

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, 2014			December 31, 2013
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	123,800		$	192,040
Investment Holdings
Money market funds (cash equivalents)	43,427			42,913
Marketable securities	45,953			46,340
	213,180			281,293
Cash held in demand accounts	20,778			23,054
Outstanding checks	(8,547		)	(32,252		)
Total cash, cash equivalents and marketable securities	$	225,411		$	272,095

Cash and cash equivalents	$	179,458		$	225,755
Marketable securities	45,953			46,340
Total cash, cash equivalents and marketable securities	$	225,411		$	272,095

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Included in the cash balance as of September 30, 2014 and December 31, 2013, are $90.8 million and $143.0 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $18.3 million and $24.5 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, 2014		Level 1		Level 2		Level 3

Money market funds	$	167,227	$	167,227	$	—	$	—
Municipal bonds	45,953		—		45,953		—
Total	$	213,180	$	167,227	$	45,953	$	—



	Fair Value Measurements
	(in thousands)
	December 31, 2013		Level 1		Level 2		Level 3

Money market funds	$	234,953	$	234,953	$	—	$	—
Municipal bonds	46,340		—		46,340		—
Total	$	281,293	$	234,953	$	46,340	$	—

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, 2014
Municipal bonds	$	45,912	$	45	$	(4	)	$	45,953

December 31, 2013
Municipal bonds	$	46,290	$	51	$	(1	)	$	46,340

As of September 30, 2014, the contractual maturities of our marketable securities were as follows:



	Amortized Cost		Estimated Fair Value
	(in thousands)

Less than one year	$	14,503	$	14,519
One to five years	31,409		31,434
Total	$	45,912	$	45,953