10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013.

or

o 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)

Delaware	76-0479645
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
19001 Crescent Springs Drive
Kingwood, Texas	77339
(Address of principal executive offices)	(Zip Code)

(Registrant’s Telephone Number, Including Area Code):  (281) 358-8986

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 ý  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes ý  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No ý

As of October 25, 2013, 25,570,160 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

	TABLE OF CONTENTS
	Part I
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25
Part II
Item 1.	Legal Proceedings	26
Item 1a.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28

PART I

ITEM 1.  FINANCIAL STATEMENTS

INSPERITY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

ASSETS

	September 30, 2013			December 31, 2012
	(Unaudited)
Current assets:
Cash and cash equivalents	$	161,842		$	264,544
Restricted cash	50,317			47,149
Marketable securities	47,400			16,904
Accounts receivable, net:
Trade	2,062			6,931
Unbilled	214,210			181,040
Other	2,690			2,415
Prepaid insurance	17,349			15,620
Other current assets	10,097			9,651
Deferred income taxes	3,451			7,211
Total current assets	509,418			551,465
Property and equipment:
Land	4,115			4,115
Buildings and improvements	68,363			68,583
Computer hardware and software	84,684			81,140
Software development costs	38,137			35,866
Furniture and fixtures	37,118			36,717
Aircraft	35,879			35,879
	268,296			262,300
Accumulated depreciation and amortization	(179,252		)	(168,358		)
Total property and equipment, net	89,044			93,942
Other assets:
Prepaid health insurance	9,000			9,000
Deposits – health insurance	3,700			3,000
Deposits – workers’ compensation	75,112			64,201
Goodwill and other intangible assets, net	22,275			23,775
Other assets	1,920			4,817
Total other assets	112,007			104,793
Total assets	$	710,469		$	750,200

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INSPERITY, INC.

CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY

	September 30, 2013			December 31, 2012
	(Unaudited)
Current liabilities:
Accounts payable	$	3,311		$	3,660
Payroll taxes and other payroll deductions payable	102,288			178,534
Accrued worksite employee payroll cost	184,142			150,070
Accrued health insurance costs	6,824			13,942
Accrued workers’ compensation costs	52,312			49,484
Accrued corporate payroll and commissions	22,186			23,537
Other accrued liabilities	15,561			12,478
Income taxes payable	57			4,054
Total current liabilities	386,681			435,759
Noncurrent liabilities:
Accrued workers’ compensation costs	66,654			64,536
Deferred income taxes	8,395			9,000
Total noncurrent liabilities	75,049			73,536
Commitments and contingencies
Stockholders’ equity:
Common stock	308			308
Additional paid-in capital	134,781			133,207
Treasury stock, at cost	(141,401		)	(133,950		)
Accumulated other comprehensive income, net of tax	23			16
Retained earnings	255,028			241,324
Total stockholders’ equity	248,739			240,905
Total liabilities and stockholders’ equity	$	710,469		$	750,200

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2013			2012			2013			2012
Revenues (gross billings of $3.236 billion, $3.068 billion, $9.736 billion and $9.339 billion, less worksite employee payroll cost of $2.696 billion, $2.556 billion, $8.037 billion and $7.712 billion, respectively)	$	539,869		$	511,953		$	1,698,979		$	1,626,386
Direct costs:
Payroll taxes, benefits and workers’ compensation costs	442,460			413,533			1,395,706			1,337,668
Gross profit	97,409			98,420			303,273			288,718
Operating expenses:
Salaries, wages and payroll taxes	43,797			44,032			137,697			127,402
Stock-based compensation	2,749			2,429			8,351			7,385
Commissions	3,609			3,358			10,349			10,299
Advertising	4,273			3,680			19,243			17,001
General and administrative expenses	20,567			21,122			62,592			61,694
Depreciation and amortization	5,302			4,659			15,692			13,336
	80,297			79,280			253,924			237,117
Operating income	17,112			19,140			49,349			51,601
Other income (expense):
Interest, net	26			142			155			462
Other, net	(1		)	(3		)	(2,668		)	141
Income before income tax expense	17,137			19,279			46,836			52,204
Income tax expense	7,055			7,827			20,093			21,247
Net income	$	10,082		$	11,452		$	26,743		$	30,957
Less distributed and undistributed earnings allocated to participating securities	(289		)	(334		)	(769		)	(898		)
Net income allocated to common shares	$	9,793		$	11,118		$	25,974		$	30,059
Basic net income per share of common stock	$	0.39		$	0.45		$	1.05		$	1.20
Diluted net income per share of common stock	$	0.39		$	0.45		$	1.04		$	1.20

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Net income	$	10,082	$	11,452	$	26,743	$	30,957
Other comprehensive income:
Unrealized gain on available-for-sale securities, net of tax	26		12		7		46
Comprehensive income	$	10,108	$	11,464	$	26,750	$	31,003

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2013

(in thousands)

(Unaudited)

	Common Stock Issued			Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings			Total
	Shares	Amount
Balance at December 31, 2012	30,758	$	308	$	133,207		$	(133,950	)	$	16	$	241,324		$	240,905
Purchase of treasury stock, at cost	—	—		—			(17,130		)	—		—			(17,130		)
Exercise of stock options	—	—		(740		)	1,903			—		—			1,163
Income tax benefit from stock-based compensation, net	—	—		877			—			—		—			877
Stock-based compensation expense	—	—		1,341			7,010			—		—			8,351
Other	—	—		96			766			—		—			862
Dividends paid	—	—		—			—			—		(13,039		)	(13,039		)
Unrealized gain on marketable securities, net of tax	—	—		—			—			7		—			7
Net income	—	—		—			—			—		26,743			26,743
Balance at September 30, 2013	30,758	$	308	$	134,781		$	(141,401	)	$	23	$	255,028		$	248,739

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended   September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	26,743		$	30,957
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	15,692			13,315
Impairment charge	2,679			—
Amortization of marketable securities	1,597			1,827
Stock-based compensation	8,351			7,385
Deferred income taxes	3,150			2,259
Changes in operating assets and liabilities:
Restricted cash	(3,168		)	(1,332		)
Accounts receivable	(28,576		)	(32,175		)
Prepaid insurance	(1,729		)	(2,439		)
Other current assets	(446		)	3,355
Other assets	(11,406		)	(6,373		)
Accounts payable	(349		)	(1,997		)
Payroll taxes and other payroll deductions payable	(76,246		)	(60,704		)
Accrued worksite employee payroll expense	34,072			43,947
Accrued health insurance costs	(7,118		)	13,095
Accrued workers’ compensation costs	2,828			5,231
Accrued corporate payroll, commissions and other accrued liabilities	3,850			2,155
Income taxes payable/receivable	(4,301		)	6,529
Total adjustments	(61,120		)	(5,922		)
Net cash provided by (used in) operating activities	(34,377		)	25,035
Cash flows from investing activities:
Marketable securities:
Purchases	(49,580		)	(23,585		)
Proceeds from dispositions	8,025			—
Proceeds from maturities	9,474			27,119
Cash exchanged for acquisitions	—			(1,200		)
Property and equipment	(9,281		)	(11,996		)
Net cash used in investing activities	(41,362		)	(9,662		)

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

(Unaudited)

	Nine Months Ended   September 30,
	2013			2012
Cash flows from financing activities:
Purchase of treasury stock	$	(17,130	)	$	(13,770	)
Dividends paid	(13,039		)	(12,643		)
Proceeds from the exercise of stock options	1,163			1,062
Income tax benefit from stock-based compensation	1,181			1,457
Other	862			(469		)
Net cash used in financing activities	(26,963		)	(24,363		)
Net decrease in cash and cash equivalents	(102,702		)	(8,990		)
Cash and cash equivalents at beginning of period	264,544			211,208
Cash and cash equivalents at end of period	$	161,842		$	202,218

See accompanying notes.

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INSPERITY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

(Unaudited)

1. Basis of Presentation

Insperity, Inc., a Delaware corporation (“Insperity,” “we,” “our,” and “us”), provides an array of human resources (“HR”) and business solutions designed to help improve business performance.  Our most comprehensive HR business offering is provided through our professional employer organization (“PEO”) services, known as Workforce Optimization^™, which encompasses a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services.

In addition to Workforce Optimization, we offer Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial Services, Expense Management, Retirement Services and Insurance Services (collectively “Adjacent Businesses”), many of which are offered via desktop applications and software as a service (“SaaS”) delivery models.  These other products or services are offered separately, as a bundle, or along with Workforce Optimization.

We provide our Workforce Optimization solution to small and medium-sized businesses in strategically selected markets throughout the United States.  For the nine months ended September 30, 2013 and 2012, Workforce Optimization revenues from our Texas markets represented 26% in both periods, while Workforce Optimization revenues from our California markets represented 18% and 17%, respectively, of our total Workforce Optimization revenues.

The Consolidated Financial Statements include the accounts of Insperity and its subsidiaries, all of which are wholly owned.  Intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“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.

The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2012. Our Consolidated Balance Sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements.  Our Consolidated Balance Sheet at September 30, 2013 and our Consolidated Statements of Operations and Comprehensive Income for the three and nine month periods ended September 30, 2013 and 2012, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2013 and 2012, and our Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2013, have been prepared by us without audit.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.

The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations.

2. Accounting Policies

Health Insurance Costs

We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield, Unity Health Plan and Tufts, all of which provide fully insured policies or service contracts.

