10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2014.

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

Securities Registered Pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share	New York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred Stock	New York Stock Exchange
(Title of class)	(Name of Exchange on Which Registered)

Securities Registered Pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Yes ý   No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   

Yes o   No ý

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 website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

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 the 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 (Do not check if a smaller reporting company)	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 February 3, 2015, 25,338,512 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.  As of the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the common stock held by non-affiliates (based upon the June 30, 2014, closing price of the common stock as reported by the New York Stock Exchange) was approximately $749 million.

DOCUMENTS INCORPORATED BY REFERENCE

Part III information is incorporated by reference from the proxy statement for the 2015 annual meeting of stockholders, which the registrant intends to file within 120 days of the end of the fiscal year.

TABLE OF CONTENTS

Part I
Item 1.	Business	2
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	24
Item S-K 401(b).	Executive Officers of the Registrant	25
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 8.	Financial Statements and Supplementary Data	49
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	49
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	49
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
Item 14.	Principal Accounting Fees and Services	50
Part IV
Item 15.	Exhibits, Financial Statement Schedules	51

PART I

Unless otherwise indicated, “Insperity,” “we,” “our” and “us” are used in this annual report to refer to Insperity, Inc. and its consolidated subsidiaries.  This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 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.  In the normal course of business, in an effort to help keep our stockholders and the public informed about our operations we 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 or other operating results.  We base the forward-looking statements on our current expectations, estimates and projections.  We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict.  In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.  Therefore, the actual results of the future events described in such forward-looking statements in this annual report, or elsewhere, could differ materially from those stated in such forward-looking statements.  Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this annual report, including, without limitation, factors discussed in Item 1, “Business,” Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 1.   BUSINESS.

General

Insperity, Inc., (“Insperity”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance.  Since our formation 28 years ago, we have evolved from being solely a professional employer organization (“PEO”), an industry we pioneered, to our current position as a comprehensive business performance solutions provider.  We were organized as a corporation in 1986 and have provided PEO services since inception.

Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources service offering and to leverage our buying power and expertise to provide additional valuable services to clients.  Our most comprehensive HR services offerings are provided through our Workforce Optimization^® and Workforce Synchronization solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management and training and development services. Our Workforce Optimization solution is our most comprehensive HR outsourcing solution and is our primary offering. Our Workforce Synchronization solution, which is generally offered only to our mid-market client segment, is a lower cost offering with a longer commitment that includes the same compliance and administrative services as our Workforce Optimization solution and makes available, for an additional fee, the strategic HR products and organizational development services that are included with our Workforce Optimization solution.

In addition to our PEO HR Outsourcing solutions, we offer a number of other business performance solutions, including Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services,  Employment Screening, Financial and Expense Management Services, Retirement Services and Insurance Services (collectively “Strategic Businesses” and formerly known as “Adjacent Businesses”), many of which are offered via desktop applications and cloud-based delivery models.  These other products and services are offered separately, as a bundle or along with our PEO HR Outsourcing solutions.

Our PEO HR Outsourcing solutions are designed to improve the productivity and profitability of small and medium-sized businesses.  These solutions relieve business owners and key executives of many employer-related administrative and regulatory burdens, which enables them to focus on the core competencies of their businesses.  Our PEO HR Outsourcing solutions also promote employee performance through human resources management techniques designed to improve employee satisfaction. We provide our PEO HR Outsourcing solutions by entering into a Client Service Agreement (“CSA”), pursuant to which we and our client act as co-employers of the employees who work at the client’s worksite (“worksite employees”). Under the CSA, we assume responsibility for personnel administration and assist our clients in complying with employment-related governmental regulations, while the client retains the employees’ services in its business and remains the employer for various other purposes. We charge a comprehensive service fee (“comprehensive service fee” or “gross billing”), which is invoiced concurrently with the processing of payroll for the worksite employees of the client. The comprehensive

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service fee consists of the payroll of our worksite employees plus an additional amount reflected as a percentage of the payroll cost of the worksite employees.

We accomplish the objectives of our PEO HR Outsourcing solutions through a “high-touch/high-tech” approach to service delivery. In advisory areas, such as recruiting, employee performance management and employee training, we employ a high-touch approach designed to ensure that our clients receive the personal attention and expertise needed to create a customized human resources solution. For transactional processing, we employ a high-tech approach that provides secure, convenient information exchange among Insperity, our clients and our worksite employees, creating efficiencies for all parties. The primary component of the high-tech portion of our strategy is the Employee Service Center^SM(“ESC”).  The ESC is our cloud-based PEO HR Outsourcing solutions portal, which is designed to provide automated, personalized PEO HR Outsourcing solutions to our clients and worksite employees.

As of December 31, 2014, we had 57 offices, including 48 PEO HR Outsourcing solutions sales offices in 25 markets. In addition, we had four regional service centers along with human resources and client service personnel located in a majority of our 25 sales markets, which serviced an average of 136,764 worksite employees per month in the fourth quarter of 2014. Our service centers coordinate PEO HR Outsourcing solutions for clients on a regional basis and localized face-to-face human resources services.

Our principal executive offices are located at 19001 Crescent Springs Drive, Kingwood, Texas 77339.  Our telephone number at that address is (281) 358-8986 and our website address is insperity.com.  Our stock is traded on the New York Stock Exchange under the symbol “NSP.”  We file or furnish periodic reports with the Securities and Exchange Commission (“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. Through the investor relations section of our website, we make available electronic copies of the documents that we file or furnish to the SEC, the charters of the committees of our Board of Directors and other documents related to our corporate governance, including our Code of Conduct. Access to these electronic filings is available free of charge as soon as reasonably practicable after filing or furnishing them to the SEC. Printed copies of our committee charters or other governance documents and filings can be requested by writing to our corporate secretary at the address on the cover of this report.

PEO Industry

The PEO industry began to evolve in the early 1980s largely in response to the burdens placed on small and medium-sized employers by an increasingly complex legal and regulatory environment.  While various service providers were available to assist these businesses with specific tasks, PEOs emerged as providers of a more comprehensive range of services relating to the employer/employee relationship.  In a PEO arrangement, the PEO assumes certain aspects of the employer/employee relationship as defined in the contract between the PEO and its client.  Because PEOs provide employer-related services to a large number of employees, they can achieve economies of scale that allow them to perform employment-related functions more efficiently, provide a greater variety of employee benefits, and devote more attention to human resources management than a client can individually.

We believe the key factors driving demand for PEO services include:

• the focus on growth and productivity of the small and medium-sized business community in the United States, utilizing outsourcing to concentrate on core competencies

• the need to provide competitive health care and related benefits to attract and retain employees

• the increasing costs associated with health and workers’ compensation insurance coverage, workplace safety programs, employee-related complaints and litigation

• complex regulation of employment issues and the related costs of compliance, including the allocation of time and effort to such functions by owners and key executives

A significant factor in the development of the PEO industry has been increasing recognition and acceptance of PEOs and the co-employer relationship by federal and state governmental authorities. Insperity and other industry leaders, in concert with the National Association of Professional Employer Organizations (“NAPEO”), have worked with the relevant governmental entities for the establishment of a regulatory framework that protects clients and employees, discourages unscrupulous and financially unsound companies, and promotes further development of the industry. Currently, 41 states have enacted legislation either recognizing PEOs or requiring licensing, registration, or certification, and several others are considering such regulation. Such laws vary from state to state but generally provide for monitoring the fiscal responsibility of PEOs. State regulation assists in screening insufficiently capitalized PEO operations and helps to resolve interpretive issues concerning employee status for specific purposes under applicable state law. We have actively supported such regulatory

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efforts and are currently recognized, licensed, registered, certified or pursuing registration in all 41 of these states. The cost of compliance with these regulations is not material to our financial position or results of operations.

In 2014, the United States Congress passed and the President signed into law the Small Business Efficiency Act (“SBEA”), which creates a federal regulatory framework for the payment of wages to worksite employees and the reporting and remittance of payroll taxes on those wages by PEOs certified under the statute (“CPEOs”). We actively supported the enactment of this law. The law is effective with respect to wages for services performed on or after January 1, 2016. The law instructs the Secretary of the Treasury to establish a certification program not later than July 1, 2015. It clarifies that a CPEO, rather than the client, will be treated as the employer for purposes of reporting and remitting payroll taxes. It also clarifies that a CPEO shall be treated as a successor employer for purposes of the wage base of worksite employees on which federal payroll taxes are applied. In addition, the law clarifies that clients of a CPEO remain eligible for specified tax credits for which they would have been eligible absent the CPEO relationship. We intend to become a CPEO. Implementation of these provisions will require us to modify our internal processes and systems. The cost of implementation and compliance with the new law is not expected to be material to our financial position or results of operations.

Service Offerings

PEO HR Outsourcing Solutions

We serve small and medium-sized businesses by providing our PEO HR Outsourcing solutions, which encompass a broad range of services. Both of our PEO HR Outsourcing solutions include the following:

• benefits and payroll administration

• health and workers’ compensation insurance programs

• personnel records management

• employer liability management

• assistance with government compliance

• general HR advice

Our Workforce Optimization solution also provides additional services that our Workforce Synchronization clients can purchase for an additional fee, including the following:

• employee recruiting and support

• employee performance management

• training and development services

Our PEO HR Outsourcing solutions are designed to attract and retain high-quality employees, while relieving client owners and key executives of many employer-related administrative and regulatory burdens. Among the employment-related laws and regulations that may affect a client are the following:

•	Internal Revenue Code (the “Code”)	•	The Family and Medical Leave Act (FMLA)
•	Federal Income Contribution Act (FICA)	•	Genetic Information Nondiscrimination Act of 2008
•	Federal Unemployment Tax Act (FUTA)	•	Drug-Free Workplace Act
•	Fair Labor Standards Act (FLSA)	•	Occupational Safety and Health Act (OSHA)
•	Employee Retirement Income Security Act, as amended (ERISA)	•	Worker Adjustment and Retraining Notification Act (WARN)
•	Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)	•	Uniformed Services Employment and Reemployment Rights Act (USERRA)
•	Immigration Reform and Control Act (IRCA)	•	State unemployment and employment security laws
•	Title VII (Civil Rights Act of 1964)	•	State workers’ compensation laws
•	Health Insurance Portability and Accountability Act (HIPAA)	•	Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”)
•	Age Discrimination in Employment Act (ADEA)	•	Patient Protection and Affordable Care Act (PPACA)
•	Americans with Disabilities Act (ADA)	•	State and local law equivalents of the foregoing

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While these laws and regulations are complex, and in some instances overlapping, we assist our PEO HR Outsourcing solutions clients in complying with these laws and regulations by providing services in the following categories:

Administrative Functions. Administrative functions encompass a wide variety of processing and recordkeeping tasks, mostly related to payroll administration and government compliance. Specific examples include:

• payroll processing

• payroll tax deposits

• quarterly payroll tax reporting

• employee file maintenance

• unemployment claims processing

• workers’ compensation claims reporting

Benefit Plans Administration. We maintain several benefit plans including the following:

• a group health plan

• a health savings account program

• a health care flexible spending account plan

• an educational assistance plan

• an adoption assistance plan

• group term life insurance

• group universal life insurance

• accidental death and dismemberment insurance

• short-term and long-term disability insurance

• a 401(k) retirement plan

• cafeteria plans for group health and health savings account contributions

The group health plan includes medical, dental, vision and prescription drug coverage, as well as a work-life program. All benefit plans are provided to eligible employees based on the specific eligibility provisions of each plan. We are the policyholder responsible for the costs and premiums associated with any group insurance policies that provide benefits under these plans, and we act as plan sponsor and administrator of the plans. We negotiate the terms and costs of the plans, maintain the plans in accordance with applicable federal and state regulations and serve as liaison for the delivery of these benefits to worksite and corporate employees. COBRA coverage is extended to eligible terminated worksite and corporate employees and other eligible individuals, in accordance with applicable law. We believe that the variety and comprehensive nature of our benefit plan offerings are generally not available to employees in our small and medium-sized business target market and are usually offered only by larger companies that can spread program costs over a much larger group of employees.  As a result, we believe the availability of these benefit plans provides our clients with a competitive advantage that small and medium-sized businesses are typically unable to attain on their own.

Employee Service Center.The ESC is our cloud-based interactive delivery platform for our PEO HR Outsourcing solutions, which is designed to provide automated, personalized content, data and services to our PEO HR Outsourcing solutions clients and worksite employees. The ESC provides a wide range of functionality, including:

• WebPayroll for the submission, approval and reporting of payroll data

• client-specific payroll information

• employee information, including online check stubs, pay history reports and W-2s

• employee on-boarding including payroll enrollment, policy acknowledgments and employment verification

• employee benefits enrollment and changes

• employee-specific benefits content, including summary plan descriptions and enrollment status

• access to 401(k) plan information through the Retirement Service Center^SM powered by Insperity^® 

• self-service and customizable access to payroll and other data through an interactive reporting environment

• online human resources forms

• best practices human resources management process maps and process overviews

• e-Learning web-based training

• online recruiting services

• links to benefits providers and other key vendors

• answers to frequently asked questions

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Personnel Management. In addition to our cloud-based solutions provided through the ESC, we provide a wide variety of personnel management services that give our clients access to HR advisors and additional resources normally found only in the human resources departments of large companies. All PEO HR Outsourcing solutions clients have access to our advice concerning personnel policies and practices, including recruiting, discipline and termination procedures. Other personnel management services we provide include:

• drafting and reviewing personnel policies and employee handbooks

• designing job descriptions

• performing prospective employee screening and background investigations

• designing performance appraisal processes and forms

• professional development and issues-oriented training

• employee counseling

• substance abuse awareness training

• outplacement services

• compensation guidance

Employer Liability Management. Under the CSA, we assume many of the employment-related responsibilities associated with the administrative functions, benefit plans administration and personnel management services we provide. For many of those employment-related responsibilities that are the responsibility of the client or that we share with our clients, we may assist our clients in managing and limiting exposure. This includes first-time and ongoing safety-related risk management reviews, as well as the implementation of safety programs designed to reduce workplace accidents and consequently, workers’ compensation claims. We also provide guidance to clients for avoiding discrimination, sexual harassment and civil rights violations, and we assist with termination decisions when consulted to attempt to minimize liability on those grounds. While we do not provide legal services to our clients, we employ in-house and external counsel who specialize in several areas of employment law, have broad experience in disputes concerning the employer/employee relationship and provide support to our human resources service specialists. As part of our comprehensive service, we also maintain employment practice liability insurance coverage for ourselves and our clients, monitor changing government laws and regulations, and notify clients of the potential effect of such changes on employer liability.

MarketPlace^SMprovided by Insperity^®. Through our many alliances with best-of-class providers, Insperity’s MarketPlace is an eCommerce portal that brings a wide range of products and services to our clients, worksite employees and their families. Through MarketPlace, our clients also have the opportunity to offer their products and services to other clients and worksite employees.

MidMarket Solutions^™. We believe the mid-market sector, which we generally define as those companies with employees ranging from 150 to 2,000 worksite employees, has historically been under-served by the PEO industry. Currently, we have a dedicated sales management and consulting staff who concentrate solely on the mid-market sector. In addition, we have service personnel who have been trained and specialize in the mid-market sector. Our average number of worksite employees per month with our mid-market clients increased1.6% over 2013, representing approximately 23.3% of our total paid worksite employees during 2014.

Strategic Business Unit Offerings

Our Strategic Business Unit (“SBU”) strategy is designed to expand the type of business performance improvement services we offer to our current and prospective clients and to increase our overall client base by providing services that can be offered separately from our PEO HR Outsourcing solutions. We also strive to leverage our SBU client relationships to cross sell our PEO HR Outsourcing solutions as well as other SBU services. We offer all of our SBU services to both PEO HR Outsourcing solutions clients and non-PEO HR Outsourcing solutions clients, with the exception of Human Capital Management and Payroll Services, which are offered to non-PEO HR Outsourcing solutions clients because comparable solutions are already included within the PEO HR Outsourcing solutions.

During 2014 and 2013, total SBU revenues unrelated to our PEO HR Outsourcing solutions as a percentage of our total revenues were 1.5% and 1.4%, respectively. Also during 2014 and 2013, our SBU gross profit unrelated to our PEO HR Outsourcing solutions as a percentage of our total gross profit was 6.5% and 5.6%, respectively.

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The following are the key components of our SBU services, which are offered separately or as a bundle:

Human Capital Management. Insperity HCM^™ is a comprehensive human capital management solution for human resources data and processes. This cloud-based solution is a unified human resources suite that includes payroll processing, tax compliance, employee administration, benefits management and enrollment, reporting and analytics, and employee and manager self-service. The solution is offered as a stand-alone cloud-based solution or in conjunction with our Payroll Services offering and/or our Time and Attendance products. We initially launched this product in late 2012.

Payroll Services. Insperity^® Payroll Services offers a robust cloud-based payroll solution that is designed to help alleviate administrative burdens associated with payroll processing and government-related compliance and includes a premium level support from our highly skilled service team. Our payroll solution is integrated with three additional offerings, including Insperity NetSaver^™, an online 401(k) solution for small businesses; a pay-as-you-go workers’ compensation program; and HR Essentials, an HR platform that assists companies with tracking employee data, important milestones and company property.

Time and Attendance. Our Time and Attendance business unit provides small to medium-sized businesses with software, hardware and services to track, allocate, and analyze employee resources and provide inputs into clients’ payroll processing and accounting systems. The service is delivered as a cloud-based solution or as an “on-premise” client-server solution. Custom interfaces exist between our Time and Attendance products and our PEO HR Outsourcing solutions technologies for those clients utilizing both services.

Performance Management. Our Performance Management business provides human resources software offerings including a suite of desktop products: Insperity^®Descriptions Now^®, Insperity^® Policies Now^®, Insperity^® Performance Now^®, and Insperity^® Ultimate Employer^®; along with Insperity^® PerformSmart^® a performance management cloud-based offering. Insperity PerformSmart is included in Workforce Optimization and is available to our Workforce Synchronization clients for an additional fee. We intend to continue to sell, through online subscription arrangements, packaged software ordered online and through various reseller arrangements.

Organizational Planning. In January 2011, we entered the organizational planning and analysis solution business with our acquisition of certain assets from HumanConcepts associated with the OrgPlus^® desktop product lines for small and medium-sized businesses and a source code license for a cloud-based version. In December 2012 we launched the cloud-based product derived from this source code, OrgPlus^® Realtime^™. Organizational planning facilitates the creation, management and communication of detailed organizational management charts.

Recruiting Services. Our Recruiting Services business unit offers direct hire placement on an as-needed basis and provides outsourced support for individual requisitions or large-scale hiring projects. In addition, we provide consulting services to assist in the creation and maintenance of consistent hiring practices and retention strategies.  We also provide compensation services, behavior-based interview training and talent assessment.  

Employment Screening.  Our Employment Screening business unit offers a customized approach to background-check reporting for companies. Services include criminal records checks; verification of employment history or education; driving record, civil record and credit history checks; and confirmation of extraordinary credentials.

Financial Solutions.  Insperity^® Financial Solutions offers a suite of financial management tools and solutions for small to medium-sized companies that provides business owners with financial intelligence. The core products and services include Insperity Reveal^®, a web-based financial dashboard and toolset, and an online bookkeeping and controller service offered through an alliance with a third party.

Expense Management.  Our Expense Management business unit delivers employee expense management solutions that automate employee expense reporting, enforce travel and expense policies, and provide management reporting and analysis.  The service is delivered both as a cloud-based solution and as a desktop software product.

Retirement Services.  Our Retirement Services business unit delivers comprehensive 401(k) plan recordkeeping and administrative services to small and medium-sized businesses, primarily to our PEO HR Outsourcing solutions clients. Services include employee education and enrollment, participant communications, elective deferral withholding and transmission, matching contribution calculation, loan and distribution processing, regulatory filing preparation and nondiscrimination testing.

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Insurance Services.  Our Insurance Services business unit offers assistance to small and medium-sized businesses to secure affordable, customizable business insurance packages and life, health and disability insurance policies. Insurance Services also assists individuals in obtaining insurance solutions.

Client Service Agreement

All PEO HR Outsourcing solutions clients execute a CSA with us.  The CSA generally provides for an ongoing relationship between Insperity and the PEO HR Outsourcing solutions client.  For most clients, the CSA generally is an annual contract subject to termination by Insperity or the client upon 30 days’ written notice or upon shorter notice in the event of default. CSAs for our mid-market clients are generally two-year contracts, subject to earlier termination by clients upon payment of a termination fee or otherwise by the parties upon an event of default.  The CSA establishes our comprehensive service fee, which is subject to periodic adjustments to account for changes in the composition of the client’s workforce, employee benefit election changes and statutory changes that affect our costs.  Under the provisions of the CSA, clients active in January of any year are obligated to pay the estimated payroll tax component of the comprehensive service fee in a manner that reflects the pattern of incurred payroll tax costs.  This practice aligns clients’ payments to Insperity for payroll taxes with Insperity’s obligations to make payments to tax authorities, which are higher in the earlier part of the year, and decrease as limits on wages subject to payroll tax, are reached.  New clients enrolling subsequent to January of any year are invoiced at a relatively constant rate throughout the remaining portion of the year, resulting in Insperity’s improving profitability over the course of the year for those clients because of the typical pattern of incurred payroll tax costs.

The CSA also establishes the division of responsibilities between Insperity and the client as co-employers.  Pursuant to the CSA, we are responsible for personnel administration and for compliance with certain employment-related government regulations.  In addition, we assume liability for payment of salaries and wages (as well as related payroll taxes) of our worksite employees and responsibility for providing specified employee benefits to such persons.  These liabilities are not contingent on the prepayment by the client of the associated comprehensive service fee and, as a result of our employment relationship with each of our worksite employees, we are liable for payment of salary and wages to the worksite employees as reported by the client and are responsible for providing specified employee benefits to such persons regardless of whether the client pays the associated comprehensive service fee.  The client retains the employees’ services and remains liable for complying with certain government regulations that require control of the worksite or daily supervisory responsibility or is otherwise beyond our ability to assume.  A third group of responsibilities and liabilities are shared by Insperity and the client where such concurrent responsibility is appropriate.  The specific division of applicable responsibilities under our CSAs generally is as follows:

Insperity

• Payment of wages and salaries as reported by the client and related tax reporting and remittance (local, state and federal withholding, FICA, FUTA, state unemployment)

• Workers’ compensation compliance, procurement, management and reporting

• Compliance with the Code, COBRA, HIPAA and ERISA (for each employee benefit plan sponsored by Insperity), as well as monitoring changes in other governmental laws and regulations governing the employer/employee relationship and updating the client when necessary

• Offering benefits under Insperity-sponsored employee benefit plans that comply with PPACA requirements

• Employee benefits administration of plans sponsored solely by Insperity

Client

• Payment, through Insperity, of commissions, bonuses, vacations, paid time off, sick pay, paid leaves of absence and severance payments

• Payment and related tax reporting and remittance of non-qualified deferred compensation and equity-based compensation

• Ownership and protection of all client intellectual property rights

• Compliance with OSHA regulations, EPA regulations, FLSA, FMLA, WARN, USERRA and state and local equivalents and compliance with government contracting provisions

• Compliance with federal, state and local pay or play health care mandates and all such other similar federal, state and local legislation

• Compliance with the National Labor Relations Act (“NLRA”), including all organizing efforts and expenses related to a collective bargaining agreement and related benefits

• Professional licensing requirements, fidelity bonding and professional liability insurance

• Products produced and/or services provided

• COBRA, HIPAA, PPACA and ERISA compliance for client-sponsored benefit plans

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Concurrent

• Implementation of policies and practices relating to the employee/employer relationship

• Compliance with all federal, state and local employment laws, including, but not limited to Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA, the Consumer Credit Protection Act and immigration laws and regulations

We maintain employment practice liability insurance coverages (including coverages for our clients) to manage our exposure for various employee-related claims, and as a result, our incurred costs in excess of annual premiums with respect to this exposure have historically been insignificant to our operating results.

Because we are a co-employer with the client for some purposes, it is possible that we could incur liability for violations of such laws, even if we are not responsible for the conduct giving rise to such liability.  Our CSA ordinarily addresses this issue by providing that the client will indemnify us for liability incurred to the extent the liability is attributable to conduct by the client.  Notwithstanding this contractual right to indemnification, it is possible that we could be unable to collect on a claim for indemnification and may therefore be ultimately responsible for satisfying the liability in question.

In most instances, clients are required to remit their comprehensive service fees no later than one day prior to the applicable payroll date by wire transfer or automated clearinghouse transaction.  Although we are ultimately liable, as the employer for payroll purposes, to pay employees for work previously performed, we retain the ability to terminate immediately the CSA and associated worksite employees or to require prepayment, letters of credit or other collateral upon deterioration in a client’s financial condition or upon non-payment by a client.  These rights, the periodic nature of payroll, and the overall quality of our client base have resulted in an excellent overall collections history.

PEO HR Outsourcing Solutions Clients

Insperity’s PEO HR Outsourcing solutions provide value-added, full-service human resources solutions we believe are most suitable to a specific segment of the small and medium-sized business community.  We target successful businesses with 10 to 2,000 employees that recognize the advantage in the strategic use of high-performance human resources practices. We have set a long-term goal to serve approximately 10% of the overall small and medium-sized business community in terms of worksite employees.  We serve clients and worksite employees located throughout the United States.  By region, our 2014 revenue change compared to 2013 and revenue distribution for the year ended December 31, 2014, was as follows:

	Revenue Change		% of Total Revenues
Northeast	4.2	%	26.0	%
Southeast	6.1	%	9.7	%
Central	1.7	%	14.5	%
Southwest	3.1	%	27.3	%
West	6.8	%	22.5	%

All prospective PEO HR Outsourcing solutions clients are evaluated on the basis of a comprehensive analysis of employer-related risks entailing many factors, including industry and operations, workplace safety and workers’ compensation, unemployment history, operating stability, group medical information, human resources practices and other employer risks. As part of our client selection strategy, we generally do not offer our PEO HR Outsourcing solutions to businesses falling within certain specified NAICS (North American Industry Classification System) codes for those industries that we believe present a higher employer risk such as employee injury, high turnover or litigation.  

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Our PEO HR Outsourcing solutions client base is broadly distributed throughout a wide variety of industries including:

Industry	% of Client Base
Computer and information services	18	%
Management, administration and consulting services	18	%
Finance, insurance and real estate	13	%
Manufacturing	10	%
Wholesale trade	8	%
Engineering, accounting and legal services	7	%
Medical services	6	%
Retail trade	5	%
Not-for-profit and similar organizations	5	%
Construction	4	%
Other	6	%

This diverse client base lowers our exposure to downturns or volatility in any particular industry.  However, our performance could be affected by a downturn in one of these industries or by general economic conditions within the small and medium-sized business community.

We focus heavily on client retention.  During 2014 and 2013, our retention rate was approximately 82% and 81%, respectively. Of our PEO HR Outsourcing solutions clients that remain with us for more than one year, our retention record over the last five years is approximately 81%. For all PEO HR Outsourcing solutions clients, the average annual retention rate over the last five years was also approximately 81%. Client attrition is attributable to a variety of factors, including: (i) client non-renewal due to price or service factors; (ii) client business failure, sale, merger, or disposition; (iii) our termination of the CSA resulting from the client’s non-compliance or inability to make timely payments; and (iv) competition from other PEOs or business services firms.

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Marketing and Sales

As of December 31, 2014, we had 48 PEO HR Outsourcing solutions sales offices located in 25 markets.  Our sales offices typically consist of six to eight Business Performance Advisors (“BPAs”), a district sales manager and an office administrator. To take advantage of economic efficiencies, multiple sales offices may share a physical location.  Insperity’s markets and their respective year of entry are as follows:

		Initial
Market	Sales Offices	Entry Date
Houston	5	1986
San Antonio	1	1989
Austin	1	1989
Orlando	1	1989
Dallas/Fort Worth	4	1993
Atlanta	2	1994
Phoenix	1	1995
Chicago	2	1995
Washington D.C.	2	1995
Denver	2	1996
Los Angeles	5	1997
Charlotte	1	1997
St. Louis	1	1998
San Francisco	3	1998
New York	3	1999
Maryland	2	2000
New Jersey	2	2000
San Diego	1	2001
Boston	2	2001
Minneapolis	2	2002
Raleigh	1	2006
Kansas City	1	2007
Columbus	1	2010
Nashville	1	2011
Philadelphia	1	2012

Our existing and prospective markets are identified using a systematic market evaluation and selection process. We continue to evaluate a broad range of factors in the selection process, using a market selection model that weighs various criteria we believe are reliable predictors of successful penetration based on our experience. Among the factors we consider are:

• market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile

• market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers

• existing relationships within a given market, such as vendor or client relationships

• expansion cost issues, such as advertising and overhead costs

• direct cost issues that bear on our effectiveness in controlling and managing the cost of our services, such as workers’ compensation and health insurance costs, unemployment risks and various legal and other factors

• a comparison of the services we offer to alternatives available to small and medium-sized businesses in the relevant market, such as the cost to the target clients of procuring services directly or through other PEOs

• long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the market

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Each of our expansion markets, beginning with Dallas in 1993, was selected in this manner.

We develop a mix of national and local advertising media and a placement strategy tailored to each individual market.  After selecting a market and developing our marketing mix, but prior to entering the market, we engage in an organized media and public relations campaign to prepare the market for our entry and to begin the process of generating sales leads.  We market our services through various business promotions and a broad range of media outlets, including television, radio, newspapers, periodicals, direct mail and the Internet.  We employ public relations firms for most of our markets as well as advertising consultants to coordinate and implement our marketing campaigns.  We have developed an inventory of television, radio and newsprint advertisements, which are utilized in this effort.

We routinely seek to develop new marketing approaches and campaigns to capitalize on changes in the competitive landscape for our human resources services and to more successfully reach our target market.  We have an agreement with the Professional Golf Association Champions Tour to be the title sponsor of the annual Insperity Invitational^™ presented by UnitedHealthcare^® professional golf tournament held annually in The Woodlands, Texas (a suburb of Houston).  In addition, we have arrangements with Arnold Palmer and Jim Nantz, a sports commentator, to serve as our national spokespersons.  Our marketing campaigns use this event and the relationships with Mr. Palmer and Mr. Nantz as a focal point of our brand marketing efforts.

Our organic growth model generates sales leads from five primary sources: direct sales efforts, advertising, referrals, marketing alliances and the Internet.  These leads result in initial presentations to prospective PEO HR Outsourcing solutions clients, and ultimately, prospective PEO HR Outsourcing solutions client census reports.  A prospective PEO HR Outsourcing solutions client’s census report reflects information gathered by the BPA about the prospect’s employees, including base compensation, level of benefits coverage options, job classification, state of employment and workers’ compensation classification.  This information is used to generate a bid from our customized bid system, which applies Insperity’s proprietary pricing model to the census data. Concurrent with this process, we evaluate prospective clients through the previously described comprehensive employer risk analysis.  Upon completion of a favorable employer risk evaluation, the BPA presents the bid and attempts to complete the sale and enroll the prospect.  Our selling process typically takes approximately 90 days for clients with less than 150 employees, and 180 or longer days for mid-market clients. The process can be extended during economic downturns.

We have implemented cross-selling channels between our PEO HR Outsourcing solutions business and our SBUs in order to execute on our SBU strategy.  This strategy focuses on using our PEO HR Outsourcing solutions to increase market penetration in each of our SBU businesses and using our SBU offerings as a source of leads for our PEO HR Outsourcing solutions.  The cross-selling channels attempt to reduce barriers to selling our products and services and allow us to tailor service packages to better meet the specific needs of the business.

Competition

We provide a value-added, full-service human resources solution through our PEO HR Outsourcing solutions, which we believe is most suitable to a specific segment of the small and medium-sized business community.  This full-service approach is exemplified by our commitment to provide a high level of service and technology personnel, which has produced a ratio of corporate staff to worksite employees (the “staff support ratio”) that is higher than average for the PEO industry.  Based on an analysis of the 2011 through 2013 annual NAPEO surveys of the PEO industry, we have successfully leveraged our full-service approach into significantly higher returns for Insperity on a per worksite employee per month basis.  During the three-year period from 2011 through 2013, our staff support ratio averaged 57% higher than the PEO industry average.  During the same three-year period, our gross profit per worksite employee and operating income per worksite employee exceeded industry averages by 154% and 188%, respectively.

Competition in the PEO industry revolves primarily around quality of services, scope of services, choice and quality of benefits packages, reputation and price.  We believe reputation, national presence, regulatory expertise, financial resources, risk management and information technology capabilities distinguish leading PEOs from the rest of the industry.  We also believe we compete favorably in these areas; however, other PEOs may offer their PEO services at more competitive prices than we may be able to offer.

Due to the differing geographic regions and market segments in which most PEOs operate, and the relatively low level of market penetration by the industry, we consider our primary competition for our PEO HR Outsourcing solutions to be the traditional in-house provision of human resources services.  The PEO industry is highly fragmented, and we believe Insperity is one of the largest PEO service providers in the United States.  Our largest national competitors include the PEO divisions of large business services companies such as Automatic Data Processing, Inc. and Paychex, Inc., and other national PEOs, such as

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TriNet Group, Inc.  In addition, we compete to some extent with: (i) fee-for-service providers such as payroll processors and human resources consultants; (ii) human resources technology solution companies; and (iii) large regional PEOs in certain areas of the country.  As Insperity and other large PEOs expand nationally, we expect that competition may intensify.

Vendor Relationships

Insperity provides benefits to its worksite employees under arrangements with a variety of vendors. We consider our contracts with UnitedHealthcare (“United”) and member insurance companies of ACE American Insurance Company (“ACE”) to be the most significant elements of our employee benefits package.  These contracts would be the most difficult to replace.

We provide group health insurance coverage to our worksite employees through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, Unity Health Plan and Tufts, all of which provide fully insured policies or service contracts. The health insurance contract with United provides approximately 85% of our health insurance coverage and expires on December 31, 2017, subject to cancellation by either party upon 180 days’ notice. For a discussion of our contract with United, which is accounted for using a partially self-funded insurance accounting model, please read Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Benefits Costs.”

Our workers’ compensation coverage (the “ACE Program”) has been provided through an arrangement with ACE since 2007.  The ACE Program is a fully insured policy whereby ACE has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. For additional discussion of the ACE Program, which includes terms shifting some of the economic burden to us, please read Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Workers’ Compensation Costs.”

Information Technology

Insperity utilizes a variety of information technology capabilities to provide its human resources services and business performance improvement services to its clients and worksite employees and for its own administrative and management information requirements.

Insperity’s PEO HR Outsourcing solutions information system is a proprietary system that utilizes internally developed and licensed software applications.  This system manages transactions and information specific to our PEO HR Outsourcing solutions and to Insperity, including:

• worksite employee enrollment

• human resources management

• benefits and defined contribution plan administration

• payroll processing

• client invoicing and collection

• management information and reporting

• sales bid calculations

Central to this system are transaction processing capabilities that allow us to process a high volume of payroll, invoice and bid transactions that meet the specific needs of our clients and prospects.  We administer our employee benefits through a proprietary application designed to process employee eligibility and enrollments, manage carrier relationships and maintain a variety of plan offerings.  Our retirement services operations are conducted utilizing an industry-leading retirement plan administration application in a third-party hosted environment.  Aspects of all of these components are delivered to our PEO HR Outsourcing solutions clients and worksite employees through the ESC.  We utilize commercially available software for other business functions such as finance and accounting, sales force activity management and customer relationship management.

Our SBUs utilize a variety of owned and licensed software applications to deliver business performance improvement services to our clients, including to some of our PEO HR Outsourcing solutions clients.

Insperity has hosting facilities located at our corporate headquarters in Kingwood, Texas (a suburb of Houston), and in Bryan, Texas.  The hosting facilities house the majority of our business applications, telecommunications equipment and network equipment.  Each hosting facility houses a mix of primary production applications, disaster recovery, replication and back-up applications, and pre-production environments with the Bryan facility acting as our primary data center for all mission-critical applications.  Both hosting facilities are designed to run all of our critical business applications and have sufficient

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capacity to handle all of our operations on a stand-alone basis, if required.  Periodically, we perform testing to ensure our disaster recovery capabilities remain effective and available.  We leverage the hosting facilities and related infrastructure that we originally designed for our PEO HR Outsourcing solutions system to support the systems required for our business performance improvement services offered through our SBUs.  We also utilize additional leased hosting facilities for certain of our business units.

Our network infrastructure is designed to ensure appropriate connectivity exists among all of our facilities and employees and provides appropriate Internet connectivity to conduct business with our clients and worksite employees.  The network infrastructure is provided through industry standard core network hardware and via high-speed network services provided by multiple vendors.

We have incorporated a variety of measures to maintain the security and privacy of the information managed through our systems and applications.  These measures include industry standard technologies designed to protect, monitor and assess our data centers and network environment; best practice security policies and procedures; and a variety of measures designed to control access to sensitive and private information.

Industry Regulations

The operations for our PEO HR Outsourcing solutions are affected by numerous federal and state laws relating to tax, insurance and employment matters.  By entering into a co-employer relationship with our worksite employees, we assume certain obligations and responsibilities of an employer under these federal and state laws.  Because many of these federal and state laws were enacted prior to the development of nontraditional employment relationships, such as PEOs, temporary employment and outsourcing arrangements, many of these laws do not specifically address the obligations and responsibilities of nontraditional employers.  Currently, 41 states have passed laws that recognize PEOs or require licensing, registration or certification requirements for PEOs, and several others are considering such regulation. The SBEA, which was enacted in 2014, will establish a certification program and create a federal regulatory framework for the payment of wages to worksite employees and for the reporting and remittance of payroll taxes on those wages by CPEOs. This law will be effective January 1, 2016.

As an employer, we are subject to federal statutes and regulations governing the employer/employee relationship.  Subject to the issues discussed below, we believe that our operations are in compliance, in all material respects, with all applicable federal statutes and regulations.

Employee Benefit Plans

We offer various employee benefits plans to eligible employees, including our worksite employees.  These plans include:

• a 401(k) retirement plan

• cafeteria plans under Code Section 125

• a group health plan, which includes medical, dental, vision and prescription drug coverage, as well as a work-life program

• a health savings account program

• a welfare benefits plan, which includes life, disability and accidental death and dismemberment coverage

• a health care flexible spending account plan

• an educational assistance program

• an adoption assistance program

• a commuter benefits program

Generally, employee benefit plans are subject to provisions of the Code, ERISA and COBRA.

Employer Status.  In order to qualify for favorable tax treatment under the Code, employee benefit plans must be established and maintained by an employer for the exclusive benefit of its employees.  Generally, an entity is an “employer” of individuals for federal employment tax purposes if an employment relationship exists between the entity and the individuals under the common law test of employment.  In addition, the officers of a corporation are deemed to be employees of that corporation for federal employment tax purposes.  The common law test of employment, as applied by the Internal Revenue Service (“IRS”), involves an examination of approximately 20 factors to ascertain whether an employment relationship exists between a worker and a purported employer.  Generally, the test is applied to determine whether an individual is an independent contractor or an employee for federal employment tax purposes and not to determine whether each of two or more companies is

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a “co-employer.”  Substantial weight is typically given to the question of whether the purported employer has the right to direct and control the details of an individual’s work.  Among the factors that appear to have been considered more important by the IRS are:

• the employer’s degree of behavioral control (the extent of instructions, training and the nature of the work)

• the financial control or the economic aspects of the relationship

• the intended relationship of the parties (whether employee benefits are provided, whether any contracts exist, whether services are ongoing or for a project, whether there are any penalties for discharge/termination, and the frequency of the business activity)

ERISA Requirements.  Employee pension and welfare benefit plans are also governed by ERISA.  ERISA defines “employer” as “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.”  ERISA defines the term “employee” as “any individual employed by an employer.”  The United States Supreme Court has held that the common law test of employment must be applied to determine whether an individual is an employee or an independent contractor under ERISA.  A definitive judicial interpretation of “employer” in the context of a PEO or employee leasing arrangement has not been established.

If Insperity were found not to be an employer with respect to worksite employees for ERISA purposes, its plans would not comply with ERISA.  Further, as a result of such finding, Insperity and its plans would not enjoy, with respect to worksite employees, the preemption of state laws provided by ERISA and could be subject to varying state laws and regulations, as well as to claims based upon state common laws.  Even if such a finding were made, we believe we would not be materially adversely affected because we would endeavor to make available similar benefits at comparable costs.

In addition to ERISA and the Code provisions discussed herein, issues related to the relationship between Insperity and its worksite employees may also arise under other federal laws, including other federal income tax laws.

Patient Protection and Affordable Care Act.  The PPACA was signed into law on March 23, 2010.  The PPACA was subsequently amended on March 30, 2010, by the Reconciliation Act.  The PPACA and the Reconciliation Act (collectively the “Act”) entail sweeping health care reforms with staggered effective dates from 2010 through 2018, and many provisions in the Act require the issuance of additional guidance from the U.S. Department of Labor, the IRS, the U.S. Department of Health & Human Services (“HHS”) and the states.  Many provisions of the Act do not become operative until future years.  The Act did not have a material adverse impact on our results of operations in 2014.

The number and complex nature of federal and state regulations relating to employer-sponsored health plans has continued to increase over time.  The Act has already generated many new regulations, and is expected to generate many more as various provisions take effect.  We believe that additional regulatory burdens placed on employers can increase the demand for our services because small and medium-sized businesses are especially challenged by such governmental regulations due to limited resources and the lack of expertise.  As a co-employer in the PEO relationship, we assume or share many of the employer-related responsibilities and assist our clients in complying with many employment-related governmental laws and regulations.  Historically, we believe we have successfully marketed the compliance component of our service offering and that our compliance-related services have increased the value proposition of our service offering.  However, given the length and complexity of the Act, the extended time period over which the reforms will be implemented, and the unknown impact of regulatory guidance, much of which has not yet been issued, we are unable to determine the ultimate impact the Act will have in future periods on the costs we will incur to comply with the Act, our ability to match any resulting increased costs with pricing, our ability to attract and retain clients, our business model and our results of operations.

Beginning in 2010, the Act provided for a small business tax credit for eligible companies offering health care coverage to employees.  Based upon information contained in the Congressional Record, which specifically references PEOs, we believe that these tax credits are available to our clients that meet the qualification requirements. However, the Act and subsequently issued IRS guidance do not expressly address the issue of whether qualifying small business clients of a PEO are entitled to the tax credits.  At this time, we do not believe that this issue has had an adverse effect on our operations or our ability to attract and retain clients. Beginning January 1, 2016, the provisions of the SBEA clarify that a client of a CPEO remains eligible for Code Section 45R tax credits for employee health insurance expenses of small employers.

Beginning in 2011, the Act imposed a number of new mandates on the coverage required to be provided under health insurance plans, some of which were already standard in our group health plan.  For mandates not already included, we worked with our insurance carriers to incorporate the required changes. While we are unable to determine the impact of the required plan changes at this time, in future periods they may result in increased costs to us and could affect our ability to attract and

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retain clients.  Additionally, contractual arrangements and competitive market conditions may limit or delay our ability to increase service fees to offset the associated potential increased costs.

Beginning in 2014, the Act provided for the establishment of state insurance exchanges (“Exchanges”) to make health insurance available to individuals and small employers (initially defined as 100 employees or less).  States had the option of building a state-based exchange, entering into a state-federal partnership exchange or accepting the federally-facilitated exchange.  States that accept the federally-facilitated exchange can transition to a state-based exchange at a later date.  The Exchanges provide consumers with educational services and information on available options and offer a variety of health plans.  Small business tax credits and subsidies are available to qualifying businesses and individuals who purchase health insurance through the Exchanges.

Additionally in 2014, the Act ushered in a number of insurance market reforms for the small group and individual markets.  The reforms, intended to result in the community rating of health insurance for these markets, required guaranteed issue and renewability of coverage, eliminated certain underwriting practices by issuers, consolidated the number of risk pools in each state and restricted the permissible factors and variable ranges of those factors that can be considered in determining health insurance premiums.

The health insurance industry became subject to additional excise taxes in 2014.  Also, starting in 2014, reinsurance taxes were imposed on insurers and third-party administrators for the purpose of helping to offset the cost for insurance covering high-risk individuals.  As the policyholder, all or a portion of these increased costs may be passed on to us by our carriers.  Contractual arrangements and competitive market conditions may limit or delay our ability to match pricing with any potential increased costs.

On July 2, 2013, the federal government delayed implementation of the employer shared responsibility (“pay or play”) provisions of the Act until 2015. Under pay or play, penalties are imposed on large employers (those with at least 50 full-time equivalent employees) who fail to offer “minimum essential coverage” if any employee obtains coverage from an Exchange and receives a subsidy or tax credit for such coverage.  To qualify as minimum essential coverage, employer plans must satisfy affordability and minimum value tests or be subject to financial penalties if any employee obtains coverage from an Exchange and receives a subsidy or tax credit for such coverage.  However, the federal government further delayed implementation of pay or play requirements until 2016 for employers with between 50 and 99 full-time equivalent employees, provided certain transition relief requirements are satisfied. Information contained in the Congressional Record, which specifically references PEOs, indicates that any pay or play penalties should apply separately to clients of a PEO and not at the PEO level.  However, the Act and subsequently issued IRS guidance do not expressly address the issue of whether the pay or play penalties apply only at the client level or whether the penalties can be applied at the PEO level.  At this time, we are unable to determine whether the Exchanges, tax credits, subsidies, insurance market reforms or the pay or play penalties will have an adverse impact on our business operations, our ability to attract and retain clients, or our ability to increase service fees to offset any increased costs or associated penalties assessed at the PEO level.

In 2018, the Act implements rules imposing excise taxes on employers and insurers who offer excessive health benefits under so-called “Cadillac plans.”  We anticipate taking appropriate steps to avoid, to the extent necessary and possible, benefits under our group health plan from triggering such excise taxes, which our carrier may pass on to us in the form of increased premiums.  At this time, we are unable to determine the effect the excise taxes will have on our ability to match pricing with any increased costs.

401(k) Retirement Plans.  Our 401(k) Retirement Plans are operated pursuant to guidance provided by the IRS under Revenue Procedure 2002-21 and Revenue Procedure 2003-86, each of which provides guidance for the operation of defined contribution plans maintained by PEOs that benefit worksite employees.  This guidance provides qualification standards for PEO plans which, if met, negate the inquiry of common law employer status for purposes of the exclusive benefit rule.  All of Insperity’s 401(k) Retirement Plans have received determination letters from the IRS confirming the qualified status of the plans.

Employment Taxes

As a co-employer, Insperity assumes responsibility and liability for the payment of federal and state employment taxes with respect to wages and salaries paid to our worksite employees.  There are essentially three types of federal employment tax obligations:

• withholding of income tax requirements governed by Code Section 3401, et seq.

• obligations under FICA, governed by Code Section 3101, et seq.

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• obligations under FUTA, governed by Code Section 3301, et seq.

Under these Code sections, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee portion of these taxes.

Code Section 3401, which applies to federal income tax withholding requirements, contains an exception to the general common law test applied to determine whether an entity is an “employer” for purposes of federal income tax withholding.  Code Section 3401(d)(1) states that if the person for whom services are rendered does not have control of the payment of wages, the “employer” for this purpose is the person having control of the payment of wages.  The Treasury regulations issued under Code Section 3401(d)(1) state that a third party can be deemed to be the employer of workers under this section for income tax withholding purposes where the person for whom services are rendered does not have legal control of the payment of wages.  While several courts have examined Code Section 3401(d)(1), its ultimate scope has not been delineated. Moreover, the IRS has to date relied extensively on the common law test of employment in determining liability for failure to comply with federal income tax withholding requirements.

Accordingly, while we believe that we can assume the withholding obligations for worksite employees, in the event we fail to meet these obligations, the client may be held ultimately liable for those obligations.  While this interpretive issue has not to our knowledge discouraged clients from enrolling with Insperity, there can be no assurance that a definitive adverse resolution of this issue would not do so in the future.  These interpretive uncertainties may also impact our ability to report employment taxes on our own account rather than the accounts of our clients.

For worksite employee wages for services performed on or after January 1, 2016, and subject to the adoption of applicable regulations, the provisions of the SBEA clarify that a CPEO shall be treated as the employer under Subtitle C – Employment Taxes of the Code and shall be responsible for reporting employment taxes on its own account rather than the accounts of CPEO clients. We intend to seek qualification as a CPEO.

Unemployment Taxes

We record our state unemployment (“SUI”) tax expense based on taxable wages and tax rates assigned by each state.  State unemployment tax rates vary by state and are determined, in part, based on Insperity’s prior years’ compensation experience in each state.  Certain rates are determined, in part, by each client’s own compensation experience.  In addition, states have the ability under law to increase unemployment tax rates, including retroactively, to cover deficiencies in the unemployment tax funds.  Overall, state unemployment tax rates increased substantially from 2010 to 2012 due to U.S. economic conditions, but declined in 2013 and 2014 and are anticipated to further decline in 2015.  Rate notices are typically provided by the states during, or prior to, the first quarter of each year; however, some notices are received later.  Until we receive the final tax rate notices, we estimate our expected SUI rate in those particular states.

Employers in certain states are experiencing higher FUTA tax rates as a result of certain states not repaying their unemployment loans from the federal government in a timely manner.  We are obligated to pay the federal government at a higher rate in these situations.  As such, we estimate the additional tax owed in states that have had a history of not repaying their federal loans in a timely manner.

State Regulation

While some states do not explicitly regulate PEOs, 41 states have adopted provisions for licensing, registration, certification or recognition of PEOs, and several others are considering such regulation.  Such laws vary from state to state but generally provide for monitoring the fiscal responsibility of PEOs, and in some cases codify and clarify the co-employment relationship for unemployment, workers’ compensation and other purposes under state law.  We believe that we are in compliance with the material requirements in all 41 states.  Regardless of whether a state has licensing, registration or certification requirements for PEOs, we must comply with a number of other state and local regulations that could impact our operations.

Corporate Office Employees

We had approximately 2,300 corporate employees as of December 31, 2014.  We believe our relations with our corporate employees are good.  None of our corporate employees are covered by a collective bargaining agreement.

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Intellectual Property

Insperity currently has registered trademarks, copyrights and other intellectual property.  We believe that our trademarks as a whole are of considerable importance to our business.

ITEM 1A.  RISK FACTORS.

The statements in this section describe the known material risks to our business and should be considered carefully.

Adverse Economic Conditions Could Negatively Affect Our Industry, Business and Results of Operations

The small and medium-sized business market is sensitive to changes in economic activity levels as well as the credit markets. As a result, the demand for the outsourced HR services we provide clients could be adversely impacted by weak economic conditions or difficulty obtaining credit. Current and prospective clients may respond to such conditions by reducing employment levels, compensation levels, employee benefit levels and outsourced HR services. In addition, during periods of weak economic conditions, current clients may have difficulty meeting their financial obligations to us and may select alternative HR services at more competitive rates than we offer. Such developments could adversely impact our financial condition, results of operations and future growth rates.

We Assume Liability for Worksite Employee Payroll, Payroll Taxes and Benefits Costs and Are Responsible for Their Payment Regardless of the Amount Billed to or Paid by Our Clients

Under the CSA, we become a co-employer of worksite employees and assume the obligations to pay the salaries, wages and related benefits costs and payroll taxes of such worksite employees.  We assume such obligations as a principal, not as an agent of the client.  Our obligations include responsibility for:

• payment of the salaries and wages for work performed by worksite employees, regardless of whether the client timely pays us the associated service fee

• withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity

• providing benefits to worksite employees even if our costs to provide such benefits exceed the fees the client pays us

If a client does not pay us, or if the costs of benefits we provide to worksite employees exceed the fees a client pays us, our ultimate liability for worksite employee payroll and benefits costs could have a material adverse effect on our financial condition or results of operations.

Increases in Health Insurance Costs or Inability to Secure Replacement Contracts on Competitive Terms Could Have a Material Adverse Effect on Our Financial Condition or Results of Operations

Maintaining health insurance plans that cover worksite employees is a significant part of our business.  Our primary health insurance contract expires on December 31, 2017, subject to cancellation by either party upon 180 days’ notice.  In the event we are unable to secure replacement contracts on competitive terms, significant disruption to our business could occur.

Health insurance costs are in part determined by our claims experience and comprise a significant portion of our direct costs.  If we experience an increase in the number or severity of claims, our health insurance costs could increase.  Claim activity levels are impacted by a number of factors, including, but not limited to, macro-economic changes, proposed and enacted regulatory changes and medical outbreaks. Contractual arrangements with our clients limit our ability to incorporate such increases into service fees, which could result in a delay before such increases could be reflected in service fees.  As a result, such increases could have a material adverse effect on our financial condition or results of operations.  For additional information related to our health insurance costs, please read Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Benefits Costs.”

Health Care Reform Could Affect Our Health Insurance Plan and Could Lead to a Significant Disruption in Our Business

The PPACA was signed into law on March 23, 2010.  The PPACA was subsequently amended on March 30, 2010 by the Reconciliation Act.  The Act entails sweeping health care reforms with staggered effective dates from 2010 through 2018, and many provisions in the Act require the issuance of additional guidance from the HHS and the states.

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Beginning in 2014, a number of key provisions of the Act took effect, including the Exchanges, insurance market reforms and the imposition of excise taxes on the health insurance industry and reinsurance taxes on insurers and third-party administrators.  Additionally, the pay or play penalties on large employers take effect in 2015, however there is a one-year delay until 2016 for large employers with between 50 and 99 full-time equivalent employees, provided that certain transition relief requirements are satisfied. Collectively, these items have the potential to significantly change the insurance marketplace for small and medium sized businesses and how employers provide insurance to employees.  In addition, as a co-employer in the PEO relationship, we assume or share many of the employer-related responsibilities and assist our clients in complying with many employment-related governmental regulations.  Generally, the Act and subsequently issued guidance by IRS and HHS have not addressed or in some instances are unclear as to their application in the PEO relationship or whether such provisions should be applied at the PEO or client level.

We are currently unable to determine the impact of the Act on our benefit plans, business model and future results of operations.  In future periods, the changes may result in increased costs to us and could affect our ability to attract and retain clients.  Additionally, contractual arrangements and competitive market conditions may limit or delay our ability to increase service fees to offset any associated potential increased costs.  For additional information related to the Act, please read Item 1. “Business – Industry Regulations – Patient Protection and Affordable Care Act.”

Increases in Workers’ Compensation Costs or Inability to Secure Replacement Coverage on Competitive Terms Could Lead to a Significant Disruption to Our Business

Our workers’ compensation coverage has been provided through an arrangement with ACE since 2007.  Under our current arrangement with ACE, we bear the economic burden for the first $1 million layer of claims per occurrence and the economic burden for claims over $1 million, up to a maximum aggregate amount of $5 million per policy year for claims that exceed the first $1 million.  ACE bears the burden for all claims in excess of these levels. The ACE Program is a fully insured policy whereby ACE has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. For additional discussion of our policy with ACE, please read Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Workers’ Compensation Costs.”

Workers’ compensation costs are a significant portion of our direct costs.  If we were to experience an unexpected large increase in the number or severity of claims, our workers’ compensation costs could increase, which could have a material adverse effect on our results of operations or financial condition.

The current workers’ compensation coverage with ACE expires on September 30, 2015 and may be extended until September 30, 2017 if our claims do not exceed certain thresholds and certain other program conditions are satisfied.  In the event we are unable to secure replacement coverage on competitive terms, significant disruption to our business could occur.

Our Ability to Adjust and Collect Service Fees for Increases in Unemployment Tax Rates May be Limited

We record our SUI tax expense based on taxable wages and tax rates assigned by each state. SUI tax rates vary by state and are determined, in part, based on prior years’ compensation experience in each state. Prior to the receipt of final tax rate notices, we estimate our expected SUI tax rate in those states for which tax rate notices have not yet been received for purposes of pricing. In a period of adverse economic conditions state unemployment funds may experience a significant increase in the number of unemployment claims. Accordingly, SUI tax rates would likely increase substantially. Some states have the ability under law to increase SUI tax rates retroactively to cover deficiencies in the unemployment fund.

In addition, FUTA may be retroactively increased in certain states in the event the state fails to timely repay federal unemployment loans. Employers in such states are experiencing higher FUTA tax rates as a result of not repaying their unemployment loans from the federal government in a timely manner. The Benefit Cost Ratio Add-On (“BCR”) is an additional tax on the FUTA wage base for employers in states that continue to have outstanding federal unemployment insurance loans beginning with the fifth year in which there is a balance due on the loan. States have the option to apply for a waiver before July 1st of the year in which the BCR is applicable. As of December 31, 2014 there are seven states with outstanding unemployment loans and of those, all but one, Connecticut, filed for and received a BCR waiver in 2014; however, there is no certainty the states will receive waivers in 2015. If waivers are not obtained in 2015, Insperity will be required to pay the BCR taxes.

Generally, our contractual agreements allow us to incorporate such statutory tax increases into our service fees upon the effective date of the rate change. However, our ability to fully adjust service fees in our billing systems and collect such

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increases over the remaining term of the clients’ contracts could be limited, resulting in a potential tax increase not being fully recovered. As a result, such increases could have a material adverse effect on our financial condition or results of operations.

Our Contracts May be Canceled on Short Notice.  Our Inability to Renew Client Contracts or Attract New Clients Could Materially and Adversely Affect Our Financial Conditions or Results of Operations

Our standard CSA can generally be canceled by us or the client with 30 days’ notice.  Accordingly, the short-term nature of the CSA makes us vulnerable to potential cancellations by existing clients, which could materially and adversely affect our financial condition or results of operations. In addition, in the event we have a high proportion of terminating clients from our mid-market client base (which are generally under a two-year CSA), the financial impact of such an event could be significant due to the number of worksite employees involved and the time it takes to replace mid-market clients.  Also, our results of operations are dependent in part upon our ability to retain or replace our clients upon the termination or cancellation of the CSA.  Our client attrition rate was approximately 18% in 2014.  There can be no assurance that the number of contract cancellations will continue at these levels and such cancellations may increase in the future due to various factors, including but not limited to, economic conditions in the markets we operate. Clients electing to purchase our services or electing an alternative solution often do so at the beginning of the calendar year. As a result, we typically experience our largest concentration of new client additions and attrition in the first quarter of each year.

Competition May Impact Our Growth and/or Profitability

The human resources services industry, including the PEO industry, is highly fragmented. Many PEOs have limited operations and fewer than 1,000 worksite employees, but there are several industry participants that are comparable to our size or larger. We also encounter competition from “fee for service” companies such as payroll processing firms, insurance companies, human resources consultants and human resources technology solutions. Our competitors include the PEO divisions of large business services companies, such as Automatic Data Processing, Inc. and Paychex, Inc., and other national PEOs such as TriNet Group, Inc. In many cases, these competitors offer a reduced service PEO offering at a lower price than our PEO HR Outsourcing solutions. We expect that as the PEO industry grows and its regulatory framework becomes better established, well organized competition with greater resources than we have may enter the PEO market, possibly including large “fee for service” companies currently providing a more limited range of services. In addition, competitors may be able to offer or develop new technology-based lower service models that may require us to make substantial investments in order to effectively compete.

In 2013, we began offering a lower priced reduced service level PEO offering referred to as Workforce Synchronization in response to certain mid market client needs and the evolving PEO marketplace. As of December 2014, approximately 6% of our worksite employees were Workforce Synchronization clients. In the event we were to experience a significant increase in the number of clients using the Workforce Synchronization offering, or increased pricing pressures in the PEO marketplace, without a corresponding reduction in operating costs, our operating margins may decline, which could have a material adverse impact on our financial condition or results of operations.

We May Be Subject to Liabilities for Client and Employee Actions

A number of legal issues remain unresolved with respect to the co-employment arrangement between a PEO and its worksite employees, including questions concerning the ultimate liability for violations of employment and discrimination laws.  Our CSA establishes the contractual division of responsibilities between Insperity and our clients for various personnel management matters, including compliance with and liability under various governmental regulations.

Because we act as a co-employer, we may be subject to liability for violations of various employment and discrimination laws despite these contractual provisions, even if we do not participate in such violations.  Although the CSA generally provides that the client is to indemnify us for certain liabilities attributable to the client’s conduct, we may not be able to collect on such a contractual indemnification claim and thus may be responsible for satisfying such liabilities to the extent that such liabilities are not covered or insured against under our insurance policies. In addition, worksite employees may be deemed to be our agents, which may subject us to liability for the actions of such worksite employees.

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Changes in Federal, State and Local Regulation or Our Inability to Obtain Licenses Under New Regulatory Frameworks Could Have a Material Adverse Effect on Our Results of Operations or Financial Condition

As a major employer, our operations are affected by numerous federal, state and local laws and regulations relating to labor, tax, benefit, insurance and employment matters.  By entering into a co-employer relationship with employees assigned to work at client locations, we assume certain obligations and responsibilities of an employer under these laws.  However, many of these current laws (such as the Act, ERISA and federal and state employment tax laws) do not specifically address the obligations and responsibilities of non-traditional employers such as PEOs, and the definition of “employer” under these laws is not uniform.  While the SBEA is expected to provide clarification under federal employment tax laws for CPEOs, until the related regulations are adopted, including the requirements for CPEOs, we cannot be certain as to the benefit that this law will provide. In addition, many of the states in which we operate have not addressed the PEO relationship for purposes of compliance with applicable state laws governing the employer/employee relationship.  Any adverse application of new or existing federal or state laws to the PEO relationship with our worksite employees and client companies could have a material adverse effect on our results of operations or financial condition.

While some states do not explicitly regulate PEOs, 41 states have passed laws that have recognition, licensing, certification or registration requirements for PEOs and several other states are considering such regulation.  Such laws vary from state to state, but generally provide for monitoring the fiscal responsibility of PEOs, and in some cases codify and clarify the co-employment relationship for unemployment, workers’ compensation and other purposes under state law.  In addition, the SBEA will provide certain benefits for companies that qualify as a CPEO. While we generally support licensing regulation because it serves to validate the PEO relationship, we may not be able to satisfy licensing requirements or other applicable regulations for all states.  In addition, there can be no assurance that we will be able to renew our licenses in all states or that we will be able to qualify as a CPEO following the effectiveness of the SBEA.

Geographic Market Concentration Makes Our Results of Operations Vulnerable to Regional Economic Factors

Our New York, California and Texas markets accounted for approximately 10%, 18% and 25% (including 13% in Houston), respectively, of our worksite employees for the year ended December 31, 2014.  Accordingly, while we have a goal of expanding in our current markets and into new markets, for the foreseeable future, a significant portion of our revenues may be subject to economic factors specific to New York, California and Texas.

A Determination that a Client is Liable for Employment Taxes Not Paid by a PEO May Discourage Clients from Contracting with Us in the Future

Under the CSA, we assume sole responsibility and liability for paying federal employment taxes imposed under the Code with respect to wages and salaries we pay our worksite employees.  There are essentially three types of federal employment tax obligations:

• income tax withholding requirements

• FICA

• FUTA

Under the Code, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee portion of these taxes.  Most states impose similar employment tax obligations on the employer.  While the CSA provides that we have sole legal responsibility for making these tax contributions, the applicable state taxing authority or, prior to the effectiveness of the SBEA, the IRS could conclude that such liability cannot be completely transferred to us.  Accordingly, in the event that we fail to meet our tax withholding and payment obligations, the client may be held jointly and severally liable for those obligations.  While this interpretive issue has not, to our knowledge, discouraged clients from enrolling with Insperity, a definitive adverse resolution of this issue or a delay in the effectiveness of the SBEA may discourage clients from enrolling in the future.

Failure of Our Information Technology Systems Could Disrupt the HR Services We Provide to Clients

Many of the HR services offerings we provide to clients are conducted through a technology infrastructure using both internally developed and purchased commercial software, a wide variety of hardware infrastructure technologies, and a multi-carrier wide area network. The processing of payroll, benefits and other transactions is dependent upon this complex infrastructure some of which is provided by third party vendors. Any delays or failures caused by network outages, software or hardware failures, or other data processing disruptions, could result in our inability to timely process transactions. If such failures cause us to not meet client service expectations, we may lose existing clients and may have difficulty attracting new

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clients. Such developments could have a material adverse impact on our financial condition, results of operations and future growth rates.

Potential Disclosure of Sensitive or Private Information Could Damage Our Reputation and Impact Our Operating Results

Unauthorized access or unintentional disclosure of personal or confidential information could damage our reputation and operating results.  While we strive to comply with all applicable data protection laws and regulations, and maintain stringent privacy and security policies and procedures, any failure or perceived failure to adequately protect sensitive information may result in negative publicity and/or proceedings or actions against us by government entities or others, which could potentially have an adverse effect on our business.

Most states and the District of Columbia have enacted notification rules concerning privacy and data protection.  It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices.  If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which could have a material adverse effect on our business.  Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

The Failure of Our Insurance Carriers or Financial Institutions Could Have a Material Adverse Effect on Us

As part of our PEO HR Outsourcing solutions, we contract with various insurance carriers to provide insurance coverage including health insurance, workers’ compensation insurance and employment practices liability insurance. In addition, we obtain insurance coverage for various commercial risks in our business such as property insurance, errors and omissions insurance, general liability insurance, fiduciary liability insurance, automobile liability insurance, and directors’ and officers’ liability insurance.  The failure of any insurance carrier providing such coverage could leave us exposed to uninsured risk and could have a material adverse effect on our business.

In conjunction with providing services to clients, we rely on financial institutions to electronically transfer funds for the collection of our comprehensive service fee as well as the payment of wages and associated payroll tax withholdings. Failure by these financial institutions, for any reason, to deliver their services in a timely manner could result in material interruptions to our operations, impact client relations, and result in significant penalties or liabilities to us.

New and Higher Federal, State and Local Taxes Could Have a Material and Adverse Impact on Our Financial Condition and Results of Operations

In times of economic slowdowns, states and municipalities in which we operate may experience reductions in tax revenues and corresponding budget deficits.  In response to the budget shortfalls, many states and municipalities have in the past and may in the future increase or enact new taxes on businesses operating within their tax jurisdiction, including business activity taxes and income taxes.  In addition, federal, state and local taxing agencies may increase their audit activity in an effort to identify additional tax revenues.  New tax assessments on our operations could result in increased costs. Our ability to adjust our service fees and incorporate additional tax assessments into our billing system could be limited.  As a result, such higher taxes could have a material adverse impact on our financial condition or results of operations. Please read Note 14 to the Consolidated Financial Statements, “Commitments and Contingencies,” for additional information regarding tax assessments by the State of Texas and the State of Massachusetts.

Failure to Integrate or Realize the Expected Return on Our Acquisitions and Investments Could Have a Material Adverse Impact on Our Financial Condition or Results of Operations

We have adopted a strategy to market and sell additional products and services within and outside of traditional PEO HR Outsourcing solutions. As part of this strategy, periodically we make strategic long-term decisions to invest in and/or acquire new companies, business units or assets. Acquiring new businesses involves a number of risks such as over-valuation of the acquired companies, entering markets or businesses in which we have no prior experience, integrating the technology, operations, and personnel, diversion of management’s attention from other business concerns and litigation resulting from the activities of the acquired company. The occurrence of one or more of these events could result in the loss of existing or prospective clients or employees, not achieving anticipated revenues or profitability, or impairment of acquired assets. Such developments could have a material impact to our financial condition, results of operations and future growth rates.

In connection with our goodwill impairment assessments, we recorded impairment charges of $2.5 million in our Employment Screening reporting unit in 2014, $3.3 million in our Expense Management reporting unit in 2013 and $4.2

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million in our Performance Management reporting unit in 2012. In addition, we recorded a $2.7 million impairment charge related to our minority investment in The Receivables Exchange in 2013. Based on market conditions or changes in operating plans, the fair value of our other acquired businesses could decline, requiring us to record additional impairment charges for all or portions of the investments. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” and Note 6, “Other Assets “ for additional information regarding the impairment charges.

Our Business Could be Disrupted as a Result of Actions of Certain Stockholders

Our largest two stockholders have made public statements critical of our performance and have advocated that we make certain changes regarding our strategic plan, operating expenses, capital allocation, management and corporate governance. They have also suggested that we should pursue strategic alternatives. If any of our stockholders commences a proxy contest, further advocates for changes or engages in other similar activities, then our business could be affected because we may have difficulty attracting and retaining clients due to perceived uncertainties as to our future direction and negative public statements about our business; responding to proxy contests and other similar actions by stockholders could result in us incurring substantial additional costs and significantly divert the attention of management and our employees; and, if individuals are elected to our Board of Directors with a specific agenda, the execution of our strategic plan may be disrupted or a new strategic plan altogether may be implemented.

Any proxy contest in connection with our 2015 annual meeting of stockholders may be particularly disruptive because the directors whose terms expire this year are also our chairman of the Board of Directors and Chief Executive Officer, our lead independent director and chairperson of our Nominating and Corporate Governance Committee and our chairperson of the Finance, Risk Management & Audit Committee. Due to the roles that each of these positions plays on our Board of Directors, should one or more these directors be replaced by a nominee that does not support our current strategic plan, then our business may be adversely affected while a new strategic plan is developed and implemented.

We cannot predict, and no assurances can be given, as to the outcome or timing of any matters relating to the foregoing or the ultimate impact on our business, and any of these matters or any further actions by these or other stockholders may impact and result in volatility of the price of our common stock.

ITEM 1B.  UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.  PROPERTIES.

We believe our current real estate and facilities are adequate for the purposes for which they are intended and provide for further expansion to accommodate our long-term growth and expansion goals.  We believe that short-term leased facilities are readily available if needed to accommodate near-term needs if they arise.  We will continue to evaluate the need for additional facilities based on the extent of our product and service offerings, the rate of client growth, the geographic distribution of our client base and our long-term service delivery requirements.

Corporate Facilities

Our corporate headquarters is located in Kingwood, Texas, in a 327,000 square foot campus-style facility.  This 33-acre company-owned office campus includes approximately 12 acres of undeveloped land for future expansion. Development and support operations are located in the Kingwood facility.

Service Centers

We currently have four regional service centers located in Atlanta, Dallas, Houston and Los Angeles.

The Atlanta service center, which currently services approximately 33% of our worksite employee base, is located in a 40,500 square foot facility under lease until 2022.

The Dallas service center, which currently services approximately 21% of our worksite employee base, is located in a 48,600 square foot facility under lease until 2016.  In addition to the service center operations, the facility also contains sales operations.

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The Houston service center, which currently services approximately 22% of our worksite employee base, is located in a 60,600 square foot facility under lease until 2016.  In addition to the service center operations, the facility also contains corporate support operations.

The Los Angeles service center, which currently services approximately 24% of our worksite employee base, is located in a 38,000 square foot facility under lease until 2019.

Sales Offices

As of December 31, 2014, we had PEO HR Outsourcing solutions sales and service personnel in 39 facilities located in 25 sales markets throughout the United States.  All of the facilities are leased and some are shared by multiple sales offices and/or client service personnel.  As of December 31, 2014, we had 48 PEO HR Outsourcing solutions sales offices in these 25 markets.  To take advantage of economic efficiencies, multiple sales offices may share a physical location.  Each sales office is typically staffed by six to eight BPAs, a district sales manager and an office administrator.  In addition, we have placed certain client service personnel in a majority of our sales markets to provide high-quality, localized service to our clients in those major markets.  We expect to continue placing various client service personnel in sales markets as a critical mass of clients is attained in each market.

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ITEM 3.  LEGAL PROCEEDINGS.

We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business that we believe would not have a material adverse effect on our financial condition or results of operations, except as discussed in Note 14 to the Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference.

ITEM S-K 401 (b).  EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth the names, ages (as of February 3, 2015) and positions of Insperity’s executive officers:

Name	Age	Position
Paul J. Sarvadi	58	Chairman of the Board and Chief Executive Officer
Richard G. Rawson	66	President
A. Steve Arizpe	57	Executive Vice President of Client Services and Chief Operating Officer
Jay E. Mincks	61	Executive Vice President of Sales and Marketing
Douglas S. Sharp	53	Senior Vice President of Finance, Chief Financial Officer and Treasurer
Daniel D. Herink	48	Senior Vice President of Legal, General Counsel and Secretary

Paul J. Sarvadi has served as Chairman of the Board and Chief Executive Officer since August 2003.  Mr. Sarvadi co-founded Insperity in 1986 and served as Vice President and Treasurer of Insperity from its inception in 1986 through April 1987, as Vice President from April 1987 through 1989 and as President and Chief Executive Officer from 1989 to August 2003.  Prior to founding Insperity, Mr. Sarvadi started and operated several small businesses.  Mr. Sarvadi has served as President of NAPEO and was a member of its Board of Directors for five years.  Mr. Sarvadi was selected as the 2001 National Ernst & Young Entrepreneur Of The Year^® for service industries.  In 2004, he received the Conn Family Distinguished New Venture Leader Award from Mays Business School at Texas A&M University.  In 2007, he was inducted into the Texas Business Hall of Fame.

Richard G. Rawson is President of Insperity and most of its subsidiaries, a Class III director, and has been a director of Insperity since 1989.  He has been President since August 2003.  Before being elected President, he served as Executive Vice President of Administration, Chief Financial Officer and Treasurer of the Company from February 1997 until August 2003.  Prior to that, he served as Senior Vice President, Chief Financial Officer and Treasurer of Insperity since 1989.  Prior to joining Insperity in 1989, Mr. Rawson served as a Senior Financial Officer and Controller for several companies in the manufacturing and seismic data processing industries.  Mr. Rawson has served NAPEO as Chairman of the Accounting Practices Committee and several other offices and became President in 1999-2000.  Mr. Rawson has a Bachelor of Business Administration in finance from the University of Houston and currently serves as a board member for the C.T. Bauer College of Business.

A. Steve Arizpe has served as Executive Vice President of Client Services and Chief Operating Officer since August 2003.  He joined Insperity in 1989 and has served in a variety of roles, including Houston Sales Manager, Regional Sales Manager and Vice President of Sales.  Prior to joining Insperity, Mr. Arizpe served in sales and sales management roles for NCR Corporation and Clarke-American. He has also served as a director of the Texas Chapter of NAPEO.  Mr. Arizpe graduated from Texas A&M University in 1979, earning his degree in Business Management.

Jay E. Mincks has served as Executive Vice President of Sales and Marketing since January 1999.  Mr. Mincks served as Vice President of Sales and Marketing from February 1997 through January 1999.  He joined Insperity in 1990 and has served in a variety of other roles, including Houston Sales Manager and Regional Sales Manager for the Western United States.  Prior to joining Insperity, Mr. Mincks served in a variety of positions, including management positions, in the sales and sales training fields with various large companies.  He holds a business degree from the University of Houston.

Douglas S. Sharp has served as Senior Vice President of Finance, Chief Financial Officer and Treasurer since May 2008.  He served as Vice President of Finance, Chief Financial Officer and Treasurer from August 2003 until May 2008.  Mr. Sharp joined Insperity in January 2000 as Vice President of Finance and Controller.  From July 1994 until he joined Insperity, he served as Chief Financial Officer for Rimkus Consulting Group, Inc.  Prior to that, he served as Controller for a small publicly held company; as Controller for a software company; and as an Audit Manager for Ernst & Young LLP.  Mr. Sharp has served as a member of the Accounting Practices Committee of NAPEO.  Mr. Sharp is also a certified public accountant.

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Daniel D. Herink has served as Senior Vice President of Legal, General Counsel and Secretary since May 2008.  Mr. Herink joined Insperity in 2000 as Assistant General Counsel and was promoted to Associate General Counsel in 2002.  He was elected to his current position in May 2007.  Mr. Herink previously served as an attorney at Rodriguez, Colvin & Chaney, L.L.P. and McGinnis, Lochridge & Kilgore, L.L.P.  He earned his Bachelor of Science degree in business administration from the University of Nebraska and a Doctorate of Jurisprudence from The University of Texas School of Law, where he was a member of the Texas Law Review and The Order of the Coif.  Mr. Herink is also a certified public accountant.

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Price Range of Common Stock

Our common stock is traded on the New York Stock Exchange under the symbol “NSP.”  As of February 3, 2015, there were 398 holders of record of our common stock.  This number does not include stockholders for whom shares were held in “nominee” or “street name.”  The following table sets forth the high and low sales prices for the common stock as reported on the New York Stock Exchange transactional tape. 

2014	High		Low		Dividends per Share
First Quarter	$	36.09	$	27.01	$	0.17
Second Quarter	33.51		30.13		0.19
Third Quarter	33.46		27.34		0.19
Fourth Quarter	34.62		27.16		2.19		(1)
2013
First Quarter	$	34.20	$	27.04	$	0.17
Second Quarter	31.80		26.44		0.17
Third Quarter	37.80		30.36		0.17
Fourth Quarter	39.69		32.67		0.17

____________________________________

⁽¹⁾  Includes a $2.00 per share special dividend

Dividend Policy

During 2014 and 2013, we paid dividends of $69.5 million and $17.4 million, respectively, including a special cash dividend of $50.7 million paid in the fourth quarter of 2014.  The payment of dividends is made at the discretion of our Board of Directors and depends upon our operating results, financial condition, capital requirements, general business conditions and such other factors as our Board of Directors deems relevant.

Issuer Purchases of Equity Securities

The following table provides information about our purchases of Insperity common stock during the three months ended December 31, 2014:

Period	Total Number of Shares Purchased(1)	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)
10/01/2014 – 10/31/2014	—	$	—	—	768,765
11/01/2014 – 11/30/2014	—	—		—	768,765
12/01/2014 – 12/31/2014	—	—		—	768,765
Total	—	$	—	—

__________________________________

⁽¹⁾  Our Board of Directors has authorized a program to repurchase shares of our outstanding common stock.  During the three months ended December 31, 2014, no shares were repurchased under the program and no shares were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards. Unless terminated early by resolution of the Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.

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Performance Graph

The following graph compares our cumulative total stockholder return since December 31, 2009, with the S&P Smallcap 600 Index and the S&P 1500 Composite Human Resources and Employment Services Index.  The graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2009. 

	12/09	12/10	12/11	12/12	12/13	12/14
Insperity, Inc.	100.00	127.12	112.53	153.01	173.49	177.12
S&P Smallcap 600	100.00	126.31	127.59	148.42	209.74	221.81
S&P 1500 Composite Human Resources and Employment Services	100.00	118.51	98.54	110.68	198.47	198.80

This graph shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

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ITEM 6.  SELECTED FINANCIAL DATA.

The selected consolidated financial data set forth below should be read in conjunction with the Consolidated Financial Statements and accompanying Notes and Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Year ended December 31,
	2014			2013			2012			2011			2010
	(in thousands, except per share and statistical data)
Income Statement Data:
Revenues(1)	$	2,357,788		$	2,256,112		$	2,158,824		$	1,976,219		$	1,719,752
Gross profit	403,805			393,251			382,221			351,775			298,536
Operating income	47,474		(2)	56,223		(3)	67,494		(3)	57,314			37,060
Net income	28,004			32,032		(4)	40,402			30,470		(5)	22,440
Diluted net income per share of common stock	1.05		(6)	1.25			1.56		(6)	1.16			0.86
Adjusted net income(7)	30,321			35,670			42,862			34,963			22,440
Adjusted diluted net income per share of common stock(7)	1.19			1.39			1.67			1.33			0.86
Adjusted EBITDA(7)	84,124			92,303			100,899			82,198			61,054
Balance Sheet Data:
Working capital	$	73,058		$	128,630		$	115,706		$	126,562		$	144,479
Total assets	796,670			766,560			750,200			712,259			659,845
Total stockholders’ equity	204,096			253,272			240,905			245,207			240,395
Cash dividends per share	2.74		(8)	0.68			1.66		(8)	0.60			0.52
Statistical Data:
Average number of worksite employees paid per month during period	130,718			127,517			125,650			116,839			107,014
Revenues per worksite employee per month(9)	$	1,503		$	1,474		$	1,432		$	1,410		$	1,339
Gross profit per worksite employee per month	$	257		$	257		$	253		$	251		$	232
Operating income per worksite employee per month	$	30		$	37		$	45		$	41		$	29

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⁽¹⁾  Gross billings of $14.187 billion, $13.462 billion, $12.992 billion, $11.700 billion and $10.169 billion, less worksite employee payroll cost of $11.829 billion, $11.206 billion, $10.833 billion, $9.724 billion and $8.449 billion, respectively.

⁽²⁾  Includes a non-cash impairment charge in the second quarter of 2014 of $2.5 million. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information. Also includes a non-cash charge in the fourth quarter of 2014 of $1.2 million. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

⁽³⁾  Includes non-cash impairment charges of $3.3 million and $4.2 million in the fourth quarters of 2013 and 2012, respectively.  Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.

⁽⁴⁾  Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million, please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information. Also includes a $2.0 million tax benefit in the fourth quarter of 2013 related to tax years 2009 through 2012, please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

⁽⁵⁾  Includes the impact of a $4.4 million pre-tax loss related to the exchange of an aircraft, and a $3.1 million pre-tax loss related to a settlement with the State of California. 

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⁽⁶⁾  Includes the impact of dividends exceeding earnings under the two-class method, resulting in a $0.05 and $0.01 earnings per share decrease in 2014 and 2012, respectively.  Please read Note 12, “Net Income Per Share,” for additional information.

⁽⁷⁾  These are non-GAAP measures used by management to analyze the Company’s performance. Please read Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

⁽⁸⁾  Includes a $2.00 and $1.00 per share special dividend paid in the fourth quarters of 2014 and 2012, respectively.

⁽⁹⁾  Gross billings of $9,044, $8,797, $8,617, $8,345 and $7,919 per worksite employee per month, less payroll cost of $7,541, $7,323, $7,185, $6,935 and $6,580 per worksite employee per month, respectively.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this annual report.  Historical results are not necessarily indicative of trends in operating results for any future period.

The statements contained in this annual report that are not historical facts are forward-looking statements that involve a number of risks and uncertainties.  The actual results of the future events described in such forward-looking statements in this annual report could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in Item 1A. Risk Factors and the uncertainties set forth from time to time in our other public reports and filings and public statements.

Overview

Our long-term strategy is to provide the best small and medium-sized businesses in the United States with our specialized human resources service offering and to leverage our buying power and expertise to provide additional valuable services to clients.  Our most comprehensive HR services offerings are provided through our Workforce Optimization^® and Workforce Synchronization solutions (together, our PEO HR Outsourcing solutions), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management and training and development services.  Our overall operating results can be measured in terms of revenues, payroll costs, gross profit or operating income per worksite employee per month.  We often use the average number of worksite employees paid during a period as our unit of measurement in analyzing and discussing our results of operations.

In addition to our PEO HR Outsourcing solutions, we offer a number of other business performance solutions, including Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial and Expense Management Services, Retirement Services and Insurance Services, many of which are offered via desktop applications and cloud-based delivery models.  These other products or services are offered separately, as a bundle, or along with our PEO HR Outsourcing solutions.

We ended 2014 averaging 136,764 paid worksite employees in the fourth quarter, which represents a 4.6% increase over the fourth quarter of 2013.  Approximately 23% of our paid worksite employees were in our mid-market sector for the year ended December 31, 2014, which is generally defined as companies with 150 to 2,000 worksite employees.  We expect the average number of paid worksite employees per month to be between 138,300 and 138,900 in the first quarter of 2015.

Our average gross profit per worksite employee per month was $257 in both 2014 and 2013, which included a contribution to average gross profit from our Strategic Businesses of $17 per worksite employee per month in 2014 compared to $14 per worksite employee per month in 2013.

Operating expenses increased5.7% in 2014 to $356.3 million. On a per worksite employee per month basis, operating expenses increased from $220 in 2013 to $227 in 2014. 

Other expense decreased$2.6 million, primarily due to the non-recurrence of a $2.7 million non-cash impairment charge related to our investment in The Receivables Exchange in 2013.

Our net income in 2014 was $28.0 million, a $4.0 milliondecrease compared to 2013.  

We ended 2014 with working capital of $73.1 million.  During 2014, we paid $69.5 million in dividends and repurchased shares at a cost of $20.8 million.

Revenues

We account for our revenues in accordance with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition. Our PEO HR Outsourcing solutions gross billings to clients include the payroll cost of each worksite employee at the client location and a markup computed as a percentage of each worksite employee’s payroll cost. We invoice the gross billings concurrently with each periodic payroll of our worksite employees. Revenues, which exclude the payroll cost component of gross billings, and therefore, consist solely of the markup, are recognized ratably over the payroll period as worksite employees perform their service at the client worksite. This markup includes pricing components associated with our

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estimates of payroll taxes, benefits and workers’ compensation costs, plus a separate component related to our HR services.  We include revenues that have been recognized but not invoiced in unbilled accounts receivable on our Consolidated Balance Sheets.

Our revenues are primarily dependent on the number of clients enrolled, the resulting number of worksite employees paid each period and the number of worksite employees enrolled in our benefit plans.  Because our total markup is computed as a percentage of payroll cost, certain revenues are also affected by the payroll cost of worksite employees, which may fluctuate based on the composition of the worksite employee base, inflationary effects on wage levels and differences in the local economies of our markets.

Direct Costs

The primary direct costs associated with revenue-generating activities for our PEO HR Outsourcing solutions are:

• employment-related taxes (“payroll taxes”)

• costs of employee benefit plans

• workers’ compensation costs

Payroll taxes consist of the employer’s portion of Social Security and Medicare taxes under FICA, federal unemployment taxes and state unemployment taxes.  Payroll taxes are generally paid as a percentage of payroll cost. The federal tax rates are defined by federal regulations.  State unemployment tax rates are subject to claim histories and vary from state to state.

Employee benefits costs are comprised primarily of health insurance premiums and claims costs (including dental and pharmacy costs), but also include costs of other employee benefits such as life insurance, vision care, disability insurance, education assistance, adoption assistance, a flexible spending account program and a work-life program.

Workers’ compensation costs include administrative and risk charges paid to the insurance carrier, and claims costs, which are driven primarily by the frequency and severity of claims.

Gross Profit

Our gross profit per worksite employee is primarily determined by our ability to accurately estimate and control direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Outsourcing solutions clients, which are subject to pricing arrangements that are typically renewed annually. We use gross profit per worksite employee per month as our principal measurement of relative performance at the gross profit level.

Operating Expenses

• Salaries, wages and payroll taxes – Salaries, wages and payroll taxes are primarily a function of the number of corporate employees, their associated average pay and any additional incentive compensation. Our corporate employees include client services, sales and marketing, benefits, legal, finance, information technology, administrative support personnel and those associated with our SBUs.

• Stock-based compensation – Our stock-based compensation relates to the recognition of non-cash compensation expense over the vesting period of restricted stock awards.

• Commissions – Commissions expense consists primarily of amounts paid to sales managers and BPAs. Commissions are based on the number of new accounts sold and a percentage of revenue generated by such personnel.

• Advertising – Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated sales markets, including the Insperity Invitational^™ presented by UnitedHealthcare^® sponsorship.

• General and administrative expenses – Our general and administrative expenses primarily include:

• rent expenses related to our service centers and sales offices

• outside professional service fees related to legal, consulting and accounting services

• administrative costs, such as postage, printing and supplies

• employee travel and training expenses

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• technology and facility repairs and maintenance costs

• Depreciation and amortization – Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, technology infrastructure and that associated with our acquisitions.

• Impairment charges – Non-cash expense associated with the decline in fair value of long-lived and intangible assets, including goodwill.  Please read Note 1 “Accounting Policies” and Note 5 “Goodwill and Other Intangible Assets” to the Consolidated Financial Statements for additional information.

Income Taxes

Our provision for income taxes typically differs from the U.S. statutory rate of 35%, due primarily to state income taxes, non-deductible expenses and various tax credits.  Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes.  Significant items resulting in deferred income taxes include prepaid assets, accruals for workers’ compensation expenses, stock-based compensation and depreciation.  Changes in these items are reflected in our financial statements through a deferred income tax provision.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an ongoing basis, we evaluate these estimates, including those related to health and workers’ compensation insurance claims experience, client bad debts, income taxes, property and equipment, goodwill and other intangibles, and contingent liabilities.  We base these estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

We believe the following accounting policies are critical and/or require significant judgments and estimates used in the preparation of our Consolidated Financial Statements:

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

The health insurance contract with United provides the majority of our health insurance coverage.  As a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model.  Accordingly, we record the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”), as benefits expense in the Consolidated Statements of 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 we would accrue a liability for the excess costs on our Consolidated Balance Sheets.  On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums on our Consolidated Balance Sheets.  The terms of the arrangement with United require us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported as long-term prepaid insurance.  As of December 31, 2014, Plan Costs were less than the premiums paid and owed to United by $23.5 million. As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $14.5 million balance is included in prepaid insurance, a current asset, on our Consolidated Balance Sheets.  The premiums owed to United at December 31, 2014, were $15.0 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.

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We believe that recent claims activity is representative of incurred and paid trends during the reporting period.  The estimated completion rate and annual trend used to compute incurred but not reported claims involves a significant level of judgment.  Accordingly, an increase (or decrease) in the completion rate or annual trend used to estimate the incurred claims would result in an increase (or decrease) in benefits costs and net income would decrease (or increase) accordingly.

The following table illustrates the sensitivity of changes in the completion rate and annual trend on our estimate of total benefit costs of $1.0 billion in 2014:

Change in Completion Rate and Annual Trend	Change in Benefits Costs (in thousands)			Change in Net Income (in thousands)
(2.5)%	$	(12,948	)	$	7,640
(1.0)%	(5,180		)	3,056
1.0%	5,180			(3,056		)
2.5%	12,948			(7,640		)

• Workers’ compensation costs – Since October 1, 2007, our workers’ compensation coverage has been provided through our arrangement with ACE.  Under the ACE Program, we bear the economic burden for the first $1 million layer of claims per occurrence, and effective October 1, 2010, we also bear the economic burden for a maximum aggregate amount of $5 million per policy year for claim amounts that exceed the first $1 million.  ACE bears the economic burden for all claims in excess of these levels.  The ACE Program is a fully insured policy whereby ACE has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities.  Our coverage from September 1, 2003 through September 30, 2007 was provided through selected member insurance companies of American International Group, Inc.

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 years ended December 31, 2014 and 2013, Insperity reduced accrued workers’ compensation costs by $2.9 million and $9.3 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 2014 and 2013 was 1.0% and 0.8%, respectively) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

Our claim trends could be greater than or less than our prior estimates, in which case we would revise our claims estimates and record an adjustment to workers’ compensation costs in the period such determination is made.  If we were to experience any significant changes in actuarial assumptions, our loss development rates could increase (or decrease), which would result in an increase (or decrease) in workers’ compensation costs and a resulting decrease (or increase) in net income reported in our Consolidated Statements of Operations.

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The following table illustrates the sensitivity of changes in the loss development rate on our estimate of workers’ compensation costs totaling $68.7 million in 2014:

Change in Loss Development Rate	Change in Workers’ Compensation Costs (in thousands)			Change in Net Income (in thousands)
(5.0)%	$	(2,721	)	$	1,600
(2.5)%	(1,360		)	800
2.5%	1,360			(800		)
5.0%	2,721			(1,600		)

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 carrier.  Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits, a long-term asset in our Consolidated Balance Sheets.  In 2014, we paid the insurance carrier an additional $7.2 million in claim funds for policy years prior to 2014, which increased deposits.  As of December 31, 2014, we had restricted cash of $44.0 million and deposits of $113.9 million.  We have estimated and accrued $136.1 million in incurred workers’ compensation claim costs as of December 31, 2014.  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.

• Contingent liabilities – We accrue and disclose contingent liabilities in our Consolidated Financial Statements in accordance with ASC 450-10, Contingencies.  GAAP requires accrual of contingent liabilities that are considered probable to occur and that can be reasonably estimated.  For contingent liabilities that are considered reasonably possible to occur, financial statement disclosure is required, including the range of possible loss if it can be reasonably determined. From time to time we disclose in our financial statements issues that we believe are reasonably possible to occur, although we cannot determine the range of possible loss in all cases.  As issues develop, we evaluate the probability of future loss and the potential range of such losses.  If such evaluation were to determine that a loss was probable and the loss could be reasonably estimated, we would be required to accrue our estimated loss, which would reduce net income in the period that such determination was made.

• Deferred taxes – We have recorded a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.  While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, our ability to realize our deferred tax assets could change from our current estimates.  If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made.  Likewise, should we determine that we will not be able to realize all or part of our net deferred tax assets in the future, an adjustment to increase the valuation allowance would reduce net income in the period such determination is made.

• Allowance for doubtful accounts – We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our clients to pay their comprehensive service fees.  We believe that the success of our business is heavily dependent on our ability to collect these comprehensive service fees for several reasons, including:

• the fact that we are at risk for the payment of our direct costs and worksite employee payroll costs regardless of whether our clients pay their comprehensive service fees

• the large volume and dollar amount of transactions we process

• the periodic and recurring nature of payroll, upon which the comprehensive service fees are based

To mitigate this risk, we have established very tight credit policies.  We generally require our PEO HR Outsourcing solutions clients to pay their comprehensive service fees no later than one day prior to the applicable payroll date.  In addition, we generally maintain the right to terminate the CSA and associated worksite employees or to require prepayment, letters of credit or other collateral if a client’s financial position deteriorates or if the client does not pay the comprehensive service fee.  As a result of these efforts, losses related to client nonpayment have historically been low as a percentage of revenues. However, if our clients’ financial conditions were to deteriorate rapidly, resulting in nonpayment,

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our accounts receivable balances could grow and we could be required to provide for additional allowances, which would decrease net income in the period that such determination was made.

• Property and equipment – Our property and equipment relate primarily to our facilities and related improvements, furniture and fixtures, computer hardware and software and capitalized software development costs.  These costs are depreciated or amortized over the estimated useful lives of the assets.  If we determine that the useful lives of these assets will be shorter than we currently estimate, our depreciation and amortization expense could be accelerated, which would decrease net income in the periods of such a determination.  In addition, we periodically evaluate these costs for impairment.  If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset.  In addition, we may record an impairment loss, which would reduce net income, to the extent that the carrying value of the asset exceeded the fair value of the asset.  Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. Please read Note 1 to the Consolidