 31, 2023 and $250.5 million as of
December 31, 2022.
At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of
premium costs and funds to be set aside for payment of future claims (“claim funds”). The level of claim funds is primarily based upon
anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into
the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder
of claim funds are included in deposits – workers’ compensation, a long-term asset in our Consolidated Balance Sheets. During 2023, we
received $46.3 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a decrease to
deposits – workers’ compensation. At December 31, 2023, we had restricted cash of $57.4 million and deposits – workers’ compensation of
$198.2 million.
Our estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred
claim costs expected to be paid beyond one year is included in long-term liabilities on our Consolidated Balance Sheets.
Stock-Based Compensation
At December 31, 2023, we have one stock-based employee compensation plan under which we may issue awards. We account for this plan
under the recognition and measurement principles of ASC 718, Compensation — Stock Compensation, which requires all share-based
payments to employees to be recognized in the income statement based on their fair values.
We generally make annual grants of unrestricted stock under our stock-based incentive compensation plan to our non-employee directors,
and grants of restricted stock units to our officers and certain other employees. Restricted stock unit grants to officers and other employees
generally vest over a period of three years from the date of grant. Restricted stock units are valued based on the fair value on date of grant
and the associated expense, net of estimated forfeitures, and are
F-16
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
recognized over the requisite service period. Stock grants issued to non-employee directors are 100% vested on the grant date.
Our Insperity Long-Term Incentive Program (the “LTIP”) provides for performance based long-term compensation awards in the form of
performance units to certain employees based on the achievement of pre-established performance goals. Each performance unit represents
the right to receive one common share at a future date based on our performance against certain targets. Performance units have a vesting
schedule of three years. A portion of the LTIP grant to employees was considered a market-based performance award that cliff vests at the
end of three years assuming continued employment and achievement of market-based performance goals. The fair value of each
performance unit is the market price of our common stock on the date of grant. The fair value of each market-based performance unit was
determined through use of the Monte Carlo simulation method. The compensation expense for such awards is recognized on a straight-line
basis over the vesting term. Over the performance period the number of shares expected to be issued is adjusted upward or downward
based on the probability of achievement of the performance target.
Company-Sponsored 401(k) Retirement Plans
Under our 401(k) retirement plan for corporate employees (the “Corporate Plan”), we matched 100% of eligible corporate employees’
contributions, up to 6% of the employees’ eligible compensation in 2023 and 2022, and ranging from up to 3% to up to 6% of the employees’
eligible compensation in 2021. Matching contributions under the Corporate Plan are immediately vested. During 2023, 2022 and 2021, we
made matching contributions on behalf of corporate employees to the Corporate Plan of $16.9 million, $14.4 million, and $8.2 million,
respectively, and are included in salaries, wages and payroll taxes in our Consolidated Statements of Income and Comprehensive Income.
Under our separate 401(k) retirement plan for WSEEs (the “Worksite Employee Plan”), the match percentage for WSEEs ranges from 0% to
6%, as determined by each client company. Matching contributions under the Worksite Employee Plan are immediately vested. During 2023,
2022 and 2021, we made matching contributions on behalf of WSEEs to the Worksite Employee Plan of $374.5 million, $328.5 million, and
$244.1 million, respectively.
Advertising
We expense all advertising costs as incurred.
Income Taxes
We use the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax
rates and laws in effect when the differences are expected to reverse. Please read Note 7, “Income Taxes,” for additional information.
Recent Accounting Pronouncements
In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 expands annual and interim disclosure
requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective
for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 14, 2024, with early adoption
permitted. We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated
Financial Statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures. ASU2023-09
expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is
effective for fiscal years beginning after December 15, 2025, with early adoption permitted. We are currently evaluating the guidance and
have not determined the impact this standard may have on our Consolidated Financial Statements.
F-17
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Other Balance Sheet Information
Cash, Cash Equivalents and Marketable Securities
The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and
overnight investments:
(in thousands)
Overnight holdings
Investment holdings
Cash in demand accounts
Outstanding checks
Total
December 31, 2023
December 31, 2022
Cash & Cash
Equivalents
Marketable
Securities
Total
Cash & Cash
Equivalents
Marketable
Securities
Total
$
611,100 $
— $
611,100 $
678,512 $
— $
678,512
119,408
730,508
26,931
(64,566)
15,905
15,905
—
—
135,313
746,413
26,931
(64,566)
56,963
735,475
41,047
(43,694)
33,068
33,068
—
—
90,031
768,543
41,047
(43,694)
$
692,873 $
15,905 $
708,778 $
732,828 $
33,068 $
765,896
Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and
marketable securities at December 31, 2023 and December 31, 2022 included $510.1 million and $504.8 million, respectively, of funds
associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $27.6 million and
$36.8 million, respectively, in client prepayments.
Cash, Cash Equivalents, Restricted Cash and Funds Held for Clients
The following table summarizes our cash, cash equivalents, restricted cash and funds held for clients as reported in our Consolidated
Statements of Cash Flows:
(in thousands)
Year Ended December 31,
2023
2022
2021
Supplemental schedule of cash and cash equivalents, restricted cash and funds held for clients
Cash and cash equivalents
Restricted cash
Other current assets - funds held for clients
(1)
Deposits – workers’ compensation
$
732,828
$
575,812
$
554,846
49,779
46,929
45,522
34,942
(2)
31,732
(2)
—
(2)
196,370
185,027
186,331
Cash, cash equivalents, restricted cash and funds held for clients
beginning of year
Cash and cash equivalents
Restricted cash
Other current assets - funds held for clients
(1)
Deposits – workers’ compensation
Cash, cash equivalents, restricted cash and funds held for clients
end of year
____________________________________
$
$
1,013,919
692,873
57,403
(2)
87,219
198,170
$
$
839,500
732,828
49,779
$
$
786,699
575,812
46,929
34,942
(2)
196,370
—
(2)
185,027
$
1,035,665
$
1,013,919
$
807,768
(1)
(2)
Funds held for clients represent amounts held on behalf of our Traditional Payroll Solution customers that are restricted for the purpose of satisfying obligations to remit
funds to clients’ employees and various tax authorities.
Beginning in the third quarter of 2022, we adjusted the presentation of our Consolidated Statements of Cash Flows to include changes in funds held for clients as a
financing activity and to include funds held for clients in both the beginning and ending period amounts in our totals of cash, cash equivalents, restricted cash and funds
held for clients. Prior period amounts have not been adjusted to this presentation as the amounts are immaterial to our Consolidated Financial Statements. Previously, the
changes in funds held for clients and the related client fund liabilities were
F-18
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
presented within operating activities in our Consolidated Statements of Cash Flows. Funds held for clients are held in a trust separate from our company funds and we do
not use these funds held for clients for any corporate activity.
Please read Note 1. “Accounting Policies,” for a discussion of our accounting policies for deposits — workers’ compensation and restricted
cash.
3. Fair Value Measurements
We account for our financial assets in accordance with ASC 820, Fair Value Measurement. This standard defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value measurements. The fair value measurement disclosures are
grouped into three levels based on valuation factors:
• Level 1 - quoted prices in active markets using identical assets
• Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not
active, or other observable inputs
• Level 3 - significant unobservable inputs
Fair Value of Instruments Measured and Recognized at Fair Value
The following table summarizes the levels of fair value measurements of our financial assets:
(in thousands)
Money market funds
U.S. Treasury bills
Municipal bonds
December 31, 2023
December 31, 2022
Total
Level 1
Level 2
Total
Level 1
Level 2
$
730,508 $
730,508 $
15,905
15,905
—
—
746,413
746,413
—
—
—
—
—
$
735,475 $
735,475 $
29,703
3,365
29,703
—
768,543
765,178
—
—
3,365
3,365
—
—
—
Deposits - money market funds
22,292
22,292
Total
$
768,705 $
768,705 $
—
$
768,543 $
765,178 $
3,365
Please read Note 2 “Other Balance Sheet Information,” for additional information.
The municipal bond securities valued as Level 2 are primarily pre-refunded municipal bonds that are secured by escrow funds containing
U.S. government securities. Our valuation techniques used to measure fair value for these securities during the period consisted primarily of
third-party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same
or similar investments in active markets and other observable inputs.
The following is a summary of our available-for-sale marketable securities:
(in thousands)
December 31, 2023
U.S. Treasury bills
December 31, 2022
U.S. Treasury bills
Municipal bonds
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
15,896 $
9 $
— $
15,905
29,782 $
3,369
— $
—
(79) $
(4)
29,703
3,365
$
$
As of December 31, 2023, the contractual maturities of all marketable securities in our portfolio were less than one year.
F-19
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Other Financial Instruments
The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, deposits and accounts payable approximate their fair
values due to the short-term maturities of these instruments.
As of December 31, 2023, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as
Level 2 in the fair value hierarchy. Please read Note 6, “Long-Term Debt,” for additional information.
4. Accounts Receivable
Accounts receivable, net consisted of the following:
(in thousands)
Trade, net
Unbilled
Other
Accounts receivable, net
December 31,
2023
2022
$
15,772
$
13,934
668,920
9,186
600,446
8,384
$
693,878
$
622,764
Our accounts receivable is primarily composed of trade receivables and unbilled receivables. Our trade receivables, which represent
outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $1.1 million and $1.0 million as of December 31,
2023 and 2022, respectively. We establish an allowance for doubtful accounts based on management’s assessment of the collectability of
specific accounts and by making a general provision for other potentially uncollectible amounts.
We make an accrual at the end of each accounting period for our obligations associated with the earned but unpaid wages of our WSEEs
and for the accrued gross billings associated with such wages. These accruals are included in accrued worksite employee payroll cost and
unbilled accounts receivable; however, these amounts are presented net in the Consolidated Statements of Income and Comprehensive
Income. We generally require clients to pay invoices for service fees no later than the same day as the applicable payroll date. As such, we
generally do not require collateral. Client prepayments directly attributable to accrued worksite employee payroll costs and unbilled revenues
have been netted as we have the legal right of offset for these amounts. Unbilled accounts receivable consisted of the following:
(in thousands)
Accrued worksite employee payroll cost
Unbilled revenues
Client prepayments
Unbilled accounts receivable
5. Deposits and Prepaid Health Insurance
Deposits and prepaid health insurance consisted of the following:
(in thousands)
Prepaid health insurance
Deposits — health insurance
Deposits — workers’ compensation
Deposits and prepaid health insurance
December 31,
2023
2022
$
559,194
$
513,397
137,318
(27,592)
123,849
(36,800)
$
668,920
$
600,446
December 31,
$
2023
9,000
7,900
198,170
$
2022
9,000
7,900
196,370
$
215,070
$
213,270
F-20
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The contractual arrangement with United for health insurance coverage requires us to maintain an accumulated cash surplus in the plan of
$9.0 million, which is reported as deposits and prepaid health insurance in our Consolidated Balance Sheets. Please read Note 1,
“Accounting Policies,” for a discussion of our accounting policies for health insurance costs and workers’ compensation costs.
6. Long-Term Debt
We have a revolving credit facility (the “Facility”) with a borrowing capacity of up to $650 million. The Facility may be further increased to
$700 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (as amended, the “Credit
Agreement”). The Facility is available for working capital and general corporate purposes, including acquisitions, stock repurchases and
issuances of letters of credit. Our obligations under the Facility are secured by 100% of the stock of our captive insurance subsidiary and are
guaranteed by all of our subsidiaries other than our captive insurance subsidiary and certain other excluded subsidiaries. At December 31,
2023, our outstanding balance on the Facility was $369.4 million, and we had an outstanding $1.0 million letter of credit issued under the
Facility, resulting in an available borrowing capacity of $279.6 million.
The Facility matures on June 30, 2027. Borrowings under the Facility bear interest at an annual rate equal to an alternate base rate or
Adjusted Term SOFR for term SOFR loans, in either case plus an applicable margin. Adjusted Term SOFR is a forward-looking term rate
based on the secured overnight financing rate plus a spread adjustment, which ranges from 0.10% to 0.25% depending on the interest
period and type of loan. Depending on our leverage ratio, the applicable margin varies (1) in the case of SOFR loans, from 1.50% to 2.25%
and (2) in the case of alternate base rate loans, from 0.00% to 0.50%. The alternate base rate is the highest of (1) the prime rate most
recently published in The Wall Street Journal, (2) the federal funds rate plus 0.50%; and (3) the Adjusted Term SOFR rate plus 2.00%. We
also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25% per year. The average interest rate
for 2023 was 6.88%. Interest expense and unused commitment fees are recorded in other income (expense).
The Facility contains both affirmative and negative covenants that we believe are customary for arrangements of this nature. Covenants
include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise
reacquire our capital stock, acquire the capital stock or assets of another business, make investments and pay dividends. In addition, the
Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio, and
maximum leverage ratio. We were in compliance with all financial covenants under the Credit Agreement at December 31, 2023.
F-21
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7.
Income Taxes
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the net deferred tax assets as reflected on the Consolidated Balance Sheets are as follows:
(in thousands)
Deferred tax liabilities
Prepaid assets
Depreciation
Software development costs
Tenant improvements
Right-of-use leased assets
Intangibles
Total deferred tax liabilities
Deferred tax assets
Accrued incentive compensation
Net operating loss carryforward
Workers’ compensation accruals
Accrued rent
Software development costs
Stock-based compensation
Operating lease liabilities
Other
Total deferred tax assets
Valuation allowance
Total net deferred tax assets
Net deferred tax assets
December 31,
2023
2022
$
(4,191) $
(6,477)
—
(3,380)
(16,624)
(2,595)
(33,267)
8,553
332
4,588
1,781
3,717
14,332
20,007
1,010
54,320
(706)
53,614
(5,395)
(7,448)
(2,598)
(3,139)
(16,371)
(2,247)
(37,198)
13,116
407
5,358
1,790
—
12,255
19,508
972
53,406
(675)
52,731
$
20,347 $
15,533
F-22
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of income tax expense are as follows:
(in thousands)
Current income tax expense
Federal
State
Total current income tax expense
Deferred income tax (benefit) expense
Federal
State
Total deferred income tax (benefit) expense
Total income tax expense
Year Ended December 31,
2023
2022
2021
$
49,058 $
61,649 $
9,452
58,510
15,067
76,716
(3,887)
(927)
(4,814)
(8,844)
(1,797)
(10,641)
30,887
8,640
39,527
4,562
149
4,711
$
53,696 $
66,075 $
44,238
The reconciliation of income tax expense computed at U.S. federal statutory tax rates to the reported income tax expense from continuing
operations is as follows:
(in thousands)
Expected income tax expense at 21%
State income taxes, net of federal benefit
Nondeductible expenses
Equity compensation, net
Research and development credit
Other, net
Reported total income tax expense
Year Ended December 31,
2023
2022
2021
$
47,266 $
51,539 $
35,347
6,540
5,455
(4,386)
(1,183)
4
10,106
4,338
1,345
(1,241)
(12)
6,974
7,362
(4,427)
(1,018)
—
$
53,696 $
66,075 $
44,238
At December 31, 2023, we have net operating loss carryforwards totaling $1.3 million that expire from 2025 to 2030 related to an acquisition
that occurred in 2010.
We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2023, 2022 and 2021, we
have no uncertain tax positions, and as a result, have made no provisions for interest or penalties related to uncertain tax positions. The tax
years 2020 through 2022 remain open to examination by the Internal Revenue Service of the United States. The tax years 2019 through
2022 remain open to examination by various state tax authorities.
8. Stockholders' Equity
During 2023, we repurchased or withheld an aggregate of 1,259,109 shares of our common stock, as described below.
Repurchase Program
Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase
Program”). The purchases may be made from time to time in the open market or directly from stockholders at prevailing market prices based
on market conditions and other factors. During 2023, 1,062,598 shares were repurchased under the Repurchase Program. On August 1,
2023, we announced that our Board authorized an increase of 2,000,000 shares that may be repurchased under the Repurchase Program.
As of December 31, 2023, we were authorized to repurchase an additional 1,969,562 shares under the Repurchase Program.
The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposes a nondeductible 1% excise tax on the net
value of certain stock repurchases made after December 31, 2022. During 2023, we recorded the applicable excise tax in treasury stock as
part of the cost basis of stock repurchased and recorded a corresponding
F-23
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
liability for the excise tax payable in other accrued liabilities in our Consolidated Balance Sheets.
Withheld Shares
During 2023, we withheld 196,511 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock unit
awards.
Dividends
The Board declared and paid quarterly dividends as follows:
(amounts per share)
First quarter
Second quarter
Third quarter
Fourth quarter
$
$
2023
0.52
0.57
0.57
0.57
2022
0.45
0.52
0.52
0.52
During 2023 and 2022, we declared and paid dividends totaling $84.2 million and $76.6 million, respectively.
Preferred Stock
At December 31, 2023, 20 million shares of preferred stock were authorized.
9.
Incentive Plans
The Insperity, Inc. Incentive Plan, as amended, provides for options and other stock-based awards that have been and may be granted to
eligible employees and non-employee directors of Insperity or its subsidiaries. The Incentive Plan permits stock options, including
nonqualified stock options and options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal
Revenue Code, stock awards, phantom stock awards, stock appreciation rights, performance units, and other stock-based awards and cash
awards, all of which may or may not be subject to the achievement of one or more performance objectives. The purpose of the Incentive Plan
generally is to retain and attract persons of training, experience and ability to serve as employees of Insperity and its subsidiaries and to
serve as non-employee directors of Insperity, to encourage the sense of proprietorship of such persons and to stimulate the active interest of
such persons in the development and financial success of Insperity and its subsidiaries.
The Incentive Plan is administered by the Compensation Committee of the Board (the “Committee”). The Committee has the power to
determine which eligible employees will receive awards, the timing and manner of the grant of such awards, the exercise price of stock
options (which may not be less than market value on the date of grant), the number of shares and all of the terms of the awards. The Board
may at any time amend or terminate the Incentive Plan. However, no amendment that would impair the rights of any participant, with respect
to outstanding grants, can be made without the participant’s prior consent. Stockholder approval of amendments to the Incentive Plan is
necessary only when required by applicable law or stock exchange rules. Assuming all outstanding performance-based awards are paid at
maximum achievement of pre-established performance goals, at December 31, 2023, 1,837,540 shares of common stock were available for
future grants under the Incentive Plan.
We also maintain the Insperity, Inc. Long-Term Incentive Plan (“LTIP”) under the Incentive Plan. The LTIP provides for performance-based
long-term compensation awards in the form of performance units to certain employees based on the achievement of pre-established
performance goals. We granted performance units under the LTIP to our named executive officers and certain other officers in 2023, 2022
and 2021.
Employees who attain a minimum age of 62 and have provided 15 years or more of continuous service may continue to vest in awards
following a qualifying retirement as defined under the Incentive Plan award agreement, as though they were still an employee, provided the
grant date of the award is six months or more before the employee’s last day of employment, the employee provides the Company with six
months advance notice of retirement, the employee continues to work full-time during such six (6) month period, and the employee signs a
waiver and release of claims. In addition, in order to avoid forfeiting any outstanding award, a retired employee must refrain from providing
any services, including but not limited to, as an employee, director, advisor, or independent contractor to a business engaged in providing any
F-24
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
services offered by the Company and its subsidiaries and affiliates at the time of the employee’s retirement, including but not limited to PEO
services, payroll services, retirement services or insurances services. For a termination following a qualifying retirement, time-vested awards
will continue to vest in the normal course. For a termination following a qualifying retirement, performance-based awards with completed or
in-process performance periods are adjusted for achievement of the performance criteria, prorated through the date of termination and paid
in the normal course, while performance-based awards for performance periods that have not started are forfeited. Stock-based
compensation expense related to time-vested and performance-based awards is accelerated over the requisite service period for employees
who meet the requirements for continued vesting.
Stock-based compensation expense and other disclosures for stock-based awards follows:
(in thousands)
Year Ended December 31,
2023
2022
2021
Stock-based compensation expense recognized
Income tax benefit realized from stock-based compensation expense
$
52,996 $
50,080 $
12,643
13,483
40,623
10,677
Time-Based Restricted Stock Units
Time-based restricted stock units (“RSUs”), under equity plan accounting, are generally measured at fair value on the date of grant based on
the number of shares granted, estimated forfeitures and the quoted price of the common stock. Such value is recognized as compensation
expense over the corresponding vesting period, generally three years to five years for awards currently outstanding. However, for some
RSUs currently outstanding, compensation expense is accelerated over the shortened requisite service period for employees who meet the
requirements for continued vesting.
The following is a summary of time-based RSUs award activity for 2023:
Non-vested — December 31, 2022
Granted
Vested
Canceled
Non-vested — December 31, 2023
Additional disclosures for time-based RSUs:
Total Awards
(in thousands)
Weighted Average
Grant Date Fair
Value
987
556
(480)
(25)
1,038
$
$
86.34
123.66
83.54
104.82
106.98
Year Ended December 31,
2023
2022
2021
Weighted average grant date fair value of awards granted
$
123.66 $
90.06 $
88.84
Fair value of awards vested during the year (in millions)
58.7
30.4
28.7
As of December 31, 2023, unrecognized compensation expense associated with the unvested RSUs outstanding was $59.3 million and is
expected to be recognized over a weighted average period of 22 months.
Long-Term Incentive Program Awards
Each performance unit represents the right to receive common shares at a future date based on our performance against specified targets.
The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance
metrics to the specified targets, which can range from 0% to 200% of the targeted amounts. A performance unit may be comprised of either a
performance-based award or a market-based award. For performance-based awards, performance units have a vesting schedule of three
years and compensation expense is recognized based on the number of common shares expected to be issued and the market price per
common share on
F-25
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the date of grant. Over the performance period, the number of shares expected to be issued is adjusted upward or downward based upon
the probability of achievement of the performance targets. For market-based awards, performance units vest at the end of a three-year
period assuming continued employment and achievement of market-based performance goals. The fair value of market-based performance
awards was determined through the use of the Monte Carlo simulation method. The compensation expense for the LTIP awards is
recognized on a straight-line basis over the vesting terms.
The following is a summary of LTIP award activity, at 100% of targeted amount, for 2023:
Non-vested — December 31, 2022
Granted
Vested
Canceled
Non-vested — December 31, 2023
Number of
Performance Units
(in thousands)
Weighted Average
Grant Date Fair
Value
272
67
(107)
(5)
227
$
$
85.37
133.08
70.05
114.34
105.92
As of December 31, 2023, we estimate that approximately 91,000, 83,000 and 57,000 shares will vest with $0.1 million, $1.6 million and $4.2
million in unamortized compensation expense related to the 2021, 2022 and 2023 LTIP grants, respectively.
Employee Stock Purchase Plan
Our employee stock purchase plan (the “ESPP”) enables employees to purchase shares of Insperity stock at a 5% discount from the stock
price at the end of the offering period. The ESPP is a non-compensatory plan under GAAP for stock-based compensation. As a result, no
compensation expense is recognized in conjunction with this plan. Approximately 39,000, 36,000 and 36,000 shares were issued from
treasury under the ESPP during fiscal years 2023, 2022 and 2021, respectively.
10. Earnings Per Share
Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted
EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period, plus the dilutive
effect of time-vested and performance-based restricted stock units (“RSUs”).
The following table summarizes the net income and the basic and diluted shares used in the earnings per share computations:
(in thousands)
Net income
Weighted average common shares outstanding
Incremental shares from assumed time-vested and performance-based RSU awards
Adjusted weighted average common shares outstanding
Year Ended December 31,
2023
2022
2021
$
171,382 $
179,350 $
124,080
37,807
535
38,342
38,115
501
38,616
38,431
471
38,902
Potentially dilutive securities not included in weighted average share calculation due to
anti-dilutive effect
6
10
—
F-26
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Leases
We have operating leases for office space, other operating facilities, vehicles and office equipment. Our fixed operating lease costs for 2023,
2022 and 2021 were $19.5 million, $18.7 million, and $18.2 million, respectively, and are included in general and administrative expenses on
our Consolidated Statements of Income and Comprehensive Income. During 2023, cash paid for amounts included in the measurement of
operating lease liabilities was $22.9 million.
The following table presents the lease balances within our Consolidated Balance Sheets, weighted average lease term and weighted
average discount rates related to our operating leases:
(dollars in thousands)
Lease liabilities:
Classification in Consolidated Balance Sheets
December 31, 2023
Current operating lease liabilities
Other accrued liabilities
Long-term operating lease liabilities
Operating lease liabilities, net of current
Total operating lease liabilities
Less:
Landlord funded tenant improvements
Deferred rent
Operating lease ROU assets
Right-of-use leased assets
$
$
Weighted average remaining lease term
Weighted average discount rate
The following presents the maturity of our operating leases liabilities as of December 31, 2023:
(in thousands)
2024
2025
2026
2027
2028
Thereafter
Total remaining obligation
Less imputed interest
Present value of lease liabilities
19,816
57,494
77,310
13,004
6,868
57,438
5 years
4.2 %
Operating Leases
22,604
18,915
15,317
12,679
8,841
7,152
85,508
8,198
77,310
$
$
As of December 31, 2023, we have additional operating leases that have not yet commenced of $29.7 million with lease terms between three
and eleven years.
12. Commitments and Contingencies
We enter into fixed purchase and service obligations in the ordinary course of business. These arrangements primarily consist of advertising
commitments and service contracts. At December 31, 2023, future purchase and service obligations greater than $100,000 and one year
were as follows:
F-27
2023 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
2024
2025
2026
2027
2028
Thereafter
Total obligations
Litigation
$
33,472
21,622
7,552
3,113
3,159
—
$
68,918
We are a defendant in various lawsuits and claims arising in the normal course of business. Management believes it has valid defenses in
these cases and is defending them vigorously. While the results of litigation cannot be predicted with certainty, management believes the final
outcome of such litigation will not have a material adverse effect on our financial position or results of operations.
F-28
2023 Form 10-K
INSPERITY, INC. INCENTIVE PLAN
(as Amended and Restated Effective May 22, 2023)
RESTRICTED STOCK UNIT AGREEMENT
Exhibit 10.5
This Restricted Stock Unit Agreement (this “Agreement”) is between Insperity, Inc. (the “Company”) and
(the “Grantee”), an employee of the Company or one of its Subsidiaries, regarding an award (this “Award”) of
restricted stock units, each representing one share of Common Stock (as defined in the Insperity, Inc. Incentive Plan, as amended
and restated effective May 22, 2023 (the “Plan”), such units comprising this Award referred to herein as “Restricted Stock
Units”) awarded to the Grantee on (the “Award Date”), such number of Restricted Stock Units subject to adjustment as
provided in the Plan, and further subject to the following terms and conditions:
1. Relationship to Plan. This Award is subject to all of the terms, conditions and provisions of, and
administrative interpretations under, the Plan, if any, which have been adopted by the Committee thereunder. Any question of
interpretation arising under this Agreement shall be determined by the Committee and its determinations shall be final and
conclusive upon all parties in interest. Except as defined herein, capitalized terms shall have the same meanings ascribed to them
under the Plan.
2. Vesting Schedule.
(a) Subject to Sections 2(b), 2(c), 2(d) and 3 below, ( ) of the Restricted Stock Units granted under this
Award shall become vested on each annual anniversary of the Award Date (each a “Vesting Date”), subject to the
Grantee’s continuous Employment from the Award Date until (and as of) each Vesting Date.
(b) Unvested Restricted Stock Units subject to this Award shall not partially or fully vest or otherwise accelerate
vesting solely as the result of a Change in Control.
(c) All unvested Restricted Stock Units subject to this Award shall vest, irrespective of the limitations set forth in
subparagraph (a) above, provided that the Grantee has been in continuous Employment since the Award Date, upon the
earliest occurrence of:
(i) a Qualifying Termination;
(ii) a Non-Assumption; or
(iii) the Grantee’s termination of Employment by reason of death or Disability.
(d) If the Grantee’s Employment terminates due to the Grantee’s Retirement, the Grantee will continue to vest in
the remaining unvested Restricted Stock Units, if any, on the applicable annual Vesting Date in accordance with Section 2(a) or
accelerated vesting under Section 2(c)(ii) or upon the Grantee’s death as if the Grantee had remained in continuous Employment
through the applicable annual Vesting Date or vesting event, respectively.
Officer RSU Award_ Jan 2024
(e) For purposes of this Agreement:
(i) “Cause” shall be determined solely by the Compensation Committee and means a termination of
Grantee’s Employment for:
a. Gross negligence or willful misconduct in the performance of the Grantee’s duties;
b. Conviction or plea of nolo contendre for a felony or any crime involving moral turpitude; or
c. Committing an act of fraud or deceit intended to result in personal and unauthorized
enrichment of Grantee at the Company’s expense.
(ii) “Disability” means that the Grantee has a disability such that he has been determined to be eligible
for benefits under a long-term disability plan sponsored by the Company or a Subsidiary or, if the Grantee is not
covered by such a plan, a physical or mental impairment (a) which causes a Grantee to be unable to perform the
normal duties for an employer as determined by the Committee in its sole discretion; and (b) which is expected
either to result in death (or blindness) or to last for a continuous period of at least twelve (12) months. The
Committee may require that the Grantee be examined by a physician or physicians selected by the Committee. The
Grantee’s termination of Employment by reason of Disability under Section 2(c)(iii) above is subject to execution
and delivery to the Company of an effective Waiver and Release Agreement.
(iii) “Employment” means employment with the Company, a successor following a Change in Control or
a Subsidiary other than a Subsidiary that is a licensed professional employer organization.
(iv) A “Non-Assumption” shall be deemed to occur on the date of the consummation of an event that
constitutes a Change in Control as defined solely under the definition of Change in Control in section 2 of the Plan
(provided such Change in Control constitutes a "change in control event" within the meaning of Treasury
Regulation Section 1.409A-3(i)(5)), where in connection with such Change in Control, the successor entity, or a
parent of the successor entity, has not agreed to assume, replace or substitute this Award with another award of
equivalent or greater value, and on substantially similar or more favorable terms.
(v) “Qualifying Termination” means a termination of the Grantee’s Employment within eighteen (18)
months following a Change in Control for one of the following reasons:
a. A termination initiated by the Grantee due to items (1) through (4) below referred to herein as
“Good Reason” that the Grantee has not consented to in writing:
2 Officer RSU Award_ Jan 2024
(1) A material diminution in the Grantee’s title, position, authority, duties or
responsibilities from those applicable to Grantee preceding the Change in Control;
(2) A change in the geographic location at which Grantee must perform services, which
shall mean requiring Grantee to be permanently based more than 50 miles from the
Grantee’s principal Company location;
(3) A material diminution in Grantee’s base salary other than as part of an across-the-
board reduction applicable to all the Company’s executives of less than ten (10) percent; or
(4) A material diminution in Grantee’s bonus opportunity, incentive compensation or
perquisites, if inconsistent with other executives with similar levels of authority, duties or
responsibilities; or
b. An involuntary termination by the Company or Subsidiary or a successor to the Company other
than for Cause.
For purposes of this Agreement, the Grantee’s termination of Employment will be considered to be a Qualifying
Termination for Good Reason if the Grantee has provided written notice to the Company of the condition the
Grantee claims constitutes Good Reason within ninety (90) days of the initial existence of such condition, the
condition specified in the notice remains uncorrected for thirty (30) days after receipt of the notice by the
Company, and the Grantee actually terminates Employment after the thirty (30) day correction period and before
the expiration of the time limit required of a Qualifying Termination. Any vesting by reason of a Qualifying
Termination is subject to execution and delivery to the Company of an effective Waiver and Release Agreement.
(vi) “Retirement” means the Grantee’s voluntary termination of Employment other than for Good
Reason (and other than an involuntary termination by the Company for Cause) satisfying the Qualified Retirement
Policy and all of the following conditions:
a. the Grantee submits a voluntary request for retirement that satisfies applicable notice
requirements and is accepted by the Company or Subsidiary;
b. the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-
two (62) years of age and has at least fifteen (15) years of continuous Employment as of the
termination date;
c. the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant
Date; and
3 Officer RSU Award_ Jan 2024
d. the Grantee executes an effective Waiver and Release Agreement.
(vii) “Waiver and Release Agreement” means the legal document in a form approved by the Company,
in which a Grantee, in exchange for the benefits specified in Section 2(c) or Section 2(d), agrees to be subject to
the repayment conditions of the Waiver and Release Agreement and releases the Company and other related
parties, from liability and damages arising from or in connection with the Grantee’s Qualifying Termination,
Retirement or termination of Employment by reason Disability. In order for a Waiver and Release Agreement to
be effective, the Waiver and Release Agreement must be:
a. Executed and returned by the Grantee (or Grantee’s legal representative) to the Company, after
termination of the Grantee’s Employment, and within the period provided in the Waiver and
Release Agreement,
b. Unrevoked by the Grantee (and Grantee’s legal representative) during the seven (7) day period
following the date of execution (or if longer, such other period required under applicable federal
or state law), and
c. Effective and irrevocable no later than the sixtieth (60 ) day after the date of a Grantee’s
th
termination of Employment.
3. Forfeiture of Award. Except as provided in another written agreement between the Grantee and the
Company, if the Grantee’s Employment terminates other than by reason of death, Disability, Retirement or Qualifying
Termination pursuant to the provisions of Section 2, all unvested Restricted Stock Units as of the Employment termination date
shall be forfeited immediately after termination of employment. Except in the case of a Qualifying Termination, the Company has
sole discretionary authority to determine when a Grantee’s Employment terminates for all purposes under this Agreement and the
Plan. If a Grantee’s Employment terminates due to Retirement, Disability or Qualifying Termination, all unvested Restricted
Stock Units as of the Grantee’s termination date shall expire on the date that Grantee fails to deliver a timely, effective and
irrevocable Waiver and Release Agreement.
4. Dividend Equivalents; No Shareholder Rights. During the period of time between the Award Date and the
earlier of the settlement date or forfeiture date of the Restricted Stock Units, the Restricted Stock Units shall be evidenced by
book entry registration. With respect to each Restricted Stock Unit that becomes vested, at the same time such Award is settled
pursuant to Section 5, the Grantee is entitled to receive a stock dividend equivalent payment equal to all dividends and other
distributions made with respect to a share of Common Stock during the period between the Award Date and the Vesting Date or
vesting event under Section 2(c) or (d) above. The Grantee shall have no rights of a shareholder with respect to Restricted Stock
Units until and unless shares of Common Stock are transferred to the Grantee.
5. Settlement and Delivery of Shares. The Grantee will receive one share of Common Stock with respect to
each Restricted Stock Unit that becomes vested as of a Vesting Date or vesting event under Section 2(c) or (d) above, which shall
be delivered to the Grantee as soon as administratively practicable, but not later than sixty (60) days following the date the
Restricted Stock Unit becomes vested. The Company shall not be obligated to deliver any shares
4 Officer RSU Award_ Jan 2024
of Common Stock if counsel to the Company determines that such sale or delivery would violate any applicable law or any rule
or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any national
securities exchange or inter-dealer quotation system upon which the Common Stock is listed or quoted. In no event shall the
Company be obligated to take any affirmative action in order to cause the delivery of shares of Common Stock to comply with
any such law, rule, regulation or agreement.
notice or other communication to the Company with respect to this Award shall be in writing and shall be delivered:
6. Notices and Disclosure. Unless the Company notifies the Grantee in writing of a different procedure, any
(a) by registered or certified United States mail, postage prepaid, to Insperity, Inc., Attn: General Counsel, 19001
Crescent Springs Drive, Kingwood V (C5.10.60), Kingwood, Texas 77339;
(b) by hand delivery or otherwise to Insperity, Inc., Attn: General Counsel, 19001 Crescent Springs Drive,
Kingwood V (C5.10.60), Kingwood, Texas 77339; or
(c) by email to the Company’s General Counsel or his delegate.
Notwithstanding the foregoing, in the event that the address of the Company is changed, notices shall instead be
made pursuant to the foregoing provisions at the Company’s then current address.
Any notices provided for in this Agreement or in the Plan shall be given in writing and shall be deemed effectively
delivered or given upon receipt or, in the case of notices delivered by the Company to the Grantee, five days (5) after deposit in
the United States mail, postage prepaid, addressed to the Grantee at the address specified at the end of this Agreement or at such
other address as the Grantee hereafter designates by written notice to the Company.
The foregoing notwithstanding, the Grantee agrees that the Company may deliver by email all documents relating
to the Plan or this Award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and
all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports
and proxy statements). The Grantee also agrees that the Company may deliver these documents by posting them on a web site
maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a
web site, such posting is deemed to notify the Grantee.
7. No Transfer or Assignment of Award. Except as otherwise permitted by the Committee, the Grantee’s rights
under the Plan and this Agreement are personal; no assignment or transfer of the Grantee’s rights under and interest in this Award
may be made by the Grantee other than by will or by the laws of descent and distribution or by a qualified domestic relations
order, and this Award is payable during his lifetime only to the Grantee, or in the case of a Grantee who is mentally incapacitated,
this Award shall be payable to his guardian or legal representative.
8. Payment of Par Value. In the event that the Company does not settle the Award from the Company’s treasury
shares or in consideration of the Grantee’s past service, the Company’s obligation to deliver the shares of Common Stock to
Grantee upon the vesting of Restricted Stock Units shall be subject to the payment in full of the requisite par value per share
5 Officer RSU Award_ Jan 2024
of the shares of Common Stock prior to such issuance (collectively, the “Par Value”). The Grantee approves and authorizes the
Company to deduct the Par Value of the shares of Common Stock from the Grantee’s payroll from the Company or its affiliates.
If the Company is unable to or otherwise does not make such payroll deduction, Grantee acknowledges and agrees that he shall
be responsible for the payment of any and all federal, state and local taxes on such income if the Company pays the Par Value on
behalf of Grantee.
9. Withholding. The Company’s obligation to deliver shares of Common Stock to the Grantee upon the vesting
of Restricted Stock Units shall be subject to the satisfaction of all applicable federal, state and local income and employment tax
withholding requirements (the “Required Withholding”). The Company shall withhold from the Common Stock that would
otherwise have been delivered to the Grantee the number of shares necessary to satisfy the Grantee’s Required Withholding, and
deliver the remaining shares of Common Stock to the Grantee, unless the Grantee has made arrangements with the Company for
the Grantee to deliver to the Company cash, a check or other available funds for the full amount of the Required Withholding by
5:00 p.m. Central Standard Time on the date the Restricted Stock Units become vested. The amount of the Required Withholding
and the number of shares of Common Stock to be withheld by the Company, if applicable, to satisfy the Grantee’s Required
Withholding, shall be based on the Fair Market Value of the shares of Common Stock on the date prior to the applicable date of
vesting and shall be limited to the withholding amount calculated using the minimum statutory withholding rates or; in
accordance with any policy adopted by the Company, such other applicable withholding rates not in excess of the maximum
statutory rates in effect for the applicable jurisdiction.
10. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the
Grantee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and
legatees), except that the Grantee may not assign any rights or obligations under this Agreement except to the extent and in the
manner expressly permitted herein.
11. Right to Employment or Service. The granting of this Award shall not impose upon the Company any
obligation to maintain Grantee as an Employee and shall not diminish the power of the Company to terminate Grantee's
Employment at any time. The Company and its Subsidiaries reserve the right to terminate a Grantee’s Employment at any time,
with or without cause.
12. Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall
not affect any of the other terms, provisions, covenants, or conditions of this Agreement, each of which shall be binding and
enforceable.
13. Governing Law. This Agreement, to the extent not otherwise governed by mandatory provisions of the
Code or the securities laws of the United States, shall be governed by, construed, and enforced in accordance with the laws of the
State of Texas.
14. Section 409A. It is the intent of the Company and the Grantee that this Award comply with or be exempt
from the requirements of Section 409A and the provisions of this Agreement will be administered, interpreted and construed
accordingly. To the extent this Award constitutes “deferred compensation” under Section 409A, (a) the time of settlement of this
Award specified in Section 5 is a specified time within the meaning of Treasury Regulation
6 Officer RSU Award_ Jan 2024
§ 1.409A-3(i)(1), (b) if a Waiver and Release Agreement is due during the sixty (60) day settlement period under Section 5 and
such period begins in one taxable year and ends in another taxable year, any settlement under Section 5 shall not be made until
the beginning of the second taxable year, and (c) if the Grantee is a “specified employee” within the meaning of Section 409A on
the date of his or her “separation from service” within the meaning of Section 409A, any payments of deferred compensation
hereunder shall be made on the first to occur of (x) the date that is six (6) months after the date of the Grantee’s separation from
service, (y) the date of the Grantee’s death, or (z) such other date as complies with the requirements of Section 409A. For
purposes of this Agreement, “termination of Employment” (and similar phrases) shall mean a “separation from service” within
the meaning of Treasury Regulation 1.409A-1(h).
15. Recoupment Policy and Clawback Provision. Any amounts granted or paid under this Agreement may be
subject to the Insperity, Inc. Incentive Compensation Recoupment Policy, the Policy for the Recovery of Erroneously Awarded
Compensation, the Qualified Retirement Policy, or other applicable recoupment or clawback policy of the Company in effect
from time to time.
16. Restrictive Covenants. Grantee’s right to receive settlement of the Restricted Stock Units shall be further
conditioned upon his or her compliance with the provisions of this Section 16. In the event Grantee fails to comply with any of
the provisions of this Section 16, Grantee shall repay to the Company any prior settlement of Restricted Stock Units subject to
this Agreement and will forfeit any unvested Restricted Stock Units covered by this Agreement. For purposes of this Section 16,
the term “Company” means the Company and its Subsidiaries.
(a) Definitions. As used in this Section 16, the following terms shall have the following meanings:
(1) “Non-Solicit Period” means the period during which Grantee is employed by the Company
and extending until twenty-four (24) months following Grantee’s termination of Employment.
(2) “Proprietary Information” includes all confidential or proprietary scientific or technical
information, data, formulas and related concepts, business plans (both current and under development),
client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary
business information relating to the business of the Company, whether in written or electronic form of
writings, correspondence, notes, drafts, records, maps, invoices, technical and business logs, policies,
computer programs, disks or otherwise. Proprietary Information does not include information that is or
becomes publicly known through lawful means.
(b) Confidential Treatment. Grantee acknowledges and agrees that he or she has acquired, and will in the
future acquire as a result of his or her Employment or otherwise, Proprietary Information of the Company which is
of a confidential or trade secret nature, and all of which has a great value to the Company and is a substantial basis
and foundation upon which the Company’s business is predicated. Accordingly, other than in the legitimate
performance of Grantee’s job duties, Grantee agrees:
(1) to regard and preserve as confidential at all times all Proprietary Information;
7 Officer RSU Award_ Jan 2024
(2) to refrain from publishing or disclosing any part of the Proprietary Information and from
using, copying or duplicating it in any way by any means whatsoever; and
(3) not to use on Grantee’s own behalf or on behalf of any third party or to disclose the
Proprietary Information to any person or entity without the prior written consent of the Company.
(c) Property of the Company. Grantee acknowledges that all Proprietary Information and other property
of the Company which Grantee accumulates during Grantee’s Employment are the exclusive property of the
Company. Upon the termination of Grantee’s Employment, or at any time upon the Company’s request, Grantee
shall surrender and deliver to the Company (and not keep, recreate or furnish to any third party) any and all work
papers, reports, manuals, documents and the like (including all originals and copies thereof) in Grantee’s
possession which contain Proprietary Information relating to the business, prospects or plans of the Company.
Further, Grantee agrees to search for and delete all Company information, including Proprietary Information, from
his or her computer, smartphone, tablet, or any other personal electronic storage devices, other than payroll
information or other financial information that Grantee may need for his or her tax filings, and, upon request,
certify to the Company that Grantee has completed this search and deletion process.
(d) Cooperation. Grantee agrees that, following any termination of his or her Employment, Grantee will
not disclose or cause to be disclosed any Proprietary Information, unless (in any such case) required by court
order. Pursuant to the Defend Trade Secrets Act of 2016, Grantee shall not be held criminally or civilly liable
under any Federal or state trade secret law for the disclosure of any Proprietary Information that (i) is made (A) in
confidence to a Federal, state or local government official, either directly or indirectly, or to an attorney and (B)
solely for the purpose of reporting or investigating a suspected violation of law or (ii) is made in a complaint or
other document filed in a lawsuit or other proceeding, if such filing is made under seal. The Company may seek
the assistance, cooperation or testimony of Grantee following any such termination in connection with any
investigation, litigation or proceeding arising out of matters within the knowledge of Grantee and related to his or
her Employment, and in such instance, Grantee shall provide such assistance, cooperation or testimony and the
Company shall pay Grantee’s reasonable costs and expenses in connection therewith.
(e) Non-Solicitation.
(1) Grantee and the Company agree to the non-solicitation provisions of this Section 16(e): (i) in
consideration for the Proprietary Information provided by the Company to Grantee; and (ii) to protect the
Proprietary Information of the Company disclosed or entrusted to Grantee by the Company or created or
developed by Grantee for the Company, the business goodwill of the Company developed through the
efforts of Grantee and the business opportunities disclosed or entrusted to Grantee by the Company.
(2) Grantee expressly covenants and agrees that, during the Non-Solicit Period, Grantee will not:
(i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person
who
8 Officer RSU Award_ Jan 2024
is an officer or employee of the Company; or (ii) canvass, solicit, approach or entice away or cause to be
canvassed, solicited, approached or enticed away from the Company any person who or which is or was a
customer of the Company, during the prior two years of Grantee’s Employment, and either (x) about which
Grantee received Proprietary Information or (y) with which Grantee had contact or dealings on behalf of
the Company.
(3) Grantee expressly recognizes that he or she is a key employee and an important member of
management who will be provided with access to Proprietary Information and trade secrets as part of
Grantee’s Employment and that the restrictive covenants set forth in this Section 16 are reasonable and
necessary in light of Grantee’s position and access to the Proprietary Information.
(f) Relief. Grantee and the Company agree and acknowledge that the limitations as to time and scope of
activity to be restrained as set forth in this Section 16 are reasonable and do not impose any greater restraint than
is necessary to protect the legitimate business interests of the Company. Grantee and the Company also
acknowledge that money damages would not be sufficient remedy for any breach of this Section 16 by Grantee,
and the Company shall be entitled to enforce the provisions of this Section 16 by terminating any unvested
Restricted Stock Units, taking action to recoup the value of any Restricted Stock Units already settled and paid to
Grantee, and to specific performance and injunctive relief as remedies for such breach or any threatened breach.
Such remedies shall not be deemed the exclusive remedies for a breach of this Section 16 but shall be in addition
to all remedies available at law or in equity, including the recovery of damages from Grantee and Grantee’s agents.
However, if it is determined that Grantee has not committed a breach of this Section 16, then the Company shall
resume vesting of the Restricted Stock Units due under this Agreement and pay to Grantee all Restricted Stock
Units that would have vested but had been suspended pending such determination.
(g) Reformation. The Company and Grantee agree that the foregoing restrictions are reasonable under the
circumstances and that any breach of the covenants contained in this Section 16 would cause irreparable injury to
the Company. Grantee expressly represents that enforcement of the restrictive covenants set forth in this Section
16 will not impose an undue hardship upon Grantee or any person or entity affiliated with Grantee. Further,
Grantee acknowledges that Grantee’s skills are such that Grantee can be gainfully employed and that the
restrictive covenants will not prevent Grantee from earning a living. Nevertheless, if any of the aforesaid
restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to time, or
otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making
such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.
(h) Protected Disclosures. Notwithstanding any provision to the contrary in this Agreement, nothing in
this Agreement prohibits Grantee from reporting possible violations of law or regulation to any governmental
agency or entity, including the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the
U.S. Congress, and any agency Inspector General, or making other disclosures that are protected under the
whistleblower provisions of federal law or regulation. Nothing in this Agreement limits Grantee’s ability to
9 Officer RSU Award_ Jan 2024
communicate with any government agencies or otherwise participate in any investigation or proceeding that may
be conducted by any government agency, including providing documents or other information, without notice to
the Company. Additionally, Grantee and the Company acknowledge and agree that Grantee does not need the prior
authorization of the Company to make any such reports or disclosures and Grantee is not required to notify the
Company or any of its affiliates that Grantee has made such reports or disclosures.
(i) Survivability. The provisions of this Section 16 shall survive any termination of the Agreement and
settlement of Restricted Stock Units, and shall remain applicable to Grantee.
17. Entire Agreement; Binding Effect. This Agreement shall cover all shares of Common Stock acquired by
the Grantee pursuant to this Agreement, including any community and/or separate property interest owned by the Grantee’s
spouse in said shares. All terms, conditions and limitations on transferability imposed under this Agreement upon shares acquired
by the Grantee shall apply to any interest of the Grantee’s spouse in such shares. This Agreement and the Plan constitute the
entire understanding between the parties regarding this Award, and supersedes any and all prior written or oral agreements
between the parties with respect to the subject matter hereof. There are no representations, agreements, arrangements, or
understanding, either written or oral, between or among the parties with respect to the subject matter hereof which are not set
forth in this Agreement. This Agreement is binding upon the Grantee’s heirs, executors and personal representatives with respect
to all provisions hereof. Except as set forth herein, this Agreement cannot be modified, altered or amended, to the detriment of
the Grantee, except by an agreement, in writing, signed by both a duly authorized executive officer of the Company and the
Grantee.
INSPERITY, INC.
Award Date: By:
Name:
Title:
10 Officer RSU Award_ Jan 2024
Acknowledgement and Acceptance by the Grantee
I, _________________________, the undersigned Grantee, hereby acknowledge that I have received copies of the
Insperity, Inc. Incentive Plan, as amended and restated effective May 22, 2023 (the “Plan”) and corresponding Prospectus for the
Plan, and that I will consult with and rely upon only my own tax, legal and financial advisors regarding the consequences and
risks of the Award. I hereby agree to and accept the foregoing Restricted Stock Unit Agreement, subject to the terms and
provisions of the Plan and administrative interpretations thereof referred to above.
GRANTEE:
Date:
11 Officer RSU Award_ Jan 2024
INSPERITY, INC. INCENTIVE PLAN
(as Amended and Restated Effective May 22, 2023)
RESTRICTED STOCK UNIT AGREEMENT
Exhibit 10.6
This Restricted Stock Unit Agreement (this “Agreement”) is between Insperity, Inc. (the “Company”) and
(the “Grantee”), an employee of the Company or one of its Subsidiaries, regarding an award (this “Award”) of
restricted stock units, each representing one share of Common Stock (as defined in the Insperity, Inc. Incentive Plan, as amended
and restated effective May 22, 2023 (the “Plan”), such units comprising this Award referred to herein as “Restricted Stock
Units”) awarded to the Grantee on (the “Award Date”), such number of Restricted Stock Units subject to adjustment as
provided in the Plan, and further subject to the following terms and conditions:
1. Relationship to Plan. This Award is subject to all of the terms, conditions and provisions of, and
administrative interpretations under, the Plan, if any, which have been adopted by the Committee thereunder. Any question of
interpretation arising under this Agreement shall be determined by the Committee and its determinations shall be final and
conclusive upon all parties in interest. Except as defined herein, capitalized terms shall have the same meanings ascribed to them
under the Plan.
2. Vesting Schedule.
(a) Subject to Sections 2(b), 2(c), 2(d) and 3 below, ( ) of the Restricted Stock Units granted under this
Award shall become vested on each annual anniversary of the Award Date (each a “Vesting Date”), subject to the
Grantee’s continuous Employment from the Award Date until (and as of) each Vesting Date.
(b) Unvested Restricted Stock Units subject to this Award shall not partially or fully vest or otherwise accelerate
vesting solely as the result of a Change in Control.
(c) All unvested Restricted Stock Units subject to this Award shall vest, irrespective of the limitations set forth
in subparagraph (a) above, provided that the Grantee has been in continuous Employment since the Award Date, upon the
earliest occurrence of:
(i) a Qualifying Termination;
(ii) a Non-Assumption; or
(iii) the Grantee’s termination of Employment by reason of death or Disability.
(d) If the Grantee’s Employment terminates due to the Grantee’s Retirement, the Grantee will continue to vest in
the remaining unvested Restricted Stock Units, if any, on the applicable annual Vesting Date in accordance with Section
2(a) or accelerated vesting under Section 2(c)(ii) or upon the Grantee’s death as if the Grantee had remained in continuous
Employment through the applicable annual Vesting Date or vesting event, respectively.
L1819_RSU Award_ Jan 2024
(e) For purposes of this Agreement:
(i) “Cause” shall be determined solely by the Compensation Committee and means a termination of
Grantee’s Employment for:
a. Gross negligence or willful misconduct in the performance of the Grantee’s duties;
b. Conviction or plea of nolo contendre for a felony or any crime involving moral turpitude; or
c. Committing an act of fraud or deceit intended to result in personal and unauthorized
enrichment of Grantee at the Company’s expense.
(ii) “Disability” means that the Grantee has a disability such that he has been determined to be eligible
for benefits under a long-term disability plan sponsored by the Company or a Subsidiary or, if the Grantee is not
covered by such a plan, a physical or mental impairment (a) which causes a Grantee to be unable to perform the
normal duties for an employer as determined by the Committee in its sole discretion; and (b) which is expected
either to result in death (or blindness) or to last for a continuous period of at least twelve (12) months. The
Committee may require that the Grantee be examined by a physician or physicians selected by the Committee. The
Grantee’s termination of Employment by reason of Disability under Section 2(c)(iii) above is subject to execution
and delivery to the Company of an effective Waiver and Release Agreement.
(iii) “Employment” means employment with the Company, a successor following a Change in Control or
a Subsidiary other than a Subsidiary that is a licensed professional employer organization.
(iv) A “Non-Assumption” shall be deemed to occur on the date of the consummation of an event that
constitutes a Change in Control as defined solely under the definition of Change in Control in section 2 of the Plan
(provided such Change in Control constitutes a “change in control event” within the meaning of Treasury
Regulation Section 1.409A-3(i)(5)), where in connection with such Change in Control, the successor entity, or a
parent of the successor entity, has not agreed to assume, replace or substitute this Award with another award of
equivalent or greater value, and on substantially similar or more favorable terms.
(v) “Qualifying Termination” means a termination of the Grantee’s Employment within twelve (12)
months following a Change in Control for one of the following reasons:
a. A termination initiated by the Grantee due to items (1) through (3) below referred to herein as
“Good Reason” that the Grantee has not consented to in writing:
(1) A change in the geographic location at which Grantee must perform services, which
shall mean requiring
2
L1819_RSU Award_ Jan 2024
Grantee to be permanently based more than 50 miles from the Grantee’s principal Company
location;
(2) A material diminution in Grantee’s base salary other than as part of an across-the-
board reduction applicable to employees at the same salary grade or level of less than ten
(10) percent; or
(3) A material diminution in Grantee’s bonus opportunity, incentive compensation or
perquisites, if inconsistent with other employees at Grantee’s salary grade or level.
b. An involuntary termination by the Company or Subsidiary or a successor to the Company other
than for Cause.
For purposes of this Agreement, the Grantee’s termination of Employment will be considered to be a Qualifying
Termination for Good Reason if the Grantee has provided written notice to the Company of the condition the
Grantee claims constitutes Good Reason within ninety (90) days of the initial existence of such condition, the
condition specified in the notice remains uncorrected for thirty (30) days after receipt of the notice by the
Company, and the Grantee actually terminates Employment after the thirty (30) day correction period and before
the expiration of the time limit required of a Qualifying Termination. Any vesting by reason of a Qualifying
Termination is subject to execution and delivery to the Company of an effective Waiver and Release Agreement.
(vi) “Retirement” means the Grantee’s voluntary termination of Employment other than for Good
Reason (and other than an involuntary termination by the Company for Cause) satisfying the Qualified Retirement
Policy and all of the following conditions:
a. the Grantee submits a voluntary request for retirement that satisfies applicable notice
requirements and is accepted by the Company or Subsidiary;
b. the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-
two (62) years of age and has at least fifteen (15) years of continuous Employment as of the
termination date;
c. the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant
Date; and
d. the Grantee executes an effective Waiver and Release Agreement.
(vii) “Waiver and Release Agreement” means the legal document in a form approved by the Company,
in which a Grantee, in exchange for the benefits specified in Section 2(c) or 2(d), agrees to be subject to the
repayment conditions of the Waiver and Release Agreement and releases the Company and other related
3
L1819_RSU Award_ Jan 2024
parties, from liability and damages arising from or in connection with the Grantee’s Qualifying Termination,
Retirement or termination of Employment by reason of Disability. In order for a Waiver and Release Agreement to
be effective, the Waiver and Release Agreement must be:
a. Executed and returned by the Grantee (or Grantee’s legal representative) to the Company, after
termination of the Grantee’s Employment, and within the period provided in the Waiver and
Release Agreement,
b. Unrevoked by the Grantee (and Grantee’s legal representative) during the seven (7) day period
following the date of execution (or if longer, such other period required under applicable federal
or state law), and
c. Effective and irrevocable no later than the sixtieth (60 ) day after the date of a Grantee’s
th
termination of Employment.
3. Forfeiture of Award. Except as provided in another written agreement between the Grantee and the
Company, if the Grantee’s Employment terminates other than by reason of death, Disability, Retirement or Qualifying
Termination pursuant to the provisions of Section 2, all unvested Restricted Stock Units as of the Employment termination date
shall be forfeited immediately after termination of employment. Except in the case of a Qualifying Termination, the Company has
sole discretionary authority to determine when a Grantee’s Employment terminates for all purposes under this Agreement and the
Plan. If a Grantee’s Employment terminates due to Retirement, Disability or Qualifying Termination, all unvested Restricted
Stock Units as of the Grantee’s termination date shall expire on the date that Grantee fails to deliver a timely, effective and
irrevocable Waiver and Release Agreement.
4. Dividend Equivalents; No Shareholder Rights. During the period of time between the Award Date and the
earlier of the settlement date or forfeiture date of the Restricted Stock Units, the Restricted Stock Units shall be evidenced by
book entry registration. With respect to each Restricted Stock Unit that becomes vested, at the same time such Award is settled
pursuant to Section 5, the Grantee is entitled to receive a stock dividend equivalent payment equal to all dividends and other
distributions made with respect to a share of Common Stock during the period between the Award Date and the Vesting Date or
vesting event under Section 2(c) or (d) above. The Grantee shall have no rights of a shareholder with respect to Restricted Stock
Units until and unless shares of Common Stock are transferred to the Grantee.
5. Settlement and Delivery of Shares. The Grantee will receive one share of Common Stock with respect to
each Restricted Stock Unit that becomes vested as of a Vesting Date or vesting event under Section 2(c) or (d) above, which shall
be delivered to the Grantee as soon as administratively practicable, but not later than sixty (60) days following the date the
Restricted Stock Unit becomes vested. The Company shall not be obligated to deliver any shares of Common Stock if counsel to
the Company determines that such sale or delivery would violate any applicable law or any rule or regulation of any
governmental authority or any rule or regulation of, or agreement of the Company with, any national securities exchange or inter-
dealer quotation system upon which the Common Stock is listed or quoted. In no event shall the Company be obligated to take
any affirmative action in order to cause the delivery of shares of Common Stock to comply with any such law, rule, regulation or
agreement.
4
L1819_RSU Award_ Jan 2024
notice or other communication to the Company with respect to this Award shall be in writing and shall be delivered:
6. Notices and Disclosure. Unless the Company notifies the Grantee in writing of a different procedure, any
(a) by registered or certified United States mail, postage prepaid, to Insperity, Inc., Attn: General Counsel, 19001
Crescent Springs Drive, Kingwood V (C5.10.60), Kingwood, Texas 77339;
(b) by hand delivery or otherwise to Insperity, Inc., Attn: General Counsel, 19001 Crescent Springs Drive,
Kingwood V (C5.10.60), Kingwood, Texas 77339; or
(c) by email to the Company’s General Counsel or his delegate.
Notwithstanding the foregoing, in the event that the address of the Company is changed, notices shall instead be
made pursuant to the foregoing provisions at the Company’s then current address.
Any notices provided for in this Agreement or in the Plan shall be given in writing and shall be deemed effectively
delivered or given upon receipt or, in the case of notices delivered by the Company to the Grantee, five days (5) after deposit in
the United States mail, postage prepaid, addressed to the Grantee at the address specified at the end of this Agreement or at such
other address as the Grantee hereafter designates by written notice to the Company.
The foregoing notwithstanding, the Grantee agrees that the Company may deliver by email all documents relating
to the Plan or this Award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and
all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports
and proxy statements). The Grantee also agrees that the Company may deliver these documents by posting them on a web site
maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a
web site, such posting is deemed to notify the Grantee.
7. No Transfer or Assignment of Award. Except as otherwise permitted by the Committee, the Grantee’s rights
under the Plan and this Agreement are personal; no assignment or transfer of the Grantee’s rights under and interest in this Award
may be made by the Grantee other than by will or by the laws of descent and distribution or by a qualified domestic relations
order, and this Award is payable during his lifetime only to the Grantee, or in the case of a Grantee who is mentally incapacitated,
this Award shall be payable to his guardian or legal representative.
8. Payment of Par Value. In the event that the Company does not settle the Award from the Company’s treasury
shares or in consideration of the Grantee’s past service, the Company’s obligation to deliver the shares of Common Stock to
Grantee upon the vesting of Restricted Stock Units shall be subject to the payment in full of the requisite par value per share of
the shares of Common Stock prior to such issuance (collectively, the “Par Value”). The Grantee approves and authorizes the
Company to deduct the Par Value of the shares of Common Stock from the Grantee’s payroll from the Company or its affiliates.
If the Company is unable to or otherwise does not make such payroll deduction, Grantee acknowledges and agrees that he shall
be responsible for the payment of any and all federal, state and local taxes on such income if the Company pays the Par Value on
behalf of Grantee.
5
L1819_RSU Award_ Jan 2024
9. Withholding. The Company’s obligation to deliver shares of Common Stock to the Grantee upon the vesting
of Restricted Stock Units shall be subject to the satisfaction of all applicable federal, state and local income and employment tax
withholding requirements (the “Required Withholding”). The Company shall withhold from the Common Stock that would
otherwise have been delivered to the Grantee the number of shares necessary to satisfy the Grantee’s Required Withholding, and
deliver the remaining shares of Common Stock to the Grantee, unless the Grantee has made arrangements with the Company for
the Grantee to deliver to the Company cash, a check or other available funds for the full amount of the Required Withholding by
5:00 p.m. Central Standard Time on the date the Restricted Stock Units become vested. The amount of the Required Withholding
and the number of shares of Common Stock to be withheld by the Company, if applicable, to satisfy the Grantee’s Required
Withholding, shall be based on the Fair Market Value of the shares of Common Stock on the date prior to the applicable date of
vesting and shall be limited to the withholding amount calculated using the minimum statutory withholding rates or; in
accordance with any policy adopted by the Company, such other applicable withholding rates not in excess of the maximum
statutory rates in effect for the applicable jurisdiction.
10. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the
Grantee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and
legatees), except that the Grantee may not assign any rights or obligations under this Agreement except to the extent and in the
manner expressly permitted herein.
11. Right to Employment or Service. The granting of this Award shall not impose upon the Company any
obligation to maintain the Grantee as an Employee and shall not diminish the power of the Company to terminate the Grantee's
Employment at any time. The Company and its Subsidiaries reserve the right to terminate a Grantee’s Employment at any time,
with or without cause.
12. Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall
not affect any of the other terms, provisions, covenants, or conditions of this Agreement, each of which shall be binding and
enforceable.
13. Governing Law. This Agreement, to the extent not otherwise governed by mandatory provisions of the
Code or the securities laws of the United States, shall be governed by, construed, and enforced in accordance with the laws of the
State of Texas.
14. Section 409A. It is the intent of the Company and the Grantee that this Award comply with or be exempt
from the requirements of Section 409A and the provisions of this Agreement will be administered, interpreted and construed
accordingly. To the extent this Award constitutes “deferred compensation” under Section 409A, (a) the time of settlement of this
Award specified in Section 5 is a specified time within the meaning of Treasury Regulation § 1.409A-3(i)(1), (b) if a Waiver and
Release Agreement is due during the sixty (60) day settlement period under Section 5 and such period begins in one taxable year
and ends in another taxable year, any settlement under Section 5 shall not be made until the beginning of the second taxable year,
and (c) if the Grantee is a “specified employee” within the meaning of Section 409A on the date of his or her “separation from
service” within the meaning of Section 409A, any payments of deferred compensation hereunder shall be made on the first to
occur of (x) the date that is six (6) months after the date of the Grantee’s separation from service, (y) the date of
6
L1819_RSU Award_ Jan 2024
the Grantee’s death, or (z) such other date as complies with the requirements of Section 409A. For purposes of this Agreement,
“termination of Employment” (and similar phrases) shall mean a “separation from service” within the meaning of Treasury
Regulation 1.409A-1(h).
15. Recoupment Policy and Clawback Provision. Any amounts granted or paid under this Agreement may be
subject to the Insperity, Inc. Incentive Compensation Recoupment Policy, the Policy for the Recovery of Erroneously Awarded
Compensation, the Qualified Retirement Policy, or other applicable recoupment or clawback policy of the Company in effect
from time to time.
16. Restrictive Covenants. Grantee’s right to receive settlement of the Restricted Stock Units shall be further
conditioned upon his or her compliance with the provisions of this Section 16. In the event Grantee fails to comply with any of
the provisions of this Section 16, Grantee shall repay to the Company any prior settlement of Restricted Stock Units subject to
this Agreement and will forfeit any unvested Restricted Stock Units covered by this Agreement. For purposes of this Section 16,
the term “Company” means the Company and its Subsidiaries.
(a) Definitions. As used in this Section 16, the following terms shall have the following meanings:
(1) “Non-Solicit Period” means the period during which Grantee is employed by the Company
and extending until twelve (12) months following Grantee’s termination of Employment.
(2) “Proprietary Information” includes all confidential or proprietary scientific or technical
information, data, formulas and related concepts, business plans (both current and under development),
client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary
business information relating to the business of the Company, whether in written or electronic form of
writings, correspondence, notes, drafts, records, maps, invoices, technical and business logs, policies,
computer programs, disks or otherwise. Proprietary Information does not include information that is or
becomes publicly known through lawful means.
(b) Confidential Treatment. Grantee acknowledges and agrees that he or she has acquired, and will in the
future acquire as a result of his or her Employment or otherwise, Proprietary Information of the Company which is
of a confidential or trade secret nature, and all of which has a great value to the Company and is a substantial basis
and foundation upon which the Company’s business is predicated. Accordingly, other than in the legitimate
performance of Grantee’s job duties, Grantee agrees:
(1) to regard and preserve as confidential at all times all Proprietary Information;
(2) to refrain from publishing or disclosing any part of the Proprietary Information and from
using, copying or duplicating it in any way by any means whatsoever; and
(3) not to use on Grantee’s own behalf or on behalf of any third party or to disclose the
Proprietary Information to any person or entity without the prior written consent of the Company.
7
L1819_RSU Award_ Jan 2024
(c) Property of the Company. Grantee acknowledges that all Proprietary Information and other property
of the Company which Grantee accumulates during Grantee’s Employment are the exclusive property of the
Company. Upon the termination of Grantee’s Employment, or at any time upon the Company’s request, Grantee
shall surrender and deliver to the Company (and not keep, recreate or furnish to any third party) any and all work
papers, reports, manuals, documents and the like (including all originals and copies thereof) in Grantee’s
possession which contain Proprietary Information relating to the business, prospects or plans of the Company.
Further, Grantee agrees to search for and delete all Company information, including Proprietary Information, from
his or her computer, smartphone, tablet, or any other personal electronic storage devices, other than payroll
information or other financial information that Grantee may need for his or her tax filings, and, upon request,
certify to the Company that Grantee has completed this search and deletion process.
(d) Cooperation. Grantee agrees that, following any termination of his or her Employment, Grantee will
not disclose or cause to be disclosed any Proprietary Information, unless (in any such case) required by court
order. Pursuant to the Defend Trade Secrets Act of 2016, Grantee shall not be held criminally or civilly liable
under any Federal or state trade secret law for the disclosure of any Proprietary Information that (i) is made (A) in
confidence to a Federal, state or local government official, either directly or indirectly, or to an attorney and (B)
solely for the purpose of reporting or investigating a suspected violation of law or (ii) is made in a complaint or
other document filed in a lawsuit or other proceeding, if such filing is made under seal. The Company may seek
the assistance, cooperation or testimony of Grantee following any such termination in connection with any
investigation, litigation or proceeding arising out of matters within the knowledge of Grantee and related to his or
her Employment, and in such instance, Grantee shall provide such assistance, cooperation or testimony and the
Company shall pay Grantee’s reasonable costs and expenses in connection therewith.
(e) Non-Solicitation.
(1) Grantee and the Company agree to the non-solicitation provisions of this Section 16(e): (i) in
consideration for the Proprietary Information provided by the Company to Grantee; and (ii) to protect the
Proprietary Information of the Company disclosed or entrusted to Grantee by the Company or created or
developed by Grantee for the Company, the business goodwill of the Company developed through the
efforts of Grantee and the business opportunities disclosed or entrusted to Grantee by the Company.
(2) Grantee expressly covenants and agrees that, during the Non-Solicit Period, Grantee will not:
(i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person
who is an officer or employee of the Company; or (ii) canvass, solicit, approach or entice away or cause to
be canvassed, solicited, approached or enticed away from the Company any person who or which is or was
a customer of the Company, during the prior two years of Grantee’s Employment, and either (x) about
which Grantee received Proprietary Information or (y) with which Grantee had contact or dealings on
behalf of the Company.
8
L1819_RSU Award_ Jan 2024
(3) Grantee expressly recognizes that he or she is a key employee and an important member of
management who will be provided with access to Proprietary Information and trade secrets as part of
Grantee’s Employment and that the restrictive covenants set forth in this Section 16 are reasonable and
necessary in light of Grantee’s position and access to the Proprietary Information.
(f) Relief. Grantee and the Company agree and acknowledge that the limitations as to time and scope of
activity to be restrained as set forth in this Section 16 are reasonable and do not impose any greater restraint than
is necessary to protect the legitimate business interests of the Company. Grantee and the Company also
acknowledge that money damages would not be sufficient remedy for any breach of this Section 16 by Grantee,
and the Company shall be entitled to enforce the provisions of this Section 16 by terminating any unvested
Restricted Stock Units, taking action to recoup the value of any Restricted Stock Units already settled and paid to
Grantee, and to specific performance and injunctive relief as remedies for such breach or any threatened breach.
Such remedies shall not be deemed the exclusive remedies for a breach of this Section 16 but shall be in addition
to all remedies available at law or in equity, including the recovery of damages from Grantee and Grantee’s agents.
However, if it is determined that Grantee has not committed a breach of this Section 16, then the Company shall
resume vesting of the Restricted Stock Units due under this Agreement and pay to Grantee all Restricted Stock
Units that would have vested but had been suspended pending such determination.
(g) Reformation. The Company and Grantee agree that the foregoing restrictions are reasonable under the
circumstances and that any breach of the covenants contained in this Section 16 would cause irreparable injury to
the Company. Grantee expressly represents that enforcement of the restrictive covenants set forth in this Section
16 will not impose an undue hardship upon Grantee or any person or entity affiliated with Grantee. Further,
Grantee acknowledges that Grantee’s skills are such that Grantee can be gainfully employed and that the
restrictive covenants will not prevent Grantee from earning a living. Nevertheless, if any of the aforesaid
restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to time, or
otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making
such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.
(h) Protected Disclosures. Notwithstanding any provision to the contrary in this Agreement, nothing in
this Agreement prohibits Grantee from reporting possible violations of law or regulation to any governmental
agency or entity, including the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the
U.S. Congress, and any agency Inspector General, or making other disclosures that are protected under the
whistleblower provisions of federal law or regulation. Nothing in this Agreement limits Grantee’s ability to
communicate with any government agencies or otherwise participate in any investigation or proceeding that may
be conducted by any government agency, including providing documents or other information, without notice to
the Company. Additionally, Grantee and the Company acknowledge and agree that Grantee does not need the prior
authorization of the Company to make any such reports or disclosures and Grantee is not required to notify the
Company or any of its affiliates that Grantee has made such reports or disclosures.
9
L1819_RSU Award_ Jan 2024
(i) Survivability. The provisions of this Section 16 shall survive any termination of the Agreement and
settlement of Restricted Stock Units, and shall remain applicable to Grantee.
17. Entire Agreement; Binding Effect. This Agreement shall cover all shares of Common Stock acquired by
the Grantee pursuant to this Agreement, including any community and/or separate property interest owned by the Grantee’s
spouse in said shares. All terms, conditions and limitations on transferability imposed under this Agreement upon shares acquired
by the Grantee shall apply to any interest of the Grantee’s spouse in such shares. This Agreement and the Plan constitute the
entire understanding between the parties regarding this Award, and supersedes any and all prior written or oral agreements
between the parties with respect to the subject matter hereof. There are no representations, agreements, arrangements, or
understanding, either written or oral, between or among the parties with respect to the subject matter hereof which are not set
forth in this Agreement. This Agreement is binding upon the Grantee’s heirs, executors and personal representatives with respect
to all provisions hereof. Except as set forth herein, this Agreement cannot be modified, altered or amended, to the detriment of
the Grantee, except by an agreement, in writing, signed by both a duly authorized executive officer of the Company and the
Grantee.
INSPERITY, INC.
Award Date: By:
Name: Paul J. Sarvadi
Title: Chairman of the Board and
Chief Executive Officer
10
L1819_RSU Award_ Jan 2024
Acknowledgement and Acceptance by the Grantee
I, the undersigned Grantee, hereby acknowledge that I have received copies of the Insperity, Inc.
Incentive Plan, as amended and restated effective May 22, 2023 (the “Plan”) and corresponding Prospectus for the Plan, and that
I will consult with and rely upon only my own tax, legal and financial advisors regarding the consequences and risks of the
Award. I hereby agree to and accept the foregoing Restricted Stock Unit Agreement, subject to the terms and provisions of the
Plan and administrative interpretations thereof referred to above.
GRANTEE:
Date:
11
L1819_RSU Award_ Jan 2024
INSPERITY, INC. INCENTIVE PLAN
(as Amended and Restated Effective May 22, 2023)
RESTRICTED STOCK UNIT AGREEMENT
Exhibit 10.7
This Restricted Stock Unit Agreement (this “Agreement”) is between Insperity, Inc. (the “Company”) and
_______________ (the “Grantee”), an employee of the Company or one of its Subsidiaries, regarding an award (this “Award”)
of restricted stock units, each representing one share of Common Stock (as defined in the Insperity, Inc. Incentive Plan, as
amended and restated effective May 22, 2023 (the “Plan”), such units comprising this Award referred to herein as “Restricted
Stock Units”) awarded to the Grantee on ______________ (the “Award Date”), such number of Restricted Stock Units subject to
adjustment as provided in the Plan, and further subject to the following terms and conditions:
1. Relationship to Plan. This Award is subject to all of the terms, conditions and provisions of, and
administrative interpretations under, the Plan, if any, which have been adopted by the Committee thereunder. Any question of
interpretation arising under this Agreement shall be determined by the Committee and its determinations shall be final and
conclusive upon all parties in interest. Except as defined herein, capitalized terms shall have the same meanings ascribed to them
under the Plan.
2. Vesting Schedule.
(a) Subject to Sections 2(b), 2(c), 2(d) and 3 below, ___________ (____) of the Restricted Stock Units granted
under this Award shall become vested on each annual anniversary of the Award Date (each a “Vesting Date”), subject to
the Grantee’s continuous Employment from the Award Date until (and as of) each Vesting Date.
(b) Unvested Restricted Stock Units subject to this Award shall not partially or fully vest or otherwise accelerate
vesting solely as the result of a Change in Control.
(c) All unvested Restricted Stock Units subject to this Award shall vest, irrespective of the limitations set forth
in subparagraph (a) above, provided that the Grantee has been in continuous Employment since the Award Date, upon the
earliest occurrence of:
(i) an Involuntary Termination following a Change in Control;
(ii) a Non-Assumption; or
(iii) the Grantee’s termination of Employment by reason of death or Disability.
(d) If the Grantee’s Employment terminates due to the Grantee’s Retirement, the Grantee will continue to vest in
the remaining unvested Restricted Stock Units, if any, on the applicable annual Vesting Date in accordance with Section
2(a) or accelerated vesting under Section 2(c)(ii) or upon the Grantee’s death as if the Grantee had remained in continuous
Employment through the applicable annual Vesting Date or vesting event, respectively.
Employee RSU Award_ Jan 2024
(e) For purposes of this Agreement:
(i) “Cause” shall be determined by the Company’s Senior Vice President Corporate Human Resources
(or successor position) or other individual or individuals as delegated by the Company’s Chief Executive Officer
and means a termination of Grantee’s Employment for failure to satisfactorily perform the duties, responsibilities
or functions assigned or delegated to Grantee.
(ii) “Disability” means that the Grantee has a disability such that he has been determined to be eligible
for benefits under a long-term disability plan sponsored by the Company or a Subsidiary or, if the Grantee is not
covered by such a plan, a physical or mental impairment (a) which causes a Grantee to be unable to perform the
normal duties for an employer as determined by the Committee in its sole discretion; and (b) which is expected
either to result in death (or blindness) or to last for a continuous period of at least twelve (12) months. The
Committee may require that the Grantee be examined by a physician or physicians selected by the Committee. The
Grantee’s termination of Employment by reason of Disability under Section 2(c)(iii) above is subject to the
execution and delivery to the Company of an effective Waiver and Release Agreement.
(iii) “Employment” means employment with the Company, a successor following a Change in Control or
a Subsidiary other than a Subsidiary that is a licensed professional employer organization.
(iv) “Involuntary Termination” means an involuntary termination of Grantee’s Employment, other than
for Cause, that occurs on or within twelve (12) months following the date of a Change in Control, subject to the
execution and delivery to the Company of an effective Waiver and Release Agreement.
(v) A “Non-Assumption” shall be deemed to occur on the date of the consummation of an event that
constitutes a Change in Control as defined solely under the definition of Change in Control in section 2 of the Plan
(provided such Change in Control constitutes a “change in control event” within the meaning of Treasury
Regulation Section 1.409A-3(i)(5)), where in connection with such Change in Control, the successor entity, or a
parent of the successor entity, has not agreed to assume, replace or substitute this Award with another award of
equivalent or greater value, and on substantially similar or more favorable terms.
(vi) “Retirement” means the Grantee’s voluntary termination of Employment (and other than an
Involuntary Termination or termination for Cause by the Company) satisfying the Qualified Retirement Policy and
all of the following conditions:
a. the Grantee submits a voluntary request for retirement that satisfies applicable notice
requirements and is accepted by the Company or Subsidiary;
b. the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-
two (62) years of age and has at least fifteen (15) years of continuous Employment as of the
termination date;
2
Employee RSU Award_ Jan 2024
c. the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant
Date; and
d. the Grantee executes an effective Waiver and Release Agreement.
(vii) “Waiver and Release Agreement” means the legal document in a form approved by the Company,
in which a Grantee, in exchange for the benefits specified in Section 2(c) or 2(d), agrees to be subject to the
repayment conditions of the Waiver and Release Agreement and releases the Company and other related parties,
from liability and damages arising from or in connection with the Grantee’s Involuntary Termination, Retirement
or termination of Employment by reason of Disability. In order for a Waiver and Release Agreement to be
effective, the Waiver and Release Agreement must be:
(1) Executed and returned by the Grantee (or Grantee’s legal representative) to the
Company, after termination of the Grantee’s Employment, and within the period provided in
the Waiver and Release Agreement
(2) Unrevoked by the Grantee (and Grantee’s legal representative) during the seven (7)
day period following the date of execution (or if longer, such other period required under
applicable federal or state law), and
(3) Effective and irrevocable no later than the sixtieth (60 ) day after the date of a
Grantee’s termination of Employment.
th
3. Forfeiture of Award. Except as provided in another written agreement between the Grantee and the
Company, if the Grantee’s Employment terminates other than by reason of death, Disability, Retirement or Involuntary
Termination, all unvested Restricted Stock Units as of the Employment termination date shall be forfeited immediately after
termination of employment. The Company has sole discretionary authority to determine when a Grantee’s Employment
terminates for all purposes under this Agreement and the Plan. If a Grantee’s Employment terminates due to Retirement,
Disability or Involuntary Termination, all unvested Restricted Stock Units as of the Grantee’s termination date shall expire on the
date that Grantee fails to deliver a timely, effective and irrevocable Waiver and Release Agreement.
4. Dividend Equivalents; No Shareholder Rights. During the period of time between the Award Date and the
earlier of the settlement date or forfeiture date of the Restricted Stock Units, the Restricted Stock Units shall be evidenced by
book entry registration. With respect to each Restricted Stock Unit that becomes vested, at the same time such Award is settled
pursuant to Section 5, the Grantee is entitled to receive a stock dividend equivalent payment equal to all dividends and other
distributions made with respect to a share of Common Stock during the period between the Award Date and the Vesting Date or
vesting event under Section 2(c) or (d) above. The Grantee shall have no rights of a shareholder with respect to Restricted Stock
Units until and unless shares of Common Stock are transferred to the Grantee.
each Restricted Stock Unit that becomes vested as of a Vesting
5. Settlement and Delivery of Shares. The Grantee will receive one share of Common Stock with respect to
3
Employee RSU Award_ Jan 2024
Date or vesting event under Section 2(c) or (d) above, which shall be delivered to the Grantee as soon as administratively
practicable, but not later than sixty (60) days following the date the Restricted Stock Unit becomes vested. The Company shall
not be obligated to deliver any shares of Common Stock if counsel to the Company determines that such sale or delivery would
violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of
the Company with, any national securities exchange or inter-dealer quotation system upon which the Common Stock is listed or
quoted. In no event shall the Company be obligated to take any affirmative action in order to cause the delivery of shares of
Common Stock to comply with any such law, rule, regulation or agreement.
notice or other communication to the Company with respect to this Award shall be in writing and shall be delivered:
6. Notices and Disclosure. Unless the Company notifies the Grantee in writing of a different procedure, any
(a) by registered or certified United States mail, postage prepaid, to Insperity, Inc., Attn: General Counsel, 19001
Crescent Springs Drive, Kingwood V (C5.10.60), Kingwood, Texas 77339;
(b) by hand delivery or otherwise to Insperity, Inc., Attn: General Counsel, 19001 Crescent Springs Drive,
Kingwood V (C5.10.60), Kingwood, Texas 77339; or
(c) by email to the Company’s General Counsel or his delegate.
made pursuant to the foregoing provisions at the Company’s then current address.
Notwithstanding the foregoing, in the event that the address of the Company is changed, notices shall instead be
Any notices provided for in this Agreement or in the Plan shall be given in writing and shall be deemed effectively
delivered or given upon receipt or, in the case of notices delivered by the Company to the Grantee, five days (5) after deposit in
the United States mail, postage prepaid, addressed to the Grantee at the address specified at the end of this Agreement or at such
other address as the Grantee hereafter designates by written notice to the Company.
The foregoing notwithstanding, the Grantee agrees that the Company may deliver by email all documents relating
to the Plan or this Award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and
all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports
and proxy statements). The Grantee also agrees that the Company may deliver these documents by posting them on a web site
maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a
web site, such posting is deemed to notify the Grantee.
7. No Transfer or Assignment of Award. Except as otherwise permitted by the Committee, the Grantee’s rights
under the Plan and this Agreement are personal; no assignment or transfer of the Grantee’s rights under and interest in this Award
may be made by the Grantee other than by will or by the laws of descent and distribution or by a qualified domestic relations
order, and this Award is payable during his lifetime only to the Grantee, or in the case of a Grantee who is mentally incapacitated,
this Award shall be payable to his guardian or legal representative.
4
Employee RSU Award_ Jan 2024
8. Payment of Par Value. In the event that the Company does not settle the Award from the Company’s treasury
shares or in consideration of the Grantee’s past service, the Company’s obligation to deliver the shares of Common Stock to
Grantee upon the vesting of Restricted Stock Units shall be subject to the payment in full of the requisite par value per share of
the shares of Common Stock prior to such issuance (collectively, the “Par Value”). The Grantee approves and authorizes the
Company to deduct the Par Value of the shares of Common Stock from the Grantee’s payroll from the Company or its affiliates.
If the Company is unable to or otherwise does not make such payroll deduction, Grantee acknowledges and agrees that he shall
be responsible for the payment of any and all federal, state and local taxes on such income if the Company pays the Par Value on
behalf of Grantee.
9. Withholding. The Company’s obligation to deliver shares of Common Stock to the Grantee upon the vesting
of Restricted Stock Units shall be subject to the satisfaction of all applicable federal, state and local income and employment tax
withholding requirements (the “Required Withholding”). The Company shall withhold from the Common Stock that would
otherwise have been delivered to the Grantee the number of shares necessary to satisfy the Grantee’s Required Withholding, and
deliver the remaining shares of Common Stock to the Grantee, unless the Grantee has made arrangements with the Company for
the Grantee to deliver to the Company cash, a check or other available funds for the full amount of the Required Withholding by
5:00 p.m. Central Standard Time on the date the Restricted Stock Units become vested. The amount of the Required Withholding
and the number of shares of Common Stock to be withheld by the Company, if applicable, to satisfy the Grantee’s Required
Withholding, shall be based on the Fair Market Value of the shares of Common Stock on the date prior to the applicable date of
vesting and shall be limited to the withholding amount calculated using the minimum statutory withholding rates or; in
accordance with any policy adopted by the Company, such other applicable withholding rates not in excess of the maximum
statutory rates in effect for the applicable jurisdiction.
10. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the
Grantee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and
legatees), except that the Grantee may not assign any rights or obligations under this Agreement except to the extent and in the
manner expressly permitted herein.
11. Right to Employment or Service. The granting of this Award shall not impose upon the Company any
obligation to maintain the Grantee as an Employee and shall not diminish the power of the Company to terminate the Grantee’s
Employment at any time. The Company and its Subsidiaries reserve the right to terminate a Grantee’s Employment at any time,
with or without cause.
12. Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall
not affect any of the other terms, provisions, covenants, or conditions of this Agreement, each of which shall be binding and
enforceable.
13. Governing Law. This Agreement, to the extent not otherwise governed by mandatory provisions of the
Code or the securities laws of the United States, shall be governed by, construed, and enforced in accordance with the laws of the
State of Texas.
5
Employee RSU Award_ Jan 2024
14. Section 409A. It is the intent of the Company and the Grantee that this Award comply with or be exempt
from the requirements of Section 409A and the provisions of this Agreement will be administered, interpreted and construed
accordingly. To the extent this Award constitutes “deferred compensation” under Section 409A, (a) the time of settlement of this
Award specified in Section 5 is a specified time within the meaning of Treasury Regulation § 1.409A-3(i)(1), (b) if a Waiver and
Release Agreement is due during the sixty (60) day settlement period under Section 5 and such period begins in one taxable year
and ends in another taxable year, any settlement under Section 5 shall not be made until the beginning of the second taxable year,
and (c) if the Grantee is a “specified employee” within the meaning of Section 409A on the date of his or her “separation from
service” within the meaning of Section 409A, any payments of deferred compensation hereunder shall be made on the first to
occur of (x) the date that is six (6) months after the date of the Grantee’s separation from service, (y) the date of the Grantee’s
death, or (z) such other date as complies with the requirements of Section 409A. For purposes of this Agreement, “termination of
Employment” (and similar phrases) shall mean a “separation from service” within the meaning of Treasury Regulation 1.409A-
1(h).
15. Recoupment Policy and Clawback Provision. Any amounts granted or paid under this Agreement may be
subject to the Insperity, Inc. Incentive Compensation Recoupment Policy, the Qualified Retirement Policy, or other applicable
recoupment or clawback policy of the Company in effect from time to time.
16. Restrictive Covenants. Grantee’s right to receive settlement of the Restricted Stock Units shall be further
conditioned upon his or her compliance with the provisions of this Section 16. In the event Grantee fails to comply with any of
the provisions of this Section 16, Grantee shall repay to the Company any prior settlement of Restricted Stock Units subject to
this Agreement and will forfeit any unvested Restricted Stock Units covered by this Agreement. For purposes of this Section 16,
the term “Company” means the Company and its Subsidiaries.
(a) Definitions. As used in this Section 16, the following terms shall have the following meanings:
(1) “Non-Solicit Period” means the period during which Grantee is employed by the Company
and extending until twelve (12) months following Grantee’s termination of Employment.
(2) “Proprietary Information” includes all confidential or proprietary scientific or technical
information, data, formulas and related concepts, business plans (both current and under development),
client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary
business information relating to the business of the Company, whether in written or electronic form of
writings, correspondence, notes, drafts, records, maps, invoices, technical and business logs, policies,
computer programs, disks or otherwise. Proprietary Information does not include information that is or
becomes publicly known through lawful means.
(b) Confidential Treatment. Grantee acknowledges and agrees that he or she has acquired, and will in the
future acquire as a result of his or her Employment or otherwise, Proprietary Information of the Company which is
of a confidential or trade secret nature, and all of which has a great value to the Company and is a substantial basis
and foundation upon which the Company’s
6
Employee RSU Award_ Jan 2024
business is predicated. Accordingly, other than in the legitimate performance of Grantee’s job duties, Grantee
agrees:
(1) to regard and preserve as confidential at all times all Proprietary Information;
(2) to refrain from publishing or disclosing any part of the Proprietary Information and from
using, copying or duplicating it in any way by any means whatsoever; and
(3) not to use on Grantee’s own behalf or on behalf of any third party or to disclose the
Proprietary Information to any person or entity without the prior written consent of the Company.
(c) Property of the Company. Grantee acknowledges that all Proprietary Information and other property
of the Company which Grantee accumulates during Grantee’s Employment are the exclusive property of the
Company. Upon the termination of Grantee’s Employment, or at any time upon the Company’s request, Grantee
shall surrender and deliver to the Company (and not keep, recreate or furnish to any third party) any and all work
papers, reports, manuals, documents and the like (including all originals and copies thereof) in Grantee’s
possession which contain Proprietary Information relating to the business, prospects or plans of the Company.
Further, Grantee agrees to search for and delete all Company information, including Proprietary Information, from
his or her computer, smartphone, tablet, or any other personal electronic storage devices, other than payroll
information or other financial information that Grantee may need for his or her tax filings, and, upon request,
certify to the Company that Grantee has completed this search and deletion process.
(d) Cooperation. Grantee agrees that, following any termination of his or her Employment, Grantee will
not disclose or cause to be disclosed any Proprietary Information, unless (in any such case) required by court
order. Pursuant to the Defend Trade Secrets Act of 2016, Grantee shall not be held criminally or civilly liable
under any Federal or state trade secret law for the disclosure of any Proprietary Information that (i) is made (A) in
confidence to a Federal, state or local government official, either directly or indirectly, or to an attorney and (B)
solely for the purpose of reporting or investigating a suspected violation of law or (ii) is made in a complaint or
other document filed in a lawsuit or other proceeding, if such filing is made under seal. The Company may seek
the assistance, cooperation or testimony of Grantee following any such termination in connection with any
investigation, litigation or proceeding arising out of matters within the knowledge of Grantee and related to his or
her Employment, and in such instance, Grantee shall provide such assistance, cooperation or testimony and the
Company shall pay Grantee’s reasonable costs and expenses in connection therewith.
(e) Non-Solicitation.
(1) Grantee and the Company agree to the non-solicitation provisions of this Section 16(e): (i) in
consideration for the Proprietary Information provided by the Company to Grantee; and (ii) to protect the
Proprietary Information of the Company disclosed or entrusted to Grantee by the Company or created or
developed by Grantee for the Company, the business goodwill of the Company developed through the
efforts of
7
Employee RSU Award_ Jan 2024
Grantee and the business opportunities disclosed or entrusted to Grantee by the Company.
(2) Grantee expressly covenants and agrees that, during the Non-Solicit Period, Grantee will not:
(i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person
who is an officer or employee of the Company; or (ii) canvass, solicit, approach or entice away or cause to
be canvassed, solicited, approached or enticed away from the Company any person who or which is or was
a customer of the Company, during the prior two years of Grantee’s Employment, and either (x) about
which Grantee received Proprietary Information or (y) with which Grantee had contact or dealings on
behalf of the Company.
(3) Grantee expressly recognizes that he or she is a key employee and an important member of
management who will be provided with access to Proprietary Information and trade secrets as part of
Grantee’s Employment and that the restrictive covenants set forth in this Section 16 are reasonable and
necessary in light of Grantee’s position and access to the Proprietary Information.
(f) Relief. Grantee and the Company agree and acknowledge that the limitations as to time and scope of
activity to be restrained as set forth in this Section 16 are reasonable and do not impose any greater restraint than
is necessary to protect the legitimate business interests of the Company. Grantee and the Company also
acknowledge that money damages would not be sufficient remedy for any breach of this Section 16 by Grantee,
and the Company shall be entitled to enforce the provisions of this Section 16 by terminating any unvested
Restricted Stock Units, taking action to recoup the value of any Restricted Stock Units already settled and paid to
Grantee, and to specific performance and injunctive relief as remedies for such breach or any threatened breach.
Such remedies shall not be deemed the exclusive remedies for a breach of this Section 16 but shall be in addition
to all remedies available at law or in equity, including the recovery of damages from Grantee and Grantee’s agents.
However, if it is determined that Grantee has not committed a breach of this Section 16, then the Company shall
resume vesting of the Restricted Stock Units due under this Agreement and pay to Grantee all Restricted Stock
Units that would have vested but had been suspended pending such determination.
(g) Reformation. The Company and Grantee agree that the foregoing restrictions are reasonable under the
circumstances and that any breach of the covenants contained in this Section 16 would cause irreparable injury to
the Company. Grantee expressly represents that enforcement of the restrictive covenants set forth in this Section
16 will not impose an undue hardship upon Grantee or any person or entity affiliated with Grantee. Further,
Grantee acknowledges that Grantee’s skills are such that Grantee can be gainfully employed and that the
restrictive covenants will not prevent Grantee from earning a living. Nevertheless, if any of the aforesaid
restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to time, or
otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making
such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.
(h) Protected Disclosures. Notwithstanding any provision to the contrary in this Agreement, nothing in
this Agreement prohibits Grantee from
8
Employee RSU Award_ Jan 2024
reporting possible violations of law or regulation to any governmental agency or entity, including the U.S.
Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, and any agency
Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal
law or regulation. Nothing in this Agreement limits Grantee’s ability to communicate with any government
agencies or otherwise participate in any investigation or proceeding that may be conducted by any government
agency, including providing documents or other information, without notice to the Company. Additionally,
Grantee and the Company acknowledge and agree that Grantee does not need the prior authorization of the
Company to make any such reports or disclosures and Grantee is not required to notify the Company or any of its
affiliates that Grantee has made such reports or disclosures.
(i) Survivability. The provisions of this Section 16 shall survive any termination of the Agreement and
settlement of Restricted Stock Units, and shall remain applicable to Grantee.
17. Entire Agreement; Binding Effect. This Agreement shall cover all shares of Common Stock acquired by
the Grantee pursuant to this Agreement, including any community and/or separate property interest owned by the Grantee’s
spouse in said shares. All terms, conditions and limitations on transferability imposed under this Agreement upon shares acquired
by the Grantee shall apply to any interest of the Grantee’s spouse in such shares. This Agreement and the Plan constitute the
entire understanding between the parties regarding this Award, and supersedes any and all prior written or oral agreements
between the parties with respect to the subject matter hereof. There are no representations, agreements, arrangements, or
understanding, either written or oral, between or among the parties with respect to the subject matter hereof which are not set
forth in this Agreement. This Agreement is binding upon the Grantee’s heirs, executors and personal representatives with respect
to all provisions hereof. Except as set forth herein, this Agreement cannot be modified, altered or amended, to the detriment of
the Grantee, except by an agreement, in writing, signed by both a duly authorized executive officer of the Company and the
Grantee.
INSPERITY, INC.
Award Date: _____________ By:
Name: Paul J. Sarvadi
Title: Chairman of the Board and
Chief Executive Officer
9
Employee RSU Award_ Jan 2024
Acknowledgement and Acceptance by the Grantee
I, _________________________, the undersigned Grantee, hereby acknowledge that I have received copies of the
Insperity, Inc. Incentive Plan, as amended and restated effective May 22, 2023 (the “Plan”) and corresponding Prospectus for the
Plan, and that I will consult with and rely upon only my own tax, legal and financial advisors regarding the consequences and
risks of the Award. I hereby agree to and accept the foregoing Restricted Stock Unit Agreement, subject to the terms and
provisions of the Plan and administrative interpretations thereof referred to above.
GRANTEE:
Date:
10
Employee RSU Award_ Jan 2024
AWARD NOTICE AND AGREEMENT
(For Phantom Stock Awarded Under Long-Term Incentive Program)
Exhibit 10.9
This Award Notice and Agreement (this “Agreement”) is between Insperity, Inc. (the “Company”) and
(the “Grantee”), an employee of the Company or one of its Subsidiaries, regarding an award (this “Award”) of
shares (the “Target Amount”) of Phantom Stock (as defined in the Insperity, Inc. Long-Term Incentive Program, as
amended and restated effective January 29, 2024 (the “LTIP”), adopted under the Insperity, Inc. Incentive Plan, as amended and
restated effective May 22, 2023 (the “Incentive Plan”)), awarded to the Grantee on (the “Grant Date”), subject to the
following terms and conditions:
1. Relationship to LTIP. This Award is granted under the Incentive Plan pursuant to an award under the LTIP
and is subject to all of the terms, conditions and provisions of, and administrative interpretations under, the Incentive Plan and the
LTIP, if any, which have been adopted by the Committee thereunder. Any question of interpretation arising under this Agreement
shall be determined by the Committee and its determinations shall be final and conclusive upon all parties in interest. Except as
defined herein, capitalized terms shall have the same meanings ascribed to them under the LTIP, however, in the absence thereof,
capitalized terms herein shall have the same meanings ascribed to them under the Incentive Plan.
2. Performance Determination; Vesting; Change in Control.
(a) Performance Determination. The Grantee’s Final Award, if any, shall be equal to the number of shares of
Phantom Stock resulting from the Committee’s determination of the achievement of the Performance Goal(s) over the
Performance Period(s) specified on Schedule A attached hereto.
(b) Vesting. Subject to Sections 2(c), 3 and 4 below, the Grantee shall become vested in the Grantee’s Final
Award upon the final Valuation Date of the last Performance Period applicable to this Award (the “Final Valuation Date”),
provided that the Grantee has been in continuous Employment since the Grant Date through the Final Valuation Date.
(c) Change in Control. The Award granted under this Agreement will not partially or fully vest or otherwise
accelerate vesting solely as the result of a Change in Control. Upon a Change in Control after the Grant Date and prior to the
Final Valuation Date, the Final Award shall be determined by the Committee based on (i) actual performance results for any
Performance Period that was completed on or prior to the date of the Change in Control and (ii) the greater of Target Level or
actual performance (if measurable) for the Performance Period during which the Change in Control occurs and any Performance
Period that was scheduled to begin after the date of the Change in Control (collectively, the “Change in Control Value”). Any
Final Award determined pursuant to this Section 2(c) shall be paid at the time indicated in Section 5 and the Grantee shall
become vested in the Change in Control Value only if continuously employed through the date indicated in Section 5, except in
the event of a Qualifying Termination. However, in the event of a Change in Control as defined solely under subsection (c) of the
definition of Change in Control under section 2 of the Incentive Plan (a “Subsection (c) Change in Control”), if the successor
entity, or a parent of the successor entity, has not agreed to assume, replace or substitute this Award with another award of
equivalent or greater value, and on substantially similar or more favorable terms, then the Grantee shall vest in the Final Award as
of the Subsection (c) Change in Control and the Change in Control Value shall be paid within seventy-four (74) days of the
Subsection (c) Change in Control.
1
LTIP Jan 2024
3. Qualifying Termination; Death; Disability; Retirement.
(a) Qualifying Termination. Notwithstanding Section 2(b) above, if the Grantee remains in continuous
Employment from the Grant Date through the date of the Grantee’s Qualifying Termination that occurs prior to vesting under
Section 2(c), then, upon the date of the Grantee’s Qualifying Termination, the Grantee shall vest in a Final Award equal to the
Change in Control Value. Any Final Award determined pursuant to this Section 3(a) shall be payable to the Grantee no later than
seventy-four (74) days after the date of the Grantee’s Qualifying Termination, subject to delay pursuant to Article X.F of the
LTIP, if applicable. Any vesting by reason of a Qualifying Termination is subject to execution and delivery to the Company of an
effective Waiver and Release Agreement.
(b) Good Reason. Notwithstanding the definition in the LTIP program document, for purposes of this
Agreement, Good Reason means a Grantee terminates his or her Employment due to one of the following actions by his or her
Employer (without written consent of the Grantee): (i) a material diminution in the Grantee’s title, position, authority, duties or
responsibilities from those applicable to Grantee preceding a Change in Control; (ii) a change in the geographic location at which
the Grantee must perform services, which shall mean requiring the Grantee to be permanently based more than fifty (50) miles
from the Grantee’s principal Employer location; (iii) a material diminution in the Grantee’s Base Salary other than as part of an
across-the-board reduction applicable to all of the Company’s officers who participate in the Program of less than 10%; or (iv) a
material diminution in the Grantee’s bonus opportunity, incentive compensation or perquisites, if inconsistent with other
executives of the Company with similar levels of authority, duties or responsibilities.
(c) Death or Disability. Notwithstanding Section 2 above, if the Grantee remains in continuous Employment
from the Grant Date through the date of the Grantee’s death or Disability that occurs prior to the Final Valuation Date, then the
Grantee shall be entitled to a Final Award based on actual achievement of the Performance Goal(s) during the Performance
Period(s) pro-rated by a fraction, the numerator of which shall be the total number of days of the Grantee’s Employment from the
Grant Date through the date of the Grantee’s death or Disability, as applicable, and the denominator of which shall be the total
number of days encompassing the first day of the first Performance Period and the last day of the last Performance Period
applicable to the Award (if multiple Performance Periods). In the event of a Change in Control, if the Grantee remains in
continuous Employment from the Grant Date through the Grantee’s death or Disability occurring after a Change in Control, the
Grantee shall be entitled to a pro-rata portion, as calculated under this Section 3(c), of the Change in Control Value. Any vesting
by reason of Disability under this section is subject to execution and delivery to the Company of an effective Waiver and Release
Agreement.
(d) Retirement. Notwithstanding Section 2 above, if the Grantee remains in continuous Employment from the
Grant Date through the date of the Grantee’s Retirement that occurs prior to the Final Valuation Date, then the following shall
apply:
(i) With respect to any Performance Period which begins on or after the date of the Grantee’s Retirement,
the shares of Phantom Stock related to such Performance Period shall be forfeited;
(ii) With respect to any Performance Period which ends prior to the date of the Grantee’s Retirement, the
shares of Phantom Stock related to such Performance Period shall be paid based upon actual achievement of the
Performance Goal and settled in accordance with Section 5; and
2
LTIP Jan 2024
(iii) With respect to any other Performance Period that begins before and ends after the date of the
Grantee’s Retirement, the Grantee shall be entitled to shares of Phantom Stock based upon actual achievement of
the Performance Goal during such Performance Period pro-rated by a fraction, the numerator of which shall be the
total number of days of the Grantee’s Employment from the first day of such Performance Period through the date
of the Grantee’s Retirement and the denominator of which shall be the total number of days encompassing the first
day of such Performance Period and the last day of such Performance Period applicable to the Award, which shall
be settled in accordance with Section 5.
(iv) For purposes of this Award, “Retirement” means the Grantee’s voluntary termination of
Employment other than for Good Reason (and other than an involuntary termination by the Company for Cause),
satisfying the Qualified Retirement Policy and all of the following conditions:
a. the Grantee submits a voluntary request for retirement that satisfies applicable notice requirements
and is accepted by the Company or Subsidiary;
b. the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-two
(62) years of age and has at least fifteen (15) years of continuous Employment as of the termination
date;
c. the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant
Date; and
d. the Grantee executes an effective Waiver and Release Agreement.
(e) Waiver and Release Agreement. For purposes of this Award, “Waiver and Release Agreement” means the
legal document in a form approved by the Company, in which a Grantee, in exchange for the benefits provided under Section 3,
agrees to be subject to the repayment conditions of the Waiver and Release Agreement and releases the Company and other
related parties, from liability and damages arising from or in connection with the Grantee’s termination of Employment by reason
of Retirement, Disability or Qualifying Termination. In order for a Waiver and Release Agreement to be effective, the Waiver and
Release Agreement must be:
(i) Executed and returned by the Grantee (or Grantee’s legal representative) to the Company, after
termination of the Grantee’s Employment, and within the period provided in the Waiver and Release Agreement,
(ii) Unrevoked by the Grantee (and Grantee’s legal representative) during the seven (7) day period
following the date of execution, (or if longer, such other period required under applicable law), and
(iii) Effective and irrevocable no later than the sixtieth (60 ) day after the date of a Grantee’s termination
th
of Employment.
4. Forfeiture of Award. If the Grantee’s Employment terminates other than by reason of death, Disability,
Qualifying Termination or Retirement prior to the Final Valuation Date, this Award shall be forfeited immediately after the
Grantee’s termination of Employment. Except in the case of a Qualifying Termination or a Retirement, the Company has sole
3
LTIP Jan 2024
discretionary authority to determine when a Grantee’s Employment terminates for all purposes under this Agreement, the LTIP
and the Incentive Plan. If a Grantee’s Employment terminates due to Retirement, Disability, or Qualifying Termination, all
unvested portions of this Award as of the Grantee’s termination date shall expire on the date that Grantee fails to deliver a timely,
effective and irrevocable Waiver and Release Agreement.
5. Settlement of Final Award. Settlement of the Grantee’s Final Award, if any, as determined pursuant to
Section 2, Section 3(c) or Section 3(d) shall be made in the form of shares of Common Stock on the date that is seventy-four (74)
days after the end of the last originally scheduled and untruncated Performance Period applicable to the Award.
6. No Voting Rights; Dividend Equivalents.
(a) The Grantee shall have no voting rights in connection with Phantom Stock.
(b) If any dividends are paid with respect to the Common Stock between the Grant Date and the date of
settlement of the Grantee’s Final Award, the Grantee will be conditionally credited with Dividend Equivalents. Upon settlement
of the Grantee’s Final Award, the Grantee will receive additional shares of Common Stock in the aggregate amount of Dividend
Equivalents credited between the Grant Date and the date of settlement of the Grantee’s Final Award for each share of Phantom
Stock paid on the achievement of the Performance Goal(s) over the Performance Period(s).
7. Limitation on Delivery of Shares. The Company shall not be obligated to deliver any shares of Common
Stock if counsel to the Company determines that such sale or delivery would violate any applicable law or any rule or regulation
of any governmental authority or any rule or regulation of, or agreement of the Company with, any national securities exchange
or inter-dealer quotation system upon which the Common Stock is listed or quoted. In no event shall the Company be obligated to
take any affirmative action in order to cause the delivery of shares of Common Stock to comply with any such law, rule,
regulation or agreement.
8. Assignment of Award. Except as otherwise permitted by the Committee, the Grantee’s rights under the LTIP,
Incentive Plan and this Agreement are personal; no assignment or transfer of the Grantee’s rights under and interest in this Award
may be made by the Grantee other than by will or by the laws of descent and distribution or by a qualified domestic relations
order, and this Award is payable during his lifetime only to the Grantee, or in the case of a Grantee who is mentally incapacitated,
this Award shall be payable to his guardian or legal representative.
9. Award is Unfunded. Nothing in this Agreement, the LTIP or the Incentive Plan shall require the Company to
segregate or set aside any funds or other property for the purpose of paying any portion of an Award. No Participant, beneficiary
or other person shall have any right, title or interest in any amount awarded under this Agreement, the LTIP or the Incentive Plan
before the payment date for the Award, or in any property of the Company or a Subsidiary.
10. Withholding. The Company’s obligation to deliver shares of Common Stock to the Grantee upon settlement
of this Award shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding
requirements (the “Required Withholding”). The Company shall withhold from the Common Stock that would otherwise have
been delivered to the Grantee the number of shares necessary to satisfy the Grantee’s Required Withholding, and deliver the
remaining shares of Common Stock to the Grantee, unless the Grantee has made arrangements with the Company for the Grantee
to deliver
4
LTIP Jan 2024
to the Company cash, a check or other available funds for the full amount of the Required Withholding by 5:00 p.m. Central
Standard Time on the date the shares of Common Stock become vested. The amount of the Required Withholding and the number
of shares of Common Stock to be withheld by the Company, if applicable, to satisfy the Grantee’s Required Withholding, shall be
based on the Fair Market Value of the shares of Common Stock on the first trading date prior to the applicable settlement date
and shall be limited to the withholding amount calculated using the minimum statutory withholding rates or; in accordance with
any policy adopted by the Company, such other applicable withholding rates not in excess of the maximum statutory rates in
effect for the applicable jurisdiction.
11. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the
Grantee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and
legatees), except that the Grantee may not assign any rights or obligations under this Agreement except to the extent and in the
manner expressly permitted herein.
12. Right to Employment or Service. The granting of this Award shall not impose upon the Company any
obligation to maintain any Participant as an Employee and shall not diminish the power of the Company to terminate any
Participant's Employment at any time. The Company and its Subsidiaries reserve the right to terminate a Grantee’s Employment
at any time, with or without cause.
13. Notices and Disclosures. Unless the Company notifies the Grantee in writing of a different procedure, any
notice or other communication to the Company with respect to this Award shall be in writing and shall be delivered:
Crescent Springs Drive, Kingwood V (C5.10.60), Kingwood, Texas 77339;
(a) by registered or certified United States mail, postage prepaid, to Insperity, Inc., Attn: General Counsel, 19001
Kingwood V (C5.10.60), Kingwood, Texas 77339; or
(b) by hand delivery or otherwise to Insperity, Inc., Attn: General Counsel, 19001 Crescent Springs Drive,
(c) by email to the Company’s General Counsel or his delegate.
Notwithstanding the foregoing, in the event that the address of the Company is changed, notices shall instead be made
pursuant to the foregoing provisions at the Company’s then current address.
Any notices provided for in this Agreement or in the Plan shall be given in writing and shall be deemed effectively
delivered or given upon receipt or, in the case of notices delivered by the Company to the Grantee, five days (5) after deposit in
the United States mail, postage prepaid, addressed to the Grantee at the address specified at the end of this Agreement or at such
other address as the Grantee hereafter designates by written notice to the Company.
The foregoing notwithstanding, the Grantee agrees that the Company may deliver by email all documents relating to the
Plan or this Award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all
other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and
proxy statements). The Grantee also agrees that the Company may deliver these documents by posting them on a web site
maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a
web site, such posting is deemed to notify the Grantee.
5
LTIP Jan 2024
14. Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall
not affect any of the other terms, provisions, covenants, or conditions of this Agreement, each of which shall be binding and
enforceable.
15. Governing Law. This Agreement, to the extent not otherwise governed by mandatory provisions of the
Code or the securities laws of the United States, shall be governed by, construed, and enforced in accordance with the laws of the
State of Texas.
16. Code Section 409A. It is the intent of the Company and the Grantee that this Award be exempt from or
comply with the requirements of Code Section 409A and the provisions of this Agreement will be administered, interpreted and
construed accordingly. For purposes of Code Section 409A, the time of settlement of this Award is either exempt from Code
Section 409A, including, but not limited to, by compliance with the “short-term deferral exemption” as specified in section
1.409A-1(b)(4) of the Treasury Regulations or in compliance with Code Section 409A, including, but not limited to, being paid
pursuant to a fixed schedule or specified date pursuant to section 1.409A-3(i)(1) of the Treasury Regulations.
17. Recoupment Policy and Clawback Provision. Any amounts granted or paid under this Agreement are
subject to the Policy for the Recovery of Erroneously Awarded Compensation, the Insperity, Inc. Incentive Compensation
Recoupment Policy, the Qualified Retirement Policy or other applicable recoupment policy of the Company in effect from time to
time.
18. Restrictive Covenants. Grantee’s right to receive settlement of the Phantom Stock shall be further
conditioned upon his or her compliance with the provisions of this Section 18. In the event Grantee fails to comply with any of
the provisions of this Section 18, Grantee shall repay to the Company any prior settlement of Phantom Stock subject to this
Agreement and will forfeit any unvested Phantom Stock covered by this Agreement. For purposes of this Section 18, the term
“Company” means the Company and its Subsidiaries.
(a) Definitions. As used in this Section 18, the following terms shall have the following meanings:
(i) “Non-Solicit Period” means the period during which Grantee is employed by the Company and
extending until twenty-four (24) months following Grantee’s termination of Employment.
(ii) “Proprietary Information” includes all confidential or proprietary scientific or technical information,
data, formulas and related concepts, business plans (both current and under development), client lists, promotion
and marketing programs, trade secrets, or any other confidential or proprietary business information relating to the
business of the Company, whether in written or electronic form of writings, correspondence, notes, drafts, records,
maps, invoices, technical and business logs, policies, computer programs, disks or otherwise. Proprietary
Information does not include information that is or becomes publicly known through lawful means.
(b) Confidential Treatment. Grantee acknowledges and agrees that he or she has acquired, and will in the future
acquire as a result of his or her Employment or otherwise, Proprietary Information of the Company which is of a confidential or
trade secret nature, and all of which has a great value to the Company and is a substantial basis and foundation upon which
6
LTIP Jan 2024
the Company’s business is predicated. Accordingly, other than in the legitimate performance of Grantee’s job duties, Grantee
agrees:
(i) to regard and preserve as confidential at all times all Proprietary Information;
(ii) to refrain from publishing or disclosing any part of the Proprietary Information and from using,
copying or duplicating it in any way by any means whatsoever; and
(iii) not to use on Grantee’s own behalf or on behalf of any third party or to disclose the Proprietary
Information to any person or entity without the prior written consent of the Company.
(c) Property of the Company. Grantee acknowledges that all Proprietary Information and other property of the
Company which Grantee accumulates during Grantee’s Employment are the exclusive property of the Company. Upon the
termination of Grantee’s Employment, or at any time upon the Company’s request, Grantee shall surrender and deliver to the
Company (and not keep, recreate or furnish to any third party) any and all work papers, reports, manuals, documents and the like
(including all originals and copies thereof) in Grantee’s possession which contain Proprietary Information relating to the
business, prospects or plans of the Company. Further, Grantee agrees to search for and delete all Company information, including
Proprietary Information, from his or her computer, smartphone, tablet, or any other personal electronic storage devices, other than
payroll information or other financial information that Grantee may need for his or her tax filings, and, upon request, certify to
the Company that Grantee has completed this search and deletion process.
(d) Cooperation. Grantee agrees that, following any termination of his or her Employment, Grantee will not
disclose or cause to be disclosed any Proprietary Information, unless (in any such case) required by court order. Pursuant to the
Defend Trade Secrets Act of 2016, Grantee shall not be held criminally or civilly liable under any Federal or state trade secret
law for the disclosure of any Proprietary Information that (1) is made (A) in confidence to a Federal, state or local government
official, either directly or indirectly, or to an attorney and (B) solely for the purpose of reporting or investigating a suspected
violation of law or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made
under seal. The Company may seek the assistance, cooperation or testimony of Grantee following any such termination in
connection with any investigation, litigation or proceeding arising out of matters within the knowledge of Grantee and related to
his or her Employment, and in such instance, Grantee shall provide such assistance, cooperation or testimony and the Company
shall pay Grantee’s reasonable costs and expenses in connection therewith.
(e) Non-Solicitation.
i. Grantee and the Company agree to the non-solicitation provisions of this Section 18(e): (1) in
consideration for the Proprietary Information provided by the Company to Grantee; and (2) to protect the
Proprietary Information of the Company disclosed or entrusted to Grantee by the Company or created or
developed by Grantee for the Company, the business goodwill of the Company developed through the efforts of
Grantee and the business opportunities disclosed or entrusted to Grantee by the Company.
ii. Grantee expressly covenants and agrees that, during the Non-Solicit Period, Grantee will not: (1)
engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an
officer or
7
LTIP Jan 2024
employee of the Company; or (2) canvass, solicit, approach or entice away or cause to be canvassed, solicited,
approached or enticed away from the Company any person who or which is or was a customer of the Company,
during the prior two years of Grantee’s Employment, and either (x) about which Grantee received Proprietary
Information or (y) with which Grantee had contact or dealings on behalf of the Company.
iii. Grantee expressly recognizes that he or she is a key employee and an important member of
management who will be provided with access to Proprietary Information and trade secrets as part of Grantee’s
Employment and that the restrictive covenants set forth in this Section 18 are reasonable and necessary in light of
Grantee’s position and access to the Proprietary Information.
(f) Relief. Grantee and the Company agree and acknowledge that the limitations as to time and scope of activity
to be restrained as set forth in this Section 16 are reasonable and do not impose any greater restraint than is necessary to protect
the legitimate business interests of the Company. Grantee and the Company also acknowledge that money damages would not be
sufficient remedy for any breach of this Section 18 by Grantee, and the Company shall be entitled to enforce the provisions of
this Section 18 by terminating any unvested Phantom Stock, taking action to recoup the value of any Phantom Stock already
settled and paid to Grantee, and to specific performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Section 18 but shall be in addition to all
remedies available at law or in equity, including the recovery of damages from Grantee and Grantee’s agents. However, if it is
determined that Grantee has not committed a breach of this Section 18, then the Company shall resume vesting of the Phantom
Stock due under this Agreement and pay to Grantee all Phantom Stock that would have vested but had been suspended pending
such determination.
(g) Reformation. The Company and Grantee agree that the foregoing restrictions are reasonable under the
circumstances and that any breach of the covenants contained in this Section 18 would cause irreparable injury to the Company.
Grantee expressly represents that enforcement of the restrictive covenants set forth in this Section 18 will not impose an undue
hardship upon Grantee or any person or entity affiliated with Grantee. Further, Grantee acknowledges that Grantee’s skills are
such that Grantee can be gainfully employed and that the restrictive covenants will not prevent Grantee from earning a living.
Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly
broad as to time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court
making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.
(h) Protected Disclosures. Notwithstanding any provision to the contrary in this Agreement, nothing in this
Agreement prohibits Grantee from reporting possible violations of law or regulation to any governmental agency or entity,
including the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, and any agency
Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation.
Nothing in this Agreement limits Grantee’s ability to communicate with any government agencies or otherwise participate in any
investigation or proceeding that may be conducted by any government agency, including providing documents or other
information, without notice to the Company. Additionally, Grantee and the Company acknowledge and agree that Grantee does
not need the prior authorization of the Company to make any such reports or disclosures and Grantee is not required to notify the
Company or any of its affiliates that Grantee has made such reports or disclosures.
8
LTIP Jan 2024
settlement of Phantom Stock, and shall remain applicable to Grantee.
(i) Survivability. The provisions of this Section 18 shall survive any termination of the Agreement and
19. Entire Agreement; Binding Effect. This Agreement shall cover all shares of Phantom Stock and Common
Stock acquired by the Grantee pursuant to this Agreement, including any community and/or separate property interest owned by
the Grantee’s spouse in said shares. All terms, conditions and limitations on transferability imposed under this Agreement upon
shares acquired by the Grantee shall apply to any interest of the Grantee’s spouse in such shares. This Agreement, the LTIP and
the Incentive Plan constitute the entire understanding between the parties regarding this Award, and supersede any and all prior
written or oral agreements between the parties with respect to the subject matter hereof. There are no representations, agreements,
arrangements, or understanding, either written or oral, between or among the parties with respect to the subject matter hereof
which are not set forth in this Agreement, the LTIP or the Incentive Plan. This Agreement is binding upon the Grantee’s heirs,
executors and personal representatives with respect to all provisions hereof. Except as set forth herein, this Agreement cannot be
modified, altered or amended, to the detriment of the Grantee, except by an agreement, in writing, signed by both a duly
authorized executive officer of the Company and the Grantee.
INSPERITY, INC.
By:
Name:
Title:
9
LTIP Jan 2024
Acknowledgement and Acceptance by the Grantee
I, , the undersigned Grantee, hereby acknowledge that I will consult with and rely upon only my
own tax, legal and financial advisors regarding the consequences and risks of the Award. I hereby agree to and accept the
foregoing Award Notice and Agreement, subject to the terms and provisions of this Agreement, the Long-Term Incentive
Program, as amended and restated effective January 29, 2024, and the Insperity, Inc. Incentive Plan, as amended and restated
effective May 22, 2023, and corresponding Prospectus for the Incentive Plan, and administrative interpretations thereof referred
to above.
GRANTEE:
Date:
10
LTIP Jan 2024
INSPERITY, INC.
LONG-TERM INCENTIVE PROGRAM
(As Amended and Restated January 29, 2024)
EXHIBIT 10.23
I. INTRODUCTION
The Compensation Committee of the Board of Directors of Insperity, Inc., a Delaware corporation (the “Company”), has
adopted this Long-Term Incentive Program (the “Program”), as amended and restated effective January 29, 2024, under the
Insperity, Inc. Incentive Plan (the “Plan”), to provide for the grant of performance-based awards, as described in this Program, to
eligible Employees of the Company and its Subsidiaries. All awards granted under this Program and the rights of the Participants
herein are subject in all respects to the provisions of the Plan and this Program.
II. DEFINITIONS
Except as otherwise defined herein, capitalized terms that are used in this Program shall have the meanings assigned to
such terms in the Plan.
A. “Award” means an award under this Program as established by the Committee for shares of Phantom Stock.
B. “Award Notice and Agreement” means the document provided to each Participant (in writing or electronically)
evidencing a Participant’s Award under the Program, along with the terms and conditions of the Award.
C. “Base Salary” means a Participant’s annual base salary as of the first day of the Performance Period (subsequent
increases in annual base salary during a Performance Period will not be taken into account when determining the
amount of the Award paid, if any, under this Program).
D. “Cause” means a termination of a Participant’s Employment by his Employer for (i) gross negligence or willful
misconduct in the performance of the Participant’s duties; (ii) conviction or plea of nolo contendre for a felony or
any crime involving moral turpitude; or (iii) committing an act of fraud or deceit intended to result in personal and
unauthorized enrichment of the Participant at the Company’s expense, as determined by the Committee in its sole
discretion.
E. “Committee” means the Compensation Committee of the Board of Directors of the Company.
F. “Disability” means that the Participant has a disability such that he has been determined to be eligible for benefits
under a long-term disability plan sponsored by the Company or a Subsidiary, or, if the Participant is not covered
by such a plan, a physical or mental impairment (i) which causes the Participant to be unable to perform the
normal duties for an Employer as determined by the Committee, in its sole discretion; and (ii) which is expected
either to result in death (or blindness) or to last for a continuous period of at least twelve (12) months. The
Committee may require that the Participant be examined by a physician or physicians selected by the Committee.
Insperity - Long-Term Incentive Program_A&R Jan 2024
G. “Dividend Equivalent” means the value of a cash or stock dividend paid on a share of Common Stock.
H. “Employee” means an employee of an Employer.
I. “Employer” means the Company or one of its Subsidiaries, other than a Subsidiary that is a licensed professional
employer organization.
J. “Employment” means employment with the Employer, or a successor following a Change in Control.
K. “Final Award” means the total number of shares of Phantom Stock, if any, under an Award that the Committee has
determined to have been earned by a Participant based on the level of achievement of the Performance Goal or
Performance Goals applicable with respect to the Award, after the close of the last Performance Period for such
Award.
L. “Good Reason” means a Participant terminates his Employment due one of the following actions by his Employer:
(i) a material diminution in the Participant’s title, position, authority, duties or responsibilities from those
applicable to Participant preceding a Change in Control; (ii) a change in the geographic location at which the
Participant must perform services, which shall mean requiring the Participant to be permanently based more than
fifty (50) miles from the Participant’s principal Employer location; (iii) a material diminution in the Participant’s
Base Salary other than as part of an across-the-board reduction applicable to all of the Company’s officers who
participate in the Program of less than 10%; or (iv) a material diminution in the Participant’s bonus opportunity,
incentive compensation or perquisites, if inconsistent with other executives of the Company with similar levels of
authority, duties or responsibilities.
M. “Grant Date” means the date an Award is granted to a Participant.
N. “Phantom Stock” means a unit representing the value of one share of Common Stock under a Phantom Stock Award.
O. “Qualifying Termination” means a termination of the Participant’s Employment following a Change in Control due
to (i) a termination of Employment by the Participant due to Good Reason, or (ii) an involuntary termination of the
Participant’s Employment by the Company, its Subsidiary or a successor to the Company other than for Cause;
provided, however, that a Participant’s termination of Employment will be considered to be a Qualifying
Termination for Good Reason only if the Participant has provided written notice to the Company of the condition
the Participant claims constitutes Good Reason within ninety (90) days of the initial existence of such condition,
the condition specified in the notice remains uncorrected for thirty (30) days after receipt of the notice by the
Company, and the Participant actually terminates Employment after the thirty (30) day correction period and
before the expiration of the time limit required of a Qualifying Termination.
P. “Participant” has the meaning provided in Article III of this Program.
Q. “Performance Goal” or “Performance Goals” shall be the Performance Objectives for the Performance Period
selected by the Committee for the Participants with respect to an Award.
2
R. “Performance Period” means the period or periods specified in an Award Notice and Agreement over which the
designated Performance Goal or Performance Goals applicable to an Award will be measured.
st
S. “Plan Year” means the 12-month period beginning on January 1 and ending December 31 .
st
T. “Program” means this Long-Term Incentive Program, as adopted by the Committee and described herein, as
amended from time to time by the Committee.
U. “Valuation Date” means the date the Committee determines the results of the Performance Goal(s) as set forth in
Article IV.A of this Program.
III. ESTABLISHMENT OF PERFORMANCE GOAL(S) AND PARTICIPATION
A. For each Plan Year, the Committee has the sole and absolute discretion to decide whether Awards under the Program
will be granted, and if so, the Performance Goal(s) that will be established with respect to the Awards.
B. If the Committee elects to grant Awards for a Plan Year, then, not later than the ninetieth (90 ) day of the Plan Year
in which the Award is granted, the Committee will establish the Performance Period(s) and Performance Goal(s)
for such Awards and select each of the Employees who shall be eligible to participate in the Program (each, a
“Participant”) and be granted an Award, along with any other terms and conditions, including any vesting
requirements, applicable to the Award, all of which shall be evidenced in the Participant’s Award Notice and
Agreement. For any Award, the Committee may use multiple Performance Periods.
th
IV. CERTIFICATION OF PERFORMANCE GOAL(S) AND SETTLEMENT OF FINAL AWARD
A. As soon as practicable after the close of a Performance Period, but in no event later than the seventieth (70 ) day
thereafter (the “Valuation Date”), the Committee, in its sole discretion, shall determine and certify in writing the
level at which the Performance Goal(s) were achieved for the Performance Period and, based on that
determination, the number of shares of Phantom Stock earned by each Participant who has been in continuous
Employment at all times since the Grant Date through the Valuation Date for such Performance Period.
th
B. A Participant’s Final Award will be settled no later than the ninetieth (90 ) day after the close of the Performance
Period in shares of Common Stock; as such form of payment is specified in the Award Notice and Agreement. If
an Award has multiple Performance Periods, the Final Award will be determined, certified and paid after the close
of the last Performance Period. (For the avoidance of doubt, if an Award uses a combination of three (3) annual
Performance Periods, then the Award will be a Final Award after the close of the last (i.e., third annual)
Performance Period. Thus, the number of shares of Phantom Stock, if any, determined and certified by the
Committee for an annual Performance Period will not be paid until the Award becomes a Final Award after the
close of the last Performance Period for such Award.)
th
3
V. FORFEITURE OF AWARD
Except as otherwise provided in an Award Notice and Agreement, if a Participant’s Employment terminates for any
reason prior to the Valuation Date or, if multiple Performance Periods, prior to the final Valuation Date for an Award, the
Participant’s Award shall be forfeited immediately after termination of his Employment and the Participant shall not be
entitled to any shares or other amounts under the forfeited Award.
VI. DIVIDEND EQUIVALENTS
Dividend Equivalent rights may be extended to and made part of any Award, subject to such terms, conditions and
restrictions as the Committee may establish; provided, however, that no Dividend Equivalents shall be payable prior to
settlement of a Final Award, and any Dividend Equivalents shall be paid in the form of shares of Common Stock unless
otherwise determined by the Committee. Dividend Equivalents may be credited with earnings or Dividend Equivalents, as
established in an Award Notice and Agreement, and shall be settled at the same time as the underlying Final Award.
VII. WITHHOLDING
The Company’s obligation to deliver shares of Common Stock to the Participant in settlement of a Final Award shall be
subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements
(the “Required Withholding”). The Company shall have the right to deduct the Required Withholding, at the time of
delivery or vesting of shares of Common Stock, an appropriate number of shares for the payment of taxes required by law
or to take such other action as may be necessary in the opinion of the Company to satisfy the Required Withholding.
VIII. NO EMPLOYMENT CONTRACT
The granting of an Award under the Program shall not impose upon the Company any obligation to maintain any
Participant as an Employee and shall not diminish the power of the Company to terminate any Participant’s Employment
at any time.
IX. AMENDMENT OR TERMINATION
The Committee may amend or terminate this Program at any time; provided, however, that no such amendment or
termination shall materially adversely affect the rights of any Participant under an Award that has been granted hereunder,
without such Participant’s written consent.
X. GENERAL PROVISIONS
A. No right under this Program or the Plan shall be assignable, either voluntarily or involuntarily, by way of
encumbrance, pledge, attachment, levy or charge of any nature (except as may be required by state or federal law).
B. Nothing in this Program or the Plan shall require the Company to segregate or set aside any funds or other property
for the purpose of paying any portion of an Award. No Participant, beneficiary or other person shall have any
right, title or interest in any amount awarded under this Program or the Plan before the payment date for the
Award, or in any property of the Company or a Subsidiary.
4
C. The Committee may specify in the Award Notice and Agreement such terms, conditions and restrictions as the
Committee may determine, from time to time, in its sole discretion.
D. Any amounts attributable to an Award granted under this Program shall be excluded from compensation for purposes
of any 401(k) plan, or any other benefit, including but not limited to an Award under the Plan, life insurance or
disability.
E. Any amounts granted or paid under this Program are subject to the Policy for the Recovery of Erroneously Awarded
Compensation, the Insperity, Inc. Incentive Compensation Recoupment Policy, the Qualified Retirement Policy, or
other applicable recoupment policy of the Company in effect from time to time.
F. If a Participant is identified by the Company as a “specified employee” within the meaning of Code Section 409A(a)
(2)(B)(i) on the date on which the Participant has a “separation from service” (other than due to death) within the
meaning of Treasury Regulation § 1.409A-1(h), any Final Award payable or settled on account of a separation
from service that is deferred compensation subject to Code Section 409A shall be paid or settled on the earliest of
(i) the first business day following the expiration of six months from the Participant’s separation from service, (ii)
the date of the Participant’s death, or (iii) such earlier date as complies with the requirements of Code Section
409A.
5
SUBSIDIARIES OF INSPERITY, INC.
Exhibit 21.1
Insperity Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Insperity, Inc.
Insperity Enterprises, Inc., a Texas corporation and wholly owned subsidiary of Insperity Holdings, Inc.
•
•
• Administaff Partnerships Holding, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.
•
•
Insperity Captive Insurance Companies Limited, a Texas corporation and wholly owned subsidiary of Administaff Partnerships Holding, Inc.
Insperity Business Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff
Partnerships Holding, Inc. being a 99% limited partner.
Insperity Retirement Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff
Partnerships Holding, Inc. being a 99% limited partner.
Insperity Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships
Holding, Inc. being a 99% limited partner.
•
•
• Administaff Partnerships Holding II, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.
•
•
Insperity GP, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.
Insperity Support Services, L.P., a Delaware limited partnership, with Insperity GP, Inc. being a 1% general partner and Administaff Partnerships
Holding II, Inc. being a 99% limited partner.
• Administaff Companies, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.
• Administaff Partnerships Holding III, Inc., a Delaware corporation and wholly owned subsidiary of Administaff Companies, Inc.
•
Insperity PEO Services, L.P., a Delaware limited partnership, with Administaff Companies, Inc. being a 1% general partner and Administaff
Partnerships Holding III, Inc. being a 99% limited partner.
Insperity Insurance Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity PEO Services, L.P.
Insperity Employment Screening, L.L.C, a Delaware limited liability company and wholly owned subsidiary of Insperity Holdings, Inc.
Insperity Expense Management, Inc. a California corporation and wholly owned subsidiary of Insperity Holdings, Inc.
Insperity Payroll Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity Business Services, L.P.
IPS Client Trust, a Delaware statutory trust and wholly owned subsidiary of Insperity Payroll Services, L.L.C.
•
•
•
•
•
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
(1) Registration Statements (Form S-8 Nos. 333-273717, 333-221310, 333-181569) pertaining to the Insperity, Inc. Incentive Plan,
(2) Registration Statements (Form S-8 Nos. 333-159007, 333-140602, 333-66344) pertaining to the Insperity, Inc. 2001 Incentive Plan,
(3) Registration Statement (Form S-8 No. 333-151275) pertaining to the Insperity, Inc. 2008 Employee Stock Purchase Plan,
(4) Registration Statement (Form S-8 No. 333-118790) pertaining to the Insperity, Inc. Directors Compensation Plan, and
(5) Registration Statements (Form S-8 Nos. 333-85151, 333-66342) pertaining to the Insperity, Inc. Non-Qualified Stock Option Plan;
of our reports dated February 8, 2024, with respect to the consolidated financial statements of Insperity, Inc. and the effectiveness of internal control over
financial reporting of Insperity, Inc. included in this Annual Report (Form 10-K) of Insperity, Inc. for the year ended December 31, 2023.
/s/Ernst & Young LLP
Houston, Texas
February 8, 2024
POWER OF ATTORNEY
EXHIBIT 24.1
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Tim Clifford
January 22, 2024
Tim Clifford
Date
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Eli Jones
January 31, 2024
Eli Jones
Date
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Carol Kaufman
January 23, 2024
Carol Kaufman
Date
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc.,
POWER OF ATTORNEY
a Delaware corporation (the "Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally,
as my true and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power
of substitution and resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange
Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or
any of them shall deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended,
with full power and authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every
act and thing whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ John Lumelleau
John Lumelleau
January 31, 2024
Date
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Ellen H. Masterson
January 29, 2024
Ellen H. Masterson
Date
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Randall A. Mehl
January 22, 2024
Randall A. Mehl
Date
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ John Morphy
January 23, 2024
John Morphy
Date
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Latha Ramchand
January 23, 2024
Latha Ramchand
Date
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the
"Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and CHRISTIAN CALLENS and each of them, severally, as my true and lawful
attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and
resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the
Company's Annual Report on Form 10-K for the year ended December 31, 2023 and any and all amendments thereto as said attorneys or any of them shall
deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and
authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing
whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Richard G. Rawson
January 23, 2024
Richard G. Rawson
Date
Exhibit 31.1
I, Paul J. Sarvadi, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Insperity, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 8, 2024
/s/ Paul J. Sarvadi
Paul J. Sarvadi
Chairman of the Board & Chief Executive Officer
Exhibit 31.2
I, Douglas S. Sharp, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Insperity, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 8, 2024
/s/ Douglas S. Sharp
Douglas S. Sharp
Executive Vice President of Finance,
Chief Financial Officer & Treasurer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Insperity, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2023, (the “Report”),
as filed with the Securities and Exchange Commission on the date hereof, I, Paul J. Sarvadi, Chairman of the Board & Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ Paul J. Sarvadi
Paul J. Sarvadi
Chairman of the Board & Chief Executive Officer
February 8, 2024
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Insperity, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2023, (the “Report”),
as filed with the Securities and Exchange Commission on the date hereof, I, Douglas S. Sharp, Executive Vice President of Finance, Chief Financial Officer
& Treasurer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my
knowledge, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ Douglas S. Sharp
Douglas S. Sharp
Executive Vice President of Finance,
Chief Financial Officer & Treasurer
February 8, 2024
INSPERITY, INC.
POLICY FOR THE RECOVERY OF
ERRONEOUSLY AWARDED COMPENSATION
Exhibit 97
1. Purpose. The Compensation Committee of the Board of Directors of Insperity, Inc., a Delaware Corporation (“Insperity”
or the “Company”) has determined that it is in the best interest of the Company to adopt this Policy for the Recovery of
Erroneously Awarded Compensation. The Policy describes circumstances in which Erroneously Awarded Compensation is
subject to recovery by the Company and the process for that recovery. This Policy is intended to comply with (a) Section 954 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10D of the Exchange Act, and
implemented by Rule 10D-1 thereunder adopted by the Commission and (b) Section 303A.14 of the NYSE Listed Company
Manual.
2. Administration. This Policy shall be administered by the Administrator. Any determinations made by the Administrator
shall be final and binding on all affected individuals. Subject to any limitation under applicable law, the Administrator may
authorize and empower any officer or employee of the Company to take any and all actions necessary or appropriate to carry out
the purpose and intent of this Policy (other than with respect to any recovery under this Policy involving such officer or
employee).
3. Definitions. For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.
a. “Administrator” means the Compensation Committee of the Board of Directors of the Company.
b. “Board” means the Board of Directors of the Company.
c. “Commission” means the Securities and Exchange Commission.
d. “Compensation Eligible for Recovery” means Incentive-based Compensation received on or after the Effective
Date by an individual:
i. after beginning service as an Executive Officer,
ii. who served as an Executive Officer at any time during the performance period for the applicable
Incentive-based Compensation (regardless of whether such individual is serving as an Executive Officer at
the time the Erroneously Awarded Compensation is required to be repaid to the Company),
iii. while the Company had a class of securities listed on a national securities exchange or a national
securities association, and
iv. during the applicable Recovery Period.
e. “Effective Date” means October 2, 2023.
f. “Erroneously Awarded Compensation” means, with respect to each Executive Officer, the Compensation Eligible
for Recovery less the amount of Incentive-based Compensation that would have been determined based on the restated
amounts, computed without regard to any taxes paid.
1
NSP Policy for the Recovery of Erroneously Awarded Compensation_Final
g. “Exchange Act” means the Securities Exchange Act of 1934, as amended.
h. “Executive Officer” means:
i. each individual designated by the Board to be an officer in accordance with Rule 16a-1(f) under the
Exchange Act, and
ii. any other individual required by Rule 10D-1 of the Exchange Act to be designated as an executive
officer, as determined by the Administrator.
i. “Financial Reporting Measure” means measures that are determined and presented in accordance with the
accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or
in part from such measures. Stock price and total shareholder return (and any measures that are derived wholly or in part
from stock price or total shareholder return) for purposes of this Policy are considered Financial Reporting Measures. For
the avoidance of doubt, a Financial Reporting Measure need not be presented within the financial statements or included
in a filing with the Commission.
j. “Incentive-based Compensation” means any compensation that is granted, earned, or vested based wholly or in part
upon the attainment of a Financial Reporting Measure.
k. “NYSE” means the New York Stock Exchange LLC.
l. “Policy” means this Policy for the Recovery of Erroneously Awarded Compensation, as the same may be amended
or amended and restated from time to time.
m. “Recovery Period” means the three completed fiscal years immediately preceding the Restatement Date and if the
Company changes its fiscal year, any transition period of less than nine months within or immediately following those
three completed fiscal years.
n. “Restatement” means an accounting restatement:
i. due to material noncompliance of the Company with any financial reporting requirement under the
securities laws, including any required accounting restatement to correct an error in previously issued
financial statements that is material to the previously issued financial statements, or
ii. that would result in a material misstatement if the error were corrected in the current period or left
uncorrected in the current period.
The determination of material noncompliance or material misstatement shall be conclusive and binding, and not
subject to challenge or contest.
o. “Restatement Date” means the earlier of:
i. the date the Board, the Finance, Risk Management and Audit Committee of the Board, or such other
authorized committee of the Board concludes, or reasonably should have concluded, that the Company is
required to prepare a Restatement, or
ii. the date a court, regulator, or other legally authorized body directs the Company to prepare a
Restatement.
2
NSP Policy for the Recovery of Erroneously Awarded Compensation_Final
4. Recovery of Erroneously Awarded Compensation.
a. The Chief Financial Officer of the Company shall promptly report to the Board, the Finance, Risk Management and
Audit Committee of the Board, and the Administrator any instance in which the Company is required to prepare a
Restatement.
b. Upon learning of a required Restatement, an entity specified in Section 3(o)(i) shall determine the Restatement
Date.
c. After the Restatement, the Chief Financial Officer (or another appropriate officer or third party designated by the
Administrator) shall reasonably promptly calculate the Erroneously Awarded Compensation for each affected individual,
which calculation shall be subject to approval by the Administrator. For purposes of calculating Erroneously Awarded
Compensation:
i. Incentive-based Compensation shall be deemed received in the Company’s fiscal period during which
the Financial Reporting Measure specified in the Incentive-based Compensation award is attained, even if
the payment or grant of the Incentive-based Compensation occurs after the end of that period (but shall not
include Incentive-based Compensation received prior to the Effective Date).
ii. For Incentive-based Compensation based on (or derived from) stock price or total shareholder return,
where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation
directly from the information in a Restatement, it shall be based on a reasonable estimate of the effect of
the Restatement on the stock price or total shareholder return upon which the Incentive-based
Compensation was received. The Company shall maintain documentation of the determination of that
reasonable estimate and provide such documentation to the NYSE.
d. Reasonably promptly following the Administrator’s approval of the Erroneously Awarded Compensation, the
Administrator shall notify in writing each individual who received Erroneously Awarded Compensation and shall demand
payment or return, as applicable, of such Erroneously Award Compensation.
e. The Company shall demand recovery and recover Erroneously Awarded Compensation in compliance with this
Policy except to the extent that the Administrator determines that recovery would be impracticable, and one of the
following conditions applies:
i. the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be
recovered; provided, however, that before concluding that it would be impracticable to recover any amount
of Erroneously Awarded Compensation based on expense of enforcement, the Company must make a
reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable
attempt(s) to recover, and provide that documentation to the NYSE;
ii. recovery would violate home country law where that law was adopted prior to November 28, 2022;
provided, however, that before concluding that it would be impracticable to recover any amount of
Erroneously Awarded Compensation based on violation of home country
3
NSP Policy for the Recovery of Erroneously Awarded Compensation_Final
law, the Company must obtain an opinion of home country counsel, acceptable to the NYSE, that recovery
would result in such a violation, and must provide such opinion to the NYSE; or
iii. recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are
broadly available to employees of the Company, to fail to meet the requirements of Sections 401(a)(13) or
411(a) of the Internal Revenue Code of 1986, as amended, and regulations thereunder.
f. Except as provided in Section 4(e)(i), Section 4(e)(ii) or Section 4(e)(iii), in no event may the Company accept final
repayment from the affected individual of less than the full amount of the Erroneously Awarded Compensation received
by such individual.
g. The Administrator shall determine, in its sole discretion, the timing and method of recovering any Erroneously
Awarded Compensation pursuant to this Policy, taking into account all facts and circumstances (including the time value
of money and the cost to shareholders of delayed recovery), so long as such method complies with the terms of Section
303A.14 of the NYSE Listed Company Manual. Without limitation, recovery may include for example direct repayment
by the individual, or the forfeiture or reduction of existing or future wages, compensation or equity-based awards. If the
Administrator determines that an appropriate method of recovery is one other than the prompt repayment by the affected
individual in cash or property, the Company may offer to enter into a repayment agreement with the affected individual
(in a form and with terms reasonably acceptable to the Administrator). The Company may offset, or cause to be offset,
any amounts that the affected individual is required to repay to the Company pursuant to this Policy against any amounts
otherwise owed by the Company or any of its subsidiaries to the affected individual. The Administrator’s determinations
regarding the timing and method of recovery need not be uniform with respect to each individual covered by the Policy.
h. To the extent the affected individual has already reimbursed the Company for any Erroneously Awarded
Compensation under any duplicate obligations established by the Company or applicable law, any such reimbursed
amount may appropriately be credited to the amount of Erroneously Awarded Compensation subject to recovery under
this Policy.
i. If the affected individual fails to repay to the Company when due the full amount of the Erroneously Awarded
Compensation received by such affected individual, the Company shall take all actions reasonable and appropriate to
recover the full amount of the Erroneously Awarded Compensation from the affected individual. In accordance with this
paragraph, the affected individual shall be required to reimburse the Company for any and all expenses reasonably
incurred (including legal fees) by the Company in recovering the Erroneously Awarded Compensation.
5. Disclosure. The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the
securities laws, including the disclosure required by the applicable Commission filings.
6. No Indemnification. The Company shall not indemnify any current or former Executive Officer against the loss of
Erroneously Awarded Compensation, and shall not pay, or reimburse any current or former Executive Officers for, premiums for
any insurance policy to fund such Executive Officer’s potential recovery obligations. Further, this Policy shall supersede any
prior
4
NSP Policy for the Recovery of Erroneously Awarded Compensation_Final
right to indemnification with an Executive Officer (whether entered into before, on or after the Effective Date).
7. Effective Date. This Policy shall be effective as of the Effective Date.
8. Amendment and Interpretation. The Administrator may amend this Policy from time to time in its discretion and shall
amend this Policy as it deems necessary or advisable to reflect the regulations adopted by the Commission and to comply with
any rules or standards adopted by the NYSE. The Administrator may at any time in its sole discretion, supplement, amend or
terminate any provision of this Policy in any respect as the Administrator determines to be necessary or appropriate. The
Administrator shall interpret and construe this Policy and make all determinations necessary or advisable for the administration
of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of
the Exchange Act and Rule 10D-1 thereunder and Section 303A.14 of the NYSE Listed Company Manual and any other
applicable rules adopted by the Commission.
9. Other Recoupment Rights. Any employment agreement, equity award agreement or similar agreement entered into on or
after the Effective Date may, as a condition to the grant of any benefit thereunder, require the party thereto to agree to abide by
the terms of this Policy or implement arrangements designed to facilitate the administration hereof. Although not a prerequisite to
enforcement of this Policy, each Executive Officer shall be provided with an acknowledgment form setting forth the individual’s
obligation under this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or
rights of recovery that may be available to the Company pursuant to the terms of the Company’s Incentive Compensation
Recoupment Policy originally adopted in 2014, and as may be amended from time to time, any employment agreement, equity
award agreement, or similar agreement and any other legal remedies available to the Company.
10. Successors. This Policy shall be binding and enforceable against all current and former Executive Officers and their
beneficiaries, heirs, executors, administrators or other legal representatives.
5
NSP Policy for the Recovery of Erroneously Awarded Compensation_Final
INSPERITY, INC.
POLICY FOR THE RECOVERY OF
ERRONEOUSLY AWARDED COMPENSATION
ACKNOWLEDGEMENT FORM
By signing below, the undersigned acknowledges and confirms the undersigned has received and reviewed a copy of the
Insperity, Inc. Policy for the Recovery of Erroneously Awarded Compensation (the “Policy”). Capitalized terms used but not
otherwise defined in this Acknowledgement Form shall have the meanings ascribed to such terms in the Policy.
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to
be subject to the Policy and that the Policy will apply both during and after the undersigned’s employment with the Company. In
the event of any inconsistency between the Policy and the terms of any agreement to which I am a party, or the terms of any
compensation arrangement, agreement, plan, or program under which compensation has been granted, awarded, earned or paid,
the terms of the Policy shall govern. Further, by signing below, the undersigned agrees to abide by the terms of the Policy,
including, without limitation, by promptly returning any Erroneously Awarded Compensation (as defined in the Policy) to the
Company, in a manner required by the Administrator, and as permitted by the Policy. For the avoidance of doubt, any recovery
affected under the Policy shall not, in itself, constitute grounds to terminate the undersigned’s employment for “Good Reason”
(or any term of similar meaning) under any employment or compensation arrangements, agreements, plans or programs.
____________________________________
Signed
____________________________________
Name (Printed)
____________________________________
Date
6
NSP Policy for the Recovery of Erroneously Awarded Compensation_Final