The policy 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 Operations.  The estimated incurred claims are based upon: (i) the level of claims processed during the quarter; (ii) estimated completion rates

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based upon recent claim development patterns under the plan; and (iii) 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.

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 insurance.  In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $3.5 million as of September 30, 2013, and is reported as a long-term asset.  As of September 30, 2013, Plan Costs were less than the net premiums paid and owed to United by $16.4 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $7.4 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2013 were $3.5 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Workers’ Compensation Costs

Our workers’ compensation coverage has been provided through an arrangement with the ACE Group of Companies (“the ACE Program”) since 2007.  The ACE Program is fully insured in that ACE has the responsibility to pay all claims incurred regardless of whether we satisfy our responsibilities.  Through September 30, 2010, we bore the economic burden for the first $1 million layer of claims per occurrence and the insurance carrier was and remains responsible for the economic burden for all claims in excess of such first $1 million layer.

Effective October 1, 2010, in addition to our bearing the economic burden for the first $1 million layer of claims per occurrence, we also bear the economic burden for those claims exceeding $1 million, up to a maximum aggregate amount of $5 million per policy year.

Because we bear the economic burden 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.

We employ a third party actuary to estimate our loss development rate, which is primarily based upon the nature of worksite employees’ job responsibilities, the location of worksite employees, 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 nine months ended September 30, 2013 and 2012, we reduced our workers’ compensation costs by $8.3 million and $10.4 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 utilized in both the 2013 and 2012 periods was 0.7%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

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The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

	Nine Months Ended   September 30,
	2013			2012
	(in thousands)
Beginning balance, January 1,	$	111,685		$	104,791
Accrued claims	30,496			28,586
Present value discount	(748		)	(712		)
Paid claims	(24,462		)	(23,133		)
Ending balance	$	116,971		$	109,532
Current portion of accrued claims	$	50,317		$	46,069
Long-term portion of accrued claims	66,654			63,463
	$	116,971		$	109,532

The current portion of accrued workers’ compensation costs on the Consolidated Balance Sheets at September 30, 2013 includes $2.0 million of workers’ compensation administrative fees.

As of September 30, 2013 and 2012, the undiscounted accrued workers’ compensation costs were $127.5 million and $121.7 million, respectively.

At the beginning of each policy period, the 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 worksite employee 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. During the first nine months of 2013, we paid the insurance carrier an additional $5.0 million in claim funds for policy years prior to 2013, which increased deposits.  In the first nine months of 2012, we received $2.5 million for the return of excess claim funds related to the ACE Program, which reduced deposits. As of September 30, 2013, we had restricted cash of $50.3 million and deposits of $75.1 million.

Our estimate of incurred claim costs expected to be paid within one year are recorded as accrued workers’ compensation costs and included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year are included in long-term liabilities on our Consolidated Balance Sheets.

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3. 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:

	September 30, 2013			December 31, 2012
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	116,580		$	255,000
Investment Holdings
Money market funds (cash equivalents)	37,877			26,087
Marketable securities	47,400			16,904
	201,857			297,991
Cash held in demand accounts	18,717			21,732
Outstanding checks	(11,332		)	(38,275		)
Total cash, cash equivalents and marketable securities	$	209,242		$	281,448
Cash and cash equivalents	$	161,842		$	264,544
Marketable securities	47,400			16,904
	$	209,242		$	281,448

Our cash and overnight holdings fluctuate based on the timing of clients' payroll processing cycles.  Included in the cash balance as of September 30, 2013 and December 31, 2012, are $90.1 million and $158.2 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $9.0 million and $13.5 million in client prepayments, respectively.

We account for our financial assets in accordance with Accounting Standard Codification (“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

The following table summarizes the levels of fair value measurements of our financial assets:

	Fair Value Measurements
	(in thousands)
	September 30, 2013		Level 1		Level 2		Level 3
Money market funds	$	154,457	$	154,457	$	—	$	—
Municipal bonds	47,400		—		47,400		—
Total	$	201,857	$	154,457	$	47,400	$	—

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	Fair Value Measurements
	(in thousands)
	December 31, 2012		Level 1		Level 2		Level 3
Money market funds	$	281,087	$	281,087	$	—	$	—
Municipal bonds	16,904		—		16,904		—
Total	$	297,991	$	281,087	$	16,904	$	—

The municipal bond securities valued as Level 2 investments 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:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(in thousands)
September 30, 2013
Municipal bonds	$	47,361	$	41	$	(2	)	$	47,400
December 31, 2012
Municipal bonds	$	16,878	$	29	$	(3	)	$	16,904

As of September 30, 2013, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	30,885	$	30,905
One to five years	16,476		16,495
Total	$	47,361	$	47,400

4. Other Assets

In 2011, we acquired a minority interest in The Receivables Exchange ("TRE"), an online marketplace for the sale of accounts receivable, for $2.8 million. In the second quarter of 2013, TRE issued similar securities at per share amounts substantially below the per share book value of our investment. Accordingly, we valued the investment based on a similar security market transaction, which is a Level 2 valuation technique. This resulted in a non-cash impairment charge of $2.7 million, which was included in other income (expense) in our Consolidated Statements of Operations, during the second quarter of 2013. Due to federal income tax limitations on capital losses, no tax benefit associated with the impairment was recognized.

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5. Revolving Credit Facility

We have a $100 million revolving credit facility (the “Facility”), which may be increased to $150 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (the “Credit Agreement”). The Facility matures on September 15, 2015.  The Facility contains both affirmative and negative covenants, which we believe are customary for arrangements of this nature.  At September 30, 2013, we were in compliance with all financial covenants under the Credit Agreement and had not drawn on the Facility.

6. Stockholders' Equity

Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase Program”).  The purchases are to 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.  In May 2013, the Board increased the authorized number of shares to be repurchased under the program by one million.  During the nine months ended September 30, 2013, 476,903 shares were repurchased under the Repurchase Program and 116,931 shares not subject to the Repurchase Program were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  As of September 30, 2013, we were authorized to repurchase an additional 1,352,569 shares under the program.

The Board declared quarterly dividends in the first three quarters of 2013 and 2012 as follows:

	2013		2012
	(amounts per share)
First quarter	$	0.17	$	0.15
Second quarter	0.17		0.17
Third quarter	0.17		0.17

 During the nine months ended September 30, 2013 and 2012, we paid dividends totaling $13.0 million and $12.6 million, respectively.

7. Net Income per Share

We utilize the two-class method to compute net income per share.  The two-class method allocates a portion of net income to participating securities, which include unvested awards of share-based payments with non-forfeitable rights to receive dividends.  Net income allocated to unvested share-based payments is excluded from net income allocated to common shares.  Any undistributed losses resulting from dividends exceeding net income are not allocated to participating securities.  Basic net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period.  Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options.

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The following table summarizes the net income allocated to common shares and the basic and diluted shares used in the net income per share computations:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2013			2012			2013			2012
	(in thousands)
Net income	$	10,082		$	11,452		$	26,743		$	30,957
Less distributed and undistributed earnings allocated to participating securities	(289		)	(334		)	(769		)	(898		)
Net income allocated to common shares	$	9,793		$	11,118		$	25,974		$	30,059
Weighted average common shares outstanding	24,849			24,923			24,855			25,034
Incremental shares from assumed conversions of common stock options	18			57			24			63
Adjusted weighted average common shares outstanding	24,867			24,980			24,879			25,097
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect	—			41			10			33

8. Commitments and Contingencies

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.

Lumbermens Mutual Casualty Company

In 2003, facing continued capital constraints and a series of downgrades from various rating agencies, our former workers’ compensation insurance carrier for the two-year period ended September 2003, Lumbermens Mutual Casualty Company, formerly known as Kemper (“Lumbermens Mutual”), made the decision to substantially cease underwriting operations and voluntarily entered into “run-off."  In July 2012, Lumbermens Mutual announced that an agreed order of rehabilitation had been entered against it in Cook County, Illinois.  Under the order, the Director of the Illinois Department of Insurance was vested with control over Lumbermens Mutual property and decision-making.  In an order effective May 10, 2013, the Circuit Court of Cook County, Illinois, found that Lumbermens Mutual was insolvent and ordered its liquidation.

The entry of a liquidation order has triggered the transition of claim handling responsibilities for Lumbermens Mutual's open claims to state guaranty associations around the country. Guaranty associations are non-profit organizations created by statute for the purpose of protecting policyholders from severe financial losses and preventing delays in claim payments due to the insolvency of an insurer.  They do this by assuming responsibility for the payment of claims that would otherwise have been paid by the insurer had it not become insolvent.  Each state has one or more guaranty association(s), with each association handling certain types of insurance.  Insurance companies are required to be members of the state guaranty association as a condition of being licensed to do business in the state.

The guaranty associations in some states, including Texas, may assert that state law allows them to recover the amount of benefits paid by the guaranty association along with associated administration and defense costs from an insured with a net worth exceeding certain specified levels or based upon certain other theories of recovery.  We intend to vigorously assert our available defenses to any claims made by any guaranty association.  We estimate the outstanding amounts that may be subject to claims from state guaranty associations to range from $1.1 million to $5.0 million as of September 30, 2013.  In the event state guaranty associations are successful in seeking recovery from us, we would be required to pay such claims and record liabilities for anticipated future claims, which could have a material adverse effect on net income in the reported period.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012, as well as our Consolidated Financial Statements and notes thereto included in this quarterly report on Form 10-Q.

New Accounting Pronouncements

We believe we have implemented the accounting pronouncements with a material impact on our financial statements.

Results of Operations

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012.

The following table presents certain information related to our results of operations:

	Three Months Ended   September 30,
	2013		2012		% Change
	(in thousands, except per share and statistical data)
Revenues (gross billings of $3.236 billion and $3.068 billion, less worksite employee payroll cost of $2.696 billion and $2.556 billion, respectively)	$	539,869	$	511,953	5.5	%
Gross profit	97,409		98,420		(1.0	)%
Operating expenses	80,297		79,280		1.3	%
Operating income	17,112		19,140		(10.6	)%
Other income	25		139		(82.0	)%
Net income	10,082		11,452		(12.0	)%
Diluted net income per share of common stock	0.39		0.45		(13.3	)%
Statistical Data:
Average number of worksite employees paid per month	129,248		127,096		1.7	%
Revenues per worksite employee per month(1)	$	1,392	$	1,343	3.6	%
Gross profit per worksite employee per month	251		258		(2.7	)%
Operating expenses per worksite employee per month	207		208		(0.5	)%
Operating income per worksite employee per month	44		50		(12.0	)%
Net income per worksite employee per month	26		30		(13.3	)%

 ____________________________________

⁽¹⁾  Gross billings of $8,346 and $8,047 per worksite employee per month, less payroll cost of $6,954 and $6,704 per worksite employee per month, respectively.

Revenues

Our revenues for the third quarter of 2013increased5.5% over the 2012 period, primarily due to a 1.7%increase in the average number of worksite employees paid per month and a 3.6%, or $49increase in revenues per worksite employee per month.

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By region, our Workforce Optimization revenue change from the third quarter of 2012 and distribution for the quarters ended September 30, 2013 and 2012 were as follows:

	Three Months Ended   September 30,						Three Months Ended   September 30,
	2013		2012		% Change		2013		2012
	(in thousands)						(% of total revenue)
Northeast	$	136,334	$	131,759	3.5	%	25.7	%	26.1	%
Southeast	51,813		47,670		8.7	%	9.8	%	9.5	%
Central	78,322		73,875		6.0	%	14.8	%	14.7	%
Southwest	147,518		140,843		4.7	%	27.8	%	27.9	%
West	116,959		110,110		6.2	%	21.9	%	21.8	%
	530,946		504,257		5.3	%	100.0	%	100.0	%
Other revenue(1)	8,923		7,696		15.9	%
Total revenue	$	539,869	$	511,953	5.5	%

_____________________________

⁽¹⁾ Comprised primarily of revenues generated by Adjacent Businesses.

Our Workforce Optimization growth rate is affected by three primary sources – worksite employees paid from new client sales, client retention and the net change in existing clients through worksite employee new hires and layoffs.  During the third quarter of 2013, we saw slight improvement in client retention and in the net change in existing clients as compared with 2012, while worksite employees paid from new client sales declined modestly compared to the third quarter of 2012.

Gross Profit

Gross profit for the third quarter of 2013decreased1.0% compared to the third quarter of 2012 to $97.4 million.  The average gross profit per worksite employee decreased2.7% to $251 per month in the 2013 period from $258 per month in the 2012 period.  Included in gross profit in 2013 is a $15 per worksite employee per month contribution from our Adjacent Businesses compared to $11 per worksite employee per month in the 2012 period.

Our pricing objectives attempt to maintain or improve the gross profit per worksite employee by increasing revenue per worksite employee to match or exceed changes in primary direct costs and operating expenses.  Our revenues during the third quarter of 2013increased3.6% per worksite employee per month as compared to the third quarter of 2012. However, our direct costs, which primarily include payroll taxes, benefits and workers’ compensation expenses, increased5.2% to $1,141 per worksite employee per month in the third quarter of 2013 versus $1,085 in the third quarter of 2012.  The primary direct cost components changed as follows:

• Benefits costs – The cost of group health insurance and related employee benefits increased$45 per worksite employee per month, or 7.5% on a cost per covered employee basis compared to the third quarter of 2012. Our benefits costs incurred in the third quarter of 2012 reflected lower claims activity than historical trends, which impacted the year-over-year comparison.  The percentage of worksite employees covered under our health insurance plans was 71.8% in the 2013 period compared to 71.9% in the 2012 period. Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies– Health Insurance Costs,” for a discussion of our accounting for health insurance costs.

• Workers’ compensation costs – Workers’ compensation costs were flat in the third quarter of 2013, but decreased$1 per worksite employee per month compared to the third quarter of 2012.  As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.55% in the 2013 period compared to 0.57% in the 2012 period. During the 2013 period, we recorded reductions in workers’ compensation costs of $1.9 million, or 0.08% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $3.9 million, or 0.16% of non-bonus payroll costs in the 2012 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.

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• Payroll tax costs – Payroll taxes increased 4.7%, or $13 per worksite employee per month compared to the third quarter of 2012 primarily due to the 5.5%increase in payroll costs. Payroll taxes as a percentage of payroll cost were 6.3% in the 2013 period compared to 6.4% in the 2012 period.

Operating Expenses

The following table presents certain information related to our operating expenses:

	Three Months Ended   September 30,						Three Months Ended   September 30,
	2013		2012		% Change		2013		2012		% Change
	(in thousands)						(per worksite employee per month)
Salaries, wages and payroll taxes	$	43,797	$	44,032	(0.5	)%	$	113	$	115	(1.7	)%
Stock-based compensation	2,749		2,429		13.2	%	7		6		16.7	%
Commissions	3,609		3,358		7.5	%	9		9		—
Advertising	4,273		3,680		16.1	%	11		10		10.0	%
General and administrative expenses	20,567		21,122		(2.6	)%	53		56		(5.4	)%
Depreciation and amortization	5,302		4,659		13.8	%	14		12		16.7	%
Total operating expenses	$	80,297	$	79,280	1.3	%	$	207	$	208	(0.5	)%

Operating expenses increased1.3% to $80.3 million compared to $79.3 million in the third quarter of 2012.  Operating expenses per worksite employee per month decreased to $207 in the 2013 period from $208 in the 2012 period.  The components of operating expenses changed as follows:

• Salaries, wages and payroll taxes of corporate and sales staff decreased0.5% or $2 per worksite employee per month compared to the 2012 period.  This decrease was primarily due to lower incentive compensation accruals offset by a 7.8% rise in headcount, which includes the recent increase in Business Performance Advisors.

• Stock-based compensation increased13.2%, or $1 per worksite employee per month compared to the 2012 period, primarily due to an increase in the weighted average market value on the date of grant associated with restricted stock awards.  Stock-based compensation expense represents amortization of restricted stock awards granted to employees.

• Commissions expense increased7.5%, but remained flat on a per worksite employee per month basis compared to the 2012 period. This increase was primarily due to commissions paid to our Adjacent Businesses.

• Advertising costs increased16.1%, or $1 per worksite employee per month compared to the 2012 period, primarily due to increased spending on health care reform related advertising and business promotions.

• General and administrative expenses decreased2.6%, or $3 per worksite employee per month compared to the 2012 period, primarily due to reductions in bad debts and professional services, partially offset by increases in travel, training and repairs and maintenance.

• Depreciation and amortization expense increased13.8%, or $2 per worksite employee per month compared to the 2012 period, primarily due to investments in our technology infrastructure and amortization associated with our Adjacent Business investments.

Income Tax Expense

Our effective income tax rate was 41.2% in the 2013 period compared to 40.6% in the 2012 period.  Our provision for income taxes differed from the U.S. statutory rate of 35% primarily due to state income taxes and non-deductible expenses.

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Operating and Net Income

Operating and net income per worksite employee per month was $44 and $26 in the 2013 period, versus $50 and $30 in the 2012 period.

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012.

The following table presents certain information related to our results of operations:

	Nine Months Ended   September 30,
	2013			2012		% Change
	(in thousands, except per share and statistical data)
Revenues (gross billings of $9.736 billion and $9.339 billion, less worksite employee payroll cost of $8.037 billion and $7.712 billion, respectively)	$	1,698,979		$	1,626,386	4.5	%
Gross profit	303,273			288,718		5.0	%
Operating expenses	253,924			237,117		7.1	%
Operating income	49,349			51,601		(4.4	)%
Other income (expense)	(2,513		)	603		—
Net income	26,743			30,957		(13.6	)%
Diluted net income per share of common stock	1.04			1.20		(13.3	)%
Statistical Data:
Average number of worksite employees paid per month	126,445			124,418		1.6	%
Revenues per worksite employee per month(1)	$	1,493		$	1,452	2.8	%
Gross profit per worksite employee per month	266			258		3.1	%
Operating expenses per worksite employee per month	223			212		5.2	%
Operating income per worksite employee per month	43			46		(6.5	)%
Net income per worksite employee per month	23			28		(17.9	)%

 ____________________________________

⁽¹⁾ Gross billings of $8,555 and $8,340 per worksite employee per month, less payroll cost of $7,062 and $6,888 per worksite employee per month, respectively.

Revenues

Our revenues for the nine months ended September 30, 2013increased4.5% over the 2012 period, primarily due to a 1.6%increase in the average number of worksite employees paid per month and a 2.8%, or $41increase in revenues per worksite employee per month.

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By region, our Workforce Optimization revenue change from the first nine months of 2012 and distribution for the nine months ended September 30, 2013 and 2012 were as follows:

	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2013		2012		% Change		2013		2012
	(in thousands)						(% of total revenue)
Northeast	$	439,351	$	425,295	3.3	%	26.3	%	26.5	%
Southeast	158,976		148,552		7.0	%	9.5	%	9.3	%
Central	247,078		235,464		4.9	%	14.8	%	14.7	%
Southwest	459,740		447,617		2.7	%	27.5	%	27.9	%
West	367,829		346,387		6.2	%	21.9	%	21.6	%
	1,672,974		1,603,315		4.3	%	100.0	%	100.0	%
Other revenue(1)	26,005		23,071		12.7	%
Total revenue	$	1,698,979	$	1,626,386	4.5	%

______________________________

⁽¹⁾ Comprised primarily of revenues generated by Adjacent Businesses.

Our Workforce Optimization growth rate is affected by three primary sources – worksite employees paid from new client sales, client retention and the net change in existing clients through worksite employee new hires and layoffs.  During the first nine months of 2013, we saw declines in each of the three primary sources as compared to the first nine months of 2012.

Gross Profit

Gross profit for the first nine months of 2013increased5.0% over the first nine months of 2012 to $303.3 million.  The average gross profit per worksite employee increased 3.1% to $266 per month in the 2013 period from $258 per month in the 2012 period.  Included in gross profit in 2013 is a $14 per worksite employee per month contribution from our Adjacent Businesses compared to $11 per worksite employee per month in the 2012 period.

Our pricing objectives attempt to maintain or improve the gross profit per worksite employee by increasing revenue per worksite employee to match or exceed changes in primary direct costs and operating expenses.  Our revenues increased2.8% per worksite employee per month and our direct costs, which primarily include payroll taxes, benefits and workers’ compensation expenses, also increased2.8% to $1,227 per worksite employee per month compared to $1,194 in the first nine months of 2012.  The primary direct cost components changed as follows:

• Benefits costs – The cost of group health insurance and related employee benefits increased$23 per worksite employee per month, or 4.0% on a cost per covered employee basis compared to the first nine months of 2012.  Included in 2013 benefits costs is a reduction of $3.4 million, or $3 per worksite employee per month, for lower than expected claim costs and premium taxes related to prior periods. The 2012 benefits costs included $2.4 million, or $2 per worksite employee per month in claim costs for higher than expected run-off of claims incurred in prior periods. The percentage of worksite employees covered under our health insurance plans was 72.1% in the 2013 period compared to 72.3% in the 2012 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Health Insurance Costs,” for a discussion of our accounting for health insurance costs.

• Workers’ compensation costs – Workers’ compensation costs increased2.6%, but remained flat on a per worksite employee per month basis compared to the first nine months of 2012.  As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.54% in the 2013 period compared to 0.56% in the 2012 period.  During the 2013 period, we recorded reductions in workers’ compensation costs of $8.3 million, or 0.11% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $10.4 million, or 0.15% of non-bonus payroll costs in the 2012 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.

• Payroll tax costs – Payroll taxes increased3.3%, or $8 per worksite employee per month compared to the first nine months of 2012, primarily due to the 4.2%increase in payroll costs and a $2.9 million, or $3 per worksite employee per

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month credit recognized in 2012 related to a Pennsylvania tax matter. Payroll taxes as a percentage of payroll cost were 7.6% in the 2013 period and 7.7% in the 2012 period.  

Operating Expenses

The following table presents certain information related to our operating expenses:

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2013		2012		% Change		2013		2012		% Change
	(in thousands)						(per worksite employee per month)
Salaries, wages and payroll taxes	$	137,697	$	127,402	8.1	%	$	121	$	114	6.1	%
Stock-based compensation	8,351		7,385		13.1	%	7		7		—
Commissions	10,349		10,299		0.5	%	9		9		—
Advertising	19,243		17,001		13.2	%	17		15		13.3	%
General and administrative expenses	62,592		61,694		1.5	%	55		55		—
Depreciation and amortization	15,692		13,336		17.7	%	14		12		16.7	%
Total operating expenses	$	253,924	$	237,117	7.1	%	$	223	$	212	5.2	%

Operating expenses increased7.1% to $253.9 million compared to $237.1 million in the first nine months of 2012.  Operating expenses per worksite employee per month increased to $223 in the 2013 period from $212 in the 2012 period.  The components of operating expenses changed as follows:

• Salaries, wages and payroll taxes of corporate and sales staff increased8.1%, or $7 per worksite employee per month compared to the 2012 period.  This increase was primarily due to a 6.2% rise in headcount.

• Stock-based compensation increased13.1%, but remained flat on a per worksite employee per month basis compared to the 2012 period, primarily due to an increase in the weighted average market value on the date of grant associated with restricted stock awards.  Stock-based compensation expense represents amortization of restricted stock awards granted to employees.

• Commissions expense increased0.5% and remained flat on a per worksite employee per month basis compared to the 2012 period.

• Advertising costs increased13.2%, or $2 per worksite employee per month compared to the 2012 period, primarily due to increased spending on health care reform related advertising and business promotions.

• General and administrative expenses increased1.5%, but remained flat on a per worksite employee per month basis compared to the 2012 period, primarily due to increased travel, training and repairs and maintenance, partially offset by reductions in professional services and bad debts.

• Depreciation and amortization expense increased17.7%, or $2 per worksite employee per month compared to the 2012 period, primarily due to investments in our technology infrastructure and amortization associated with our Adjacent Business investments.

Other Income (Expense)

Other expense increased $3.1 million in the first nine months of 2013 compared to the first nine months of 2012, primarily due to a non-cash impairment charge related to our minority investment in The Receivables Exchange. Please read Note 4 to the Consolidated Financial Statements, "Other Assets," for additional information.

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Income Tax Expense

Our effective income tax rate was 42.9% in the 2013 period compared to 40.7% in the 2012 period.  Our provision for income taxes differed from the U.S. statutory rate of 35% primarily due to state income taxes and non-deductible expenses, including the 2013 non-cash impairment charge related to our minority investment in The Receivables Exchange. Please read Note 4 to the Consolidated Financial Statements, "Other Assets," for additional information.

Operating and Net Income

Operating and net income per worksite employee per month was $43 and $23 in the 2013 period, versus $46 and $28 in the 2012 period.

Non-GAAP Financial Measures

Non-bonus payroll cost is a non-GAAP financial measure that excludes the impact of bonus payrolls paid to our worksite employees.  Bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program.  As a result, our management refers to non-bonus payroll cost in analyzing, reporting and forecasting our workers’ compensation costs.  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.  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.  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 table below.

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2013		2012		% Change		2013		2012		% Change
	(in thousands, except per worksite employee per month data)
GAAP to non-GAAP reconciliation:
Payroll cost (GAAP)	$	2,696,330	$	2,556,114	5.5	%	$	8,036,532	$	7,712,302	4.2	%
Less: Bonus payroll cost	192,868		156,723		23.1	%	706,795		728,589		(3.0	)%
Non-bonus payroll cost	$	2,503,462	$	2,399,391	4.3	%	$	7,329,737	$	6,983,713	5.0	%
Payroll cost per worksite employee per month (GAAP)	$	6,954	$	6,704	3.7	%	$	7,062	$	6,888	2.5	%
Less: Bonus payroll cost per worksite employee per month	498		411		21.2	%	621		651		(4.6	)%
Non-bonus payroll cost per worksite employee per month	$	6,456	$	6,293	2.6	%	$	6,441	$	6,237	3.3	%

Liquidity and Capital Resources

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of, among other things, our expansion plans, potential acquisitions and other operating cash needs.  To meet short-term liquidity requirements, which are primarily the payment of direct and operating expenses, we rely primarily on cash from operations.  Longer-term projects or significant acquisitions may be financed with debt or equity.  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 $209.2 million in cash, cash equivalents and marketable securities at September 30, 2013, of which approximately $90.1 million was payable in early October2013 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $9.0 million were customer prepayments that were payable in October2013.  At September 30, 2013, we had working capital of $122.7 million compared to $115.7 million at December 31, 2012.  We currently believe that our cash on hand, marketable securities, cash flows from operations and availability under our credit facility will be adequate to meet our liquidity requirements for the remainder of 2013.  We will rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

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We have a $100 million revolving credit facility (“Facility”) with a syndicate of financial institutions.  The Facility is available for working capital and general corporate purposes, including acquisitions, and was undrawn at September 30, 2013.  Please read Note 5 to the Consolidated Financial Statements, “Revolving Credit Facility,” for additional information.

Cash Flows from Operating Activities

Net cash used in operating activities in 2013 was $34.4 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 levels – We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of worksite employee 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 worksite employees are paid on Fridays; therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday.  In the period ended September 30, 2013, the last business day of the reporting period was a Monday, client prepayments were $9.0 million and accrued worksite employee payroll was $184.1 million.  In the period ended September 30, 2012, the last business day of the reporting period was a Friday, client prepayments were $12.4 million and accrued worksite employee payroll was $174.3 million.

• Workers’ compensation plan funding – Under our workers’ compensation insurance arrangements, we make monthly payments to the carriers comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”).  These pre-determined amounts are stipulated in our agreements with the carriers, and are based primarily on anticipated worksite employee payroll levels and workers’ compensation loss rates during the policy year.  Changes in payroll levels from those that were anticipated in the arrangements can result in changes in the amount of cash payments, which will impact our reporting of operating cash flows.  Our claim funds paid, based upon anticipated worksite employee payroll levels and workers’ compensation loss rates, were $33.5 million in the first nine months of 2013 and $32.1 million in the first nine months of 2012.  However, our estimate of workers’ compensation loss costs was $29.7 million in the 2013 period and $27.9 million in the 2012 period, respectively. During the first nine months of 2013, we paid the insurance carrier an additional $5.0 million in claim funds for policy years prior to 2013. During the first nine months of 2012, we received $2.5 million for the return of excess claim funds related to the workers' compensation program, which resulted in an increase to working capital.

• 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.  At September 30, 2013, premiums owed and cash funded to United have exceeded Plan Costs, resulting in a $16.4 million surplus, $7.4 million of which is reflected as a current asset, and $9.0 million of which is reflected as a long-term asset on our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2013, were $3.5 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.

• Operating results – Our net income has a significant impact on our operating cash flows.  Our net income decreased13.6% to $26.7 million in the nine months ended September 30, 2013, compared to $31.0 million in the nine months ended September 30, 2012, due to higher operating expenses and a $2.7 million non-cash impairment charge on a minority investment.  Please read “Results of Operations – Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012.”

Cash Flows from Investing Activities

Net cash flows used in investing activities were $41.4 million for the nine months ended September 30, 2013, primarily due to marketable securities purchases, net of maturities and dispositions, of $32.1 million.

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Cash Flows from Financing Activities

Net cash flows used in financing activities were $27.0 million for the nine months ended September 30, 2013, including $17.1 million in stock repurchases and $13.0 million in dividends paid.

ITEM 3.  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 September 30, 2013, we had not drawn on the Facility.  Please read Note 5 to the Consolidated Financial Statements, “Revolving Credit Facility,” for additional information.  The 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.  The 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 pre-refunded municipal bonds that are secured by escrow funds containing U.S. Government Securities.

ITEM 4.  CONTROLS AND PROCEDURES.

In accordance with the Securities Exchange Act of 1934 Rules 13a-15 and 15d-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 September 30, 2013.

There has been no change in our internal controls over financial reporting that occurred during the three months ended September 30, 2013, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

- 25 -

PART II

ITEM 1.  LEGAL PROCEEDINGS.

Please read Note 8 to the Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference.

ITEM 1A.  RISK FACTORS

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions.  Forward-looking statements involve a number of risks and uncertainties.  In the normal course of business, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time 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, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results.  We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made.  These statements are not guarantees of future performance and involve risks and uncertainties 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 could differ materially from those stated in such forward-looking statements.  Among the factors that could cause actual results to differ materially are: (i) continued effects of the economic recession and general economic conditions; (ii) regulatory and tax developments and possible adverse application of various federal, state and local regulations; (iii) the ability to secure competitive replacement contracts for health insurance and workers’ compensation contracts at expiration of current contracts; (iv) increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers and other insurers, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims; (v) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (vi) changes in the competitive environment in the PEO industry, including the entrance of new competitors and our ability to renew or replace client companies; (vii) our liability for worksite employee payroll, payroll taxes and benefits costs; (viii) our liability for disclosure of sensitive or private information; (ix) our ability to integrate or realize expected return on our acquisitions; and (x) an adverse final judgment or settlement of claims against Insperity.  These factors are discussed in further detail in our 2012 Annual Report on Form 10-K under “Factors That May Affect Future Results and the Market Price of Common Stock” on page 19, and elsewhere in this report.  Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.

There have been no material changes in the risk factors disclosed pursuant to Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012.

- 26 -

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases by Insperity during the three months ended September 30, 2013, of equity securities that are registered by Insperity pursuant to Section 12 of the Exchange Act:

Period	Total Number of Shares Purchased(1)(2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program(1)	Maximum Number of Shares that may yet be Purchased under the Program(1)
07/01/2013 – 07/31/2013	184	$	33.07	—	1,413,845
08/01/2013 – 08/31/2013	29,496	33.02		29,496	1,384,349
09/01/2013 – 09/30/2013	31,780	32.35		31,780	1,352,569
Total	61,460	$	32.67	61,276	1,352,569

 ____________________________________

⁽¹⁾  Our Board has approved a program to repurchase up to 15.5 million shares of our outstanding common stock.  During the three months ended September 30, 2013, 61,276 shares were repurchased under the program and 184 shares were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  As of September 30, 2013, we were authorized to repurchase an additional 1,352,569 shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.

⁽²⁾  These shares include shares of restricted stock that were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock.  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 described above.

- 27 -

ITEM 6.  EXHIBITS

(a) List of Exhibits

31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	*	XBRL Instance Document.(1)
101.SCH	*	XBRL Taxonomy Extension Schema Document.
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	*	XBRL Extension Definition Linkbase Document.
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document.

____________________________________
*	Filed with this report.
**	Furnished with this report

⁽¹⁾  Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2013 and 2012; (ii) the Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2013 and 2012; (iii) the Consolidated Balance Sheets at September 30, 2013 and December 31, 2012; (iv) the Consolidated Statement of Stockholders’ Equity for the nine month period ended September 30, 2013; (v) the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2013 and 2012; and (vi) Notes to the Consolidated Financial Statements.

- 28 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Insperity, Inc.
Date: November 1, 2013	By:	/s/ Douglas S. Sharp
		Douglas S. Sharp
		Senior Vice President of Finance,
		Chief Financial Officer and Treasurer
		(Principal Financial and Duly Authorized Officer)

- 29 -

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Paul J. Sarvadi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;

2. 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;

3. 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;

4. 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: November 1, 2013
	/s/ Paul J. Sarvadi
	Paul J. Sarvadi
	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Douglas S. Sharp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;

2. 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;

3. 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;

4. 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: November 1, 2013
	/s/ Douglas S. Sharp
	Douglas S. Sharp
	Senior Vice President of Finance, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Paul J. Sarvadi, Chairman of the Board and 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 and Chief Executive Officer

November 1, 2013

EX-32.2

 Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Douglas S. Sharp, Senior Vice President of Finance, Chief Financial Officer and 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

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

November 1, 2013

XML

Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Activity and balances related to incurred but not paid workers' compensation claims

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

	Nine Months Ended   September 30,
	2013			2012
	(in thousands)
Beginning balance, January 1,	$	111,685		$	104,791
Accrued claims	30,496			28,586
Present value discount	(748		)	(712		)
Paid claims	(24,462		)	(23,133		)
Ending balance	$	116,971		$	109,532
Current portion of accrued claims	$	50,317		$	46,069
Long-term portion of accrued claims	66,654			63,463
	$	116,971		$	109,532

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Statement [Abstract]
Gross billings	$ 3,236	$ 3,068	$ 9,736	$ 9,339
Worksite employee payroll costs	$ 2,696	$ 2,556	$ 8,037	$ 7,712

XML

Cash, Cash Equivalents and Marketable Securities

9 Months Ended

Sep. 30, 2013

Cash, Cash Equivalents and Marketable Securities [Abstract]

Cash, Cash Equivalents and Marketable Securities

3. 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:

	September 30, 2013			December 31, 2012
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	116,580		$	255,000
Investment Holdings
Money market funds (cash equivalents)	37,877			26,087
Marketable securities	47,400			16,904
	201,857			297,991
Cash held in demand accounts	18,717			21,732
Outstanding checks	(11,332		)	(38,275		)
Total cash, cash equivalents and marketable securities	$	209,242		$	281,448
Cash and cash equivalents	$	161,842		$	264,544
Marketable securities	47,400			16,904
	$	209,242		$	281,448

Our cash and overnight holdings fluctuate based on the timing of clients' payroll processing cycles.  Included in the cash balance as of September 30, 2013 and December 31, 2012, are $90.1 million and $158.2 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $9.0 million and $13.5 million in client prepayments, respectively.

We account for our financial assets in accordance with Accounting Standard Codification (“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

The following table summarizes the levels of fair value measurements of our financial assets:

	Fair Value Measurements
	(in thousands)
	September 30, 2013		Level 1		Level 2		Level 3
Money market funds	$	154,457	$	154,457	$	—	$	—
Municipal bonds	47,400		—		47,400		—
Total	$	201,857	$	154,457	$	47,400	$	—

	Fair Value Measurements
	(in thousands)
	December 31, 2012		Level 1		Level 2		Level 3
Money market funds	$	281,087	$	281,087	$	—	$	—
Municipal bonds	16,904		—		16,904		—
Total	$	297,991	$	281,087	$	16,904	$	—

The municipal bond securities valued as Level 2 investments 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:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(in thousands)
September 30, 2013
Municipal bonds	$	47,361	$	41	$	(2	)	$	47,400
December 31, 2012
Municipal bonds	$	16,878	$	29	$	(3	)	$	16,904

As of September 30, 2013, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	30,885	$	30,905
One to five years	16,476		16,495
Total	$	47,361	$	47,400

XML

Other Assets (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2011
Other Assets [Abstract]
Impairment charge	$ 2,679,000	$ 0
Cost method investments			$ 2,800,000

XML

Cash, Cash Equivalents and Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2013

Cash, Cash Equivalents and Marketable Securities [Abstract]

Summary of investments in 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:

	September 30, 2013			December 31, 2012
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	116,580		$	255,000
Investment Holdings
Money market funds (cash equivalents)	37,877			26,087
Marketable securities	47,400			16,904
	201,857			297,991
Cash held in demand accounts	18,717			21,732
Outstanding checks	(11,332		)	(38,275		)
Total cash, cash equivalents and marketable securities	$	209,242		$	281,448
Cash and cash equivalents	$	161,842		$	264,544
Marketable securities	47,400			16,904
	$	209,242		$	281,448

Summary of fair value measurements of financial assets

The following table summarizes the levels of fair value measurements of our financial assets:

	Fair Value Measurements
	(in thousands)
	September 30, 2013		Level 1		Level 2		Level 3
Money market funds	$	154,457	$	154,457	$	—	$	—
Municipal bonds	47,400		—		47,400		—
Total	$	201,857	$	154,457	$	47,400	$	—

	Fair Value Measurements
	(in thousands)
	December 31, 2012		Level 1		Level 2		Level 3
Money market funds	$	281,087	$	281,087	$	—	$	—
Municipal bonds	16,904		—		16,904		—
Total	$	297,991	$	281,087	$	16,904	$	—

Summary of available-for-sale securities

The following is a summary of our available-for-sale marketable securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(in thousands)
September 30, 2013
Municipal bonds	$	47,361	$	41	$	(2	)	$	47,400
December 31, 2012
Municipal bonds	$	16,878	$	29	$	(3	)	$	16,904

Contractual maturities of marketable securities

As of September 30, 2013, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	30,885	$	30,905
One to five years	16,476		16,495
Total	$	47,361	$	47,400

XML

Net Income per Share (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share [Abstract]
Net income	$ 10,082	$ 11,452	$ 26,743	$ 30,957
Less distributed and undistributed earnings allocated to participating securities	(289)	(334)	(769)	(898)
Net income allocated to common shares	$ 9,793	$ 11,118	$ 25,974	$ 30,059
Weighted average common shares outstanding (in shares)	24,849	24,923	24,855	25,034
Incremental shares from assumed conversions of common stock options (in shares)	18	57	24	63
Adjusted weighted average common shares outstanding (in shares)	24,867	24,980	24,879	25,097
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect (in shares)	0	41	10	33

XML

Stockholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended						9 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2013	Sep. 30, 2012	May 16, 2013
Stockholders' Equity Note [Abstract]
Payments of Dividends							$ 13,039	$ 12,643
Stock Repurchase Program Additional Number of Shares Authorized to Be Repurchased (in shares)									1,000,000
Shares repurchased under the program (in shares)							476,903
Shares withheld for tax withholding obligations for the vesting of restricted stock awards (in shares)							116,931
Authorized to repurchased additional shares under repurchase program (in shares)	1,352,569						1,352,569
Dividends declared per share of common stock (in dollars per share)	$ 0.17	$ 0.17	$ 0.17	$ 0.17	$ 0.17	$ 0.15

XML

Revolving Credit Facility (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013
Debt Disclosure [Abstract]
Current borrowing capacity	$ 100
Maximum borrowing capacity	$ 150

XML

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (USD $) In Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income [Member]	Retained Earnings [Member]
Balance at Dec. 31, 2012	$ 240,905	$ 308	$ 133,207	$ (133,950)	$ 16	$ 241,324
Balance (shares) at Dec. 31, 2012		30,758
Purchase of treasury stock, at cost	(17,130)	0	0	(17,130)	0	0
Exercise of stock options	1,163	0	(740)	1,903	0	0
Income tax benefit from stock-based compensation, net	877	0	877	0	0	0
Stock-based compensation expense	8,351	0	1,341	7,010	0	0
Other	862	0	96	766	0	0
Dividends paid	(13,039)	0	0	0	0	(13,039)
Unrealized gain on marketable securities, net of tax	7	0	0	0	7	0
Net income	26,743	0	0	0	0	26,743
Balance at Sep. 30, 2013	$ 248,739	$ 308	$ 134,781	$ (141,401)	$ 23	$ 255,028
Balance (shares) at Sep. 30, 2013		30,758

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

Insperity, Inc., a Delaware corporation (“Insperity,” “we,” “our,” and “us”), provides an array of human resources (“HR”) and business solutions designed to help improve business performance.  Our most comprehensive HR business offering is provided through our professional employer organization (“PEO”) services, known as Workforce Optimization^™, which encompasses a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services.

In addition to Workforce Optimization, we offer Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial Services, Expense Management, Retirement Services and Insurance Services (collectively “Adjacent Businesses”), many of which are offered via desktop applications and software as a service (“SaaS”) delivery models.  These other products or services are offered separately, as a bundle, or along with Workforce Optimization.

We provide our Workforce Optimization solution to small and medium-sized businesses in strategically selected markets throughout the United States.  For the nine months ended September 30, 2013 and 2012, Workforce Optimization revenues from our Texas markets represented 26% in both periods, while Workforce Optimization revenues from our California markets represented 18% and 17%, respectively, of our total Workforce Optimization revenues.

The Consolidated Financial Statements include the accounts of Insperity and its subsidiaries, all of which are wholly owned.  Intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“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.

The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2012. Our Consolidated Balance Sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements.  Our Consolidated Balance Sheet at September 30, 2013 and our Consolidated Statements of Operations and Comprehensive Income for the three and nine month periods ended September 30, 2013 and 2012, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2013 and 2012, and our Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2013, have been prepared by us without audit.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.

The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations.

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Other Assets

9 Months Ended

Sep. 30, 2013

Other Assets [Abstract]

Cost-method Investments, Description [Text Block]

4. Other Assets

In 2011, we acquired a minority interest in The Receivables Exchange ("TRE"), an online marketplace for the sale of accounts receivable, for $2.8 million. In the second quarter of 2013, TRE issued similar securities at per share amounts substantially below the per share book value of our investment. Accordingly, we valued the investment based on a similar security market transaction, which is a Level 2 valuation technique. This resulted in a non-cash impairment charge of $2.7 million, which was included in other income (expense) in our Consolidated Statements of Operations, during the second quarter of 2013. Due to federal income tax limitations on capital losses, no tax benefit associated with the impairment was recognized.

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Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Accounting Policies

2. Accounting Policies

Health Insurance Costs

We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield, Unity Health Plan and Tufts, all of which provide fully insured policies or service contracts.

The policy 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 Operations.  The estimated incurred claims are based upon: (i) the level of claims processed during the quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) 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.

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 insurance.  In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $3.5 million as of September 30, 2013, and is reported as a long-term asset.  As of September 30, 2013, Plan Costs were less than the net premiums paid and owed to United by $16.4 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $7.4 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2013 were $3.5 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Workers’ Compensation Costs

Our workers’ compensation coverage has been provided through an arrangement with the ACE Group of Companies (“the ACE Program”) since 2007.  The ACE Program is fully insured in that ACE has the responsibility to pay all claims incurred regardless of whether we satisfy our responsibilities.  Through September 30, 2010, we bore the economic burden for the first $1 million layer of claims per occurrence and the insurance carrier was and remains responsible for the economic burden for all claims in excess of such first $1 million layer.

Effective October 1, 2010, in addition to our bearing the economic burden for the first $1 million layer of claims per occurrence, we also bear the economic burden for those claims exceeding $1 million, up to a maximum aggregate amount of $5 million per policy year.

Because we bear the economic burden 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.

We employ a third party actuary to estimate our loss development rate, which is primarily based upon the nature of worksite employees’ job responsibilities, the location of worksite employees, 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 nine months ended September 30, 2013 and 2012, we reduced our workers’ compensation costs by $8.3 million and $10.4 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 utilized in both the 2013 and 2012 periods was 0.7%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

	Nine Months Ended   September 30,
	2013			2012
	(in thousands)
Beginning balance, January 1,	$	111,685		$	104,791
Accrued claims	30,496			28,586
Present value discount	(748		)	(712		)
Paid claims	(24,462		)	(23,133		)
Ending balance	$	116,971		$	109,532
Current portion of accrued claims	$	50,317		$	46,069
Long-term portion of accrued claims	66,654			63,463
	$	116,971		$	109,532

The current portion of accrued workers’ compensation costs on the Consolidated Balance Sheets at September 30, 2013 includes $2.0 million of workers’ compensation administrative fees.

As of September 30, 2013 and 2012, the undiscounted accrued workers’ compensation costs were $127.5 million and $121.7 million, respectively.

At the beginning of each policy period, the 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 worksite employee 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. During the first nine months of 2013, we paid the insurance carrier an additional $5.0 million in claim funds for policy years prior to 2013, which increased deposits.  In the first nine months of 2012, we received $2.5 million for the return of excess claim funds related to the ACE Program, which reduced deposits. As of September 30, 2013, we had restricted cash of $50.3 million and deposits of $75.1 million.

Our estimate of incurred claim costs expected to be paid within one year are recorded as accrued workers’ compensation costs and included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year are included in long-term liabilities on our Consolidated Balance Sheets.

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013
Lumbermens Mutual Casualty Company [Abstract]
Outstanding claims minimum	$ 1.1
Outstanding claims maximum	$ 5.0

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Statement [Abstract]
Revenues (gross billings of $3.236 billion, $3.068 billion, $9.736 billion and $9.339 billion, less worksite employee payroll cost of $2.696 billion, $2.556 billion, $8.037 billion and $7.712 billion, respectively)	$ 539,869	$ 511,953	$ 1,698,979	$ 1,626,386
Direct costs:
Payroll taxes, benefits and workers’ compensation costs	442,460	413,533	1,395,706	1,337,668
Gross profit	97,409	98,420	303,273	288,718
Operating expenses:
Salaries, wages and payroll taxes	43,797	44,032	137,697	127,402
Stock-based compensation	2,749	2,429	8,351	7,385
Commissions	3,609	3,358	10,349	10,299
Advertising	4,273	3,680	19,243	17,001
General and administrative expenses	20,567	21,122	62,592	61,694
Depreciation and amortization	5,302	4,659	15,692	13,336
Total operating expenses	80,297	79,280	253,924	237,117
Operating income	17,112	19,140	49,349	51,601
Other income (expense):
Interest, net	26	142	155	462
Other, net	(1)	(3)	(2,668)	141
Income before income tax expense	17,137	19,279	46,836	52,204
Income tax expense	7,055	7,827	20,093	21,247
Net income	10,082	11,452	26,743	30,957
Less distributed and undistributed earnings allocated to participating securities	(289)	(334)	(769)	(898)
Net income allocated to common shares	$ 9,793	$ 11,118	$ 25,974	$ 30,059
Basic net income per share of common stock (in dollars per share)	$ 0.39	$ 0.45	$ 1.05	$ 1.20
Diluted net income per share of common stock (in dollars per share)	$ 0.39	$ 0.45	$ 1.04	$ 1.20

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Net Income Per Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Net Income per Share

7. Net Income per Share

We utilize the two-class method to compute net income per share.  The two-class method allocates a portion of net income to participating securities, which include unvested awards of share-based payments with non-forfeitable rights to receive dividends.  Net income allocated to unvested share-based payments is excluded from net income allocated to common shares.  Any undistributed losses resulting from dividends exceeding net income are not allocated to participating securities.  Basic net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period.  Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options.

The following table summarizes the net income allocated to common shares and the basic and diluted shares used in the net income per share computations:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2013			2012			2013			2012
	(in thousands)
Net income	$	10,082		$	11,452		$	26,743		$	30,957
Less distributed and undistributed earnings allocated to participating securities	(289		)	(334		)	(769		)	(898		)
Net income allocated to common shares	$	9,793		$	11,118		$	25,974		$	30,059
Weighted average common shares outstanding	24,849			24,923			24,855			25,034
Incremental shares from assumed conversions of common stock options	18			57			24			63
Adjusted weighted average common shares outstanding	24,867			24,980			24,879			25,097
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect	—			41			10			33

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]
Net income	$ 10,082	$ 11,452	$ 26,743	$ 30,957
Other comprehensive income:
Unrealized gain on available-for-sale securities, net of tax	26	12	7	46
Comprehensive income	$ 10,108	$ 11,464	$ 26,750	$ 31,003

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 161,842	$ 264,544
Restricted cash	50,317	47,149
Marketable securities	47,400	16,904
Accounts receivable, net:
Trade	2,062	6,931
Unbilled	214,210	181,040
Other	2,690	2,415
Prepaid insurance	17,349	15,620
Other current assets	10,097	9,651
Deferred income taxes	3,451	7,211
Total current assets	509,418	551,465
Property and equipment:
Land	4,115	4,115
Buildings and improvements	68,363	68,583
Computer hardware and software	84,684	81,140
Software development costs	38,137	35,866
Furniture and fixtures	37,118	36,717
Aircraft	35,879	35,879
Total property and equipment, gross	268,296	262,300
Accumulated depreciation and amortization	(179,252)	(168,358)
Total property and equipment, net	89,044	93,942
Other assets:
Prepaid health insurance	9,000	9,000
Deposits – health insurance	3,700	3,000
Deposits – workers’ compensation	75,112	64,201
Goodwill and other intangible assets, net	22,275	23,775
Other assets	1,920	4,817
Total other assets	112,007	104,793
Total assets	710,469	750,200
Current liabilities:
Accounts payable	3,311	3,660
Payroll taxes and other payroll deductions payable	102,288	178,534
Accrued worksite employee payroll cost	184,142	150,070
Accrued health insurance costs	6,824	13,942
Accrued workers’ compensation costs	52,312	49,484
Accrued corporate payroll and commissions	22,186	23,537
Other accrued liabilities	15,561	12,478
Income taxes payable	57	4,054
Total current liabilities	386,681	435,759
Noncurrent liabilities:
Accrued workers’ compensation costs	66,654	64,536
Deferred income taxes	8,395	9,000
Total noncurrent liabilities	75,049	73,536
Commitments and contingencies
Stockholders’ equity:
Common stock	308	308
Additional paid-in capital	134,781	133,207
Treasury stock, at cost	(141,401)	(133,950)
Accumulated other comprehensive income, net of tax	23	16
Retained earnings	255,028	241,324
Total stockholders’ equity	248,739	240,905
Total liabilities and stockholders’ equity	$ 710,469	$ 750,200

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Cash, Cash Equivalents and Marketable Securities (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Overnight Holdings
Money market funds (cash equivalents)	$ 116,580,000	$ 255,000,000
Investment Holdings
Money market funds (cash equivalents)	37,877,000	26,087,000
Marketable securities	47,400,000	16,904,000
Total cash equivalents and marketable securities	201,857,000	297,991,000
Cash held in demand accounts	18,717,000	21,732,000
Outstanding checks	(11,332,000)	(38,275,000)
Total cash, cash equivalents and marketable securities	209,242,000	281,448,000
Cash and cash equivalents	161,842,000	264,544,000	202,218,000	211,208,000
Marketable securities	47,400,000	16,904,000
Withholding associated with federal and state income taxes, employment taxes and other payroll deductions included in cash balance	90,100,000	158,200,000
Client prepayments included in cash balance	9,000,000	13,500,000
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Municipal bonds	47,400,000	16,904,000
Available-for-sale marketable securities [Abstract]
Amortized Cost	47,361,000	16,878,000
Gross Unrealized Gains	41,000	29,000
Gross Unrealized Losses	(2,000)	(3,000)
Municipal bonds	47,400,000	16,904,000
Contractual maturities amortized cost [Abstract]
Less than one year	30,885,000
One to five years	16,476,000
Amortized Cost	47,361,000
Contractual maturities estimated fair value [Abstract]
Less than one year	30,905,000
One to five years	16,495,000
Municipal bonds	47,400,000	16,904,000
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	154,457,000	281,087,000
Municipal bonds	0	0
Total	154,457,000	281,087,000
Available-for-sale marketable securities [Abstract]
Municipal bonds	0	0
Contractual maturities estimated fair value [Abstract]
Municipal bonds	0	0
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Municipal bonds	47,400,000	16,904,000
Total	47,400,000	16,904,000
Available-for-sale marketable securities [Abstract]
Municipal bonds	47,400,000	16,904,000
Contractual maturities estimated fair value [Abstract]
Municipal bonds	47,400,000	16,904,000
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Municipal bonds	0	0
Total	0	0
Available-for-sale marketable securities [Abstract]
Municipal bonds	0	0
Contractual maturities estimated fair value [Abstract]
Municipal bonds	0	0
Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	154,457,000	281,087,000
Municipal bonds	47,400,000	16,904,000
Total	201,857,000	297,991,000
Available-for-sale marketable securities [Abstract]
Municipal bonds	47,400,000	16,904,000
Contractual maturities estimated fair value [Abstract]
Municipal bonds	$ 47,400,000	$ 16,904,000

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Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders Equity

6. Stockholders' Equity

Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase Program”).  The purchases are to 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.  In May 2013, the Board increased the authorized number of shares to be repurchased under the program by one million.  During the nine months ended September 30, 2013, 476,903 shares were repurchased under the Repurchase Program and 116,931 shares not subject to the Repurchase Program were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  As of September 30, 2013, we were authorized to repurchase an additional 1,352,569 shares under the program.

The Board declared quarterly dividends in the first three quarters of 2013 and 2012 as follows:

	2013		2012
	(amounts per share)
First quarter	$	0.17	$	0.15
Second quarter	0.17		0.17
Third quarter	0.17		0.17

 During the nine months ended September 30, 2013 and 2012, we paid dividends totaling $13.0 million and $12.6 million, respectively.

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Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Health Insurance Costs

Health Insurance Costs

We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield, Unity Health Plan and Tufts, all of which provide fully insured policies or service contracts.

The policy 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 Operations.  The estimated incurred claims are based upon: (i) the level of claims processed during the quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) 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.

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 insurance.  In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $3.5 million as of September 30, 2013, and is reported as a long-term asset.  As of September 30, 2013, Plan Costs were less than the net premiums paid and owed to United by $16.4 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $7.4 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2013 were $3.5 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Workers' Compensation Costs

Workers’ Compensation Costs

Our workers’ compensation coverage has been provided through an arrangement with the ACE Group of Companies (“the ACE Program”) since 2007.  The ACE Program is fully insured in that ACE has the responsibility to pay all claims incurred regardless of whether we satisfy our responsibilities.  Through September 30, 2010, we bore the economic burden for the first $1 million layer of claims per occurrence and the insurance carrier was and remains responsible for the economic burden for all claims in excess of such first $1 million layer.

Effective October 1, 2010, in addition to our bearing the economic burden for the first $1 million layer of claims per occurrence, we also bear the economic burden for those claims exceeding $1 million, up to a maximum aggregate amount of $5 million per policy year.

Because we bear the economic burden 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.

We employ a third party actuary to estimate our loss development rate, which is primarily based upon the nature of worksite employees’ job responsibilities, the location of worksite employees, 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 nine months ended September 30, 2013 and 2012, we reduced our workers’ compensation costs by $8.3 million and $10.4 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 utilized in both the 2013 and 2012 periods was 0.7%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

	Nine Months Ended   September 30,
	2013			2012
	(in thousands)
Beginning balance, January 1,	$	111,685		$	104,791
Accrued claims	30,496			28,586
Present value discount	(748		)	(712		)
Paid claims	(24,462		)	(23,133		)
Ending balance	$	116,971		$	109,532
Current portion of accrued claims	$	50,317		$	46,069
Long-term portion of accrued claims	66,654			63,463
	$	116,971		$	109,532

The current portion of accrued workers’ compensation costs on the Consolidated Balance Sheets at September 30, 2013 includes $2.0 million of workers’ compensation administrative fees.

As of September 30, 2013 and 2012, the undiscounted accrued workers’ compensation costs were $127.5 million and $121.7 million, respectively.

At the beginning of each policy period, the 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 worksite employee 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. During the first nine months of 2013, we paid the insurance carrier an additional $5.0 million in claim funds for policy years prior to 2013, which increased deposits.  In the first nine months of 2012, we received $2.5 million for the return of excess claim funds related to the ACE Program, which reduced deposits. As of September 30, 2013, we had restricted cash of $50.3 million and deposits of $75.1 million.

Our estimate of incurred claim costs expected to be paid within one year are recorded as accrued workers’ compensation costs and included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year are included in long-term liabilities on our Consolidated Balance Sheets.

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Revolving Credit Facility

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Revolving Credit Facility

5. Revolving Credit Facility

We have a $100 million revolving credit facility (the “Facility”), which may be increased to $150 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (the “Credit Agreement”). The Facility matures on September 15, 2015.  The Facility contains both affirmative and negative covenants, which we believe are customary for arrangements of this nature.  At September 30, 2013, we were in compliance with all financial covenants under the Credit Agreement and had not drawn on the Facility.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net income	$ 26,743	$ 30,957
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	15,692	13,315
Impairment charge	2,679	0
Amortization of marketable securities	1,597	1,827
Stock-based compensation	8,351	7,385
Deferred income taxes	3,150	2,259
Changes in operating assets and liabilities:
Restricted cash	(3,168)	(1,332)
Accounts receivable	(28,576)	(32,175)
Prepaid insurance	(1,729)	(2,439)
Other current assets	(446)	3,355
Other assets	(11,406)	(6,373)
Accounts payable	(349)	(1,997)
Payroll taxes and other payroll deductions payable	(76,246)	(60,704)
Accrued worksite employee payroll expense	34,072	43,947
Accrued health insurance costs	(7,118)	13,095
Accrued workers’ compensation costs	2,828	5,231
Accrued corporate payroll, commissions and other accrued liabilities	3,850	2,155
Income taxes payable/receivable	(4,301)	6,529
Total adjustments	(61,120)	(5,922)
Net cash provided by (used in) operating activities	(34,377)	25,035
Marketable securities:
Purchases	(49,580)	(23,585)
Proceeds from dispositions	8,025	0
Proceeds from maturities	9,474	27,119
Cash exchanged for acquisitions	0	(1,200)
Property and equipment	(9,281)	(11,996)
Net cash used in investing activities	(41,362)	(9,662)
Cash flows from financing activities:
Purchase of treasury stock	(17,130)	(13,770)
Dividends paid	(13,039)	(12,643)
Proceeds from the exercise of stock options	1,163	1,062
Income tax benefit from stock-based compensation	1,181	1,457
Other	862	(469)
Net cash used in financing activities	(26,963)	(24,363)
Net decrease in cash and cash equivalents	(102,702)	(8,990)
Cash and cash equivalents at beginning of period	264,544	211,208
Cash and cash equivalents at end of period	$ 161,842	$ 202,218

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Stockholders' Equity Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Attributable to Parent [Abstract]

Quarterly dividends declared [Table Text Block]

The Board declared quarterly dividends in the first three quarters of 2013 and 2012 as follows:

	2013		2012
	(amounts per share)
First quarter	$	0.17	$	0.15
Second quarter	0.17		0.17
Third quarter	0.17		0.17

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

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.

Lumbermens Mutual Casualty Company

In 2003, facing continued capital constraints and a series of downgrades from various rating agencies, our former workers’ compensation insurance carrier for the two-year period ended September 2003, Lumbermens Mutual Casualty Company, formerly known as Kemper (“Lumbermens Mutual”), made the decision to substantially cease underwriting operations and voluntarily entered into “run-off."  In July 2012, Lumbermens Mutual announced that an agreed order of rehabilitation had been entered against it in Cook County, Illinois.  Under the order, the Director of the Illinois Department of Insurance was vested with control over Lumbermens Mutual property and decision-making.  In an order effective May 10, 2013, the Circuit Court of Cook County, Illinois, found that Lumbermens Mutual was insolvent and ordered its liquidation.

The entry of a liquidation order has triggered the transition of claim handling responsibilities for Lumbermens Mutual's open claims to state guaranty associations around the country. Guaranty associations are non-profit organizations created by statute for the purpose of protecting policyholders from severe financial losses and preventing delays in claim payments due to the insolvency of an insurer.  They do this by assuming responsibility for the payment of claims that would otherwise have been paid by the insurer had it not become insolvent.  Each state has one or more guaranty association(s), with each association handling certain types of insurance.  Insurance companies are required to be members of the state guaranty association as a condition of being licensed to do business in the state.

The guaranty associations in some states, including Texas, may assert that state law allows them to recover the amount of benefits paid by the guaranty association along with associated administration and defense costs from an insured with a net worth exceeding certain specified levels or based upon certain other theories of recovery.  We intend to vigorously assert our available defenses to any claims made by any guaranty association.  We estimate the outstanding amounts that may be subject to claims from state guaranty associations to range from $1.1 million to $5.0 million as of September 30, 2013.  In the event state guaranty associations are successful in seeking recovery from us, we would be required to pay such claims and record liabilities for anticipated future claims, which could have a material adverse effect on net income in the reported period.

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Accounting Policies (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Oct. 01, 2010	Sep. 30, 2010
Health Insurance Costs [Abstract]
Number of days in advance of the beginning of a reporting quarter United establishes cash funding rates	90 days
Required accumulated cash surplus	$ 9,000,000		$ 9,000,000
Required deposit equal to approximately one day of claims funding activity	3,500,000
Amount which plan costs were less than the net premiums paid and owed	16,400,000
Prepaid health insurance, current	7,400,000
Premiums owed to United	3,500,000
Workers' Compensation Costs [Abstract]
Company's maximum economic burden for the first layer of claims per occurrence				1,000,000	1,000,000
Company's maximum aggregate economic burden for claims in excess of 1 million per policy year				5,000,000
Reduction in accrued workers' compensation costs for changes in estimated losses	8,300,000	10,400,000
U.S. Treasury rates that correspond with the weighted average estimated claim payout period (in hundredths)	0.70%	0.70%
Incurred but not paid workers compensation liabilities [Abstract]
Beginning balance, January 1,	111,685,000	104,791,000
Accrued claims	30,496,000	28,586,000
Present value discount	(748,000)	(712,000)
Paid claims	(24,462,000)	(23,133,000)
Ending balance	116,971,000	109,532,000
Current portion of accrued claims	50,317,000	46,069,000
Long-term portion of accrued claims	66,654,000	63,463,000	64,536,000
Ending balance	116,971,000	109,532,000
Workers compensation administrative fees accrued	2,000,000
Undiscounted accrued workers' compensation costs	127,500,000	121,700,000
Time period incurred claims expected to be paid recorded as restricted cash	1 year
Additional claim funds paid related to ACE Program	5,000,000
Time period incurred claims expected to be paid, included in deposits, a long-term asset	Greater than 1 year
Return of excess claim funds related to ACE Program	0	2,500,000
Restricted cash - worker's compensation	50,317,000		47,149,000
Deposits workers compensation	$ 75,112,000		$ 64,201,000
Time period estimate of incurred claim costs to be paid included in short-term liabilities	1 year
Time period incurred claims expected to be paid, included in long-term liabilities	Greater than 1 year

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Net Income per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Summary of the net income allocated to common shares and the basic and diluted shares used in the net income per share computations

The following table summarizes the net income allocated to common shares and the basic and diluted shares used in the net income per share computations:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2013			2012			2013			2012
	(in thousands)
Net income	$	10,082		$	11,452		$	26,743		$	30,957
Less distributed and undistributed earnings allocated to participating securities	(289		)	(334		)	(769		)	(898		)
Net income allocated to common shares	$	9,793		$	11,118		$	25,974		$	30,059
Weighted average common shares outstanding	24,849			24,923			24,855			25,034
Incremental shares from assumed conversions of common stock options	18			57			24			63
Adjusted weighted average common shares outstanding	24,867			24,980			24,879			25,097
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect	—			41			10			33

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 25, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	INSPERITY, INC.
Entity Central Index Key	0001000753
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		25,570,160
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013

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Basis of Presentation (Details)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Percentage of PEO revenues from the Company's Texas markets (in hundredths)	26.00%	26.00%
Percentage of PEO revenues from the Company's California markets (in hundredths)	18.00%	17.00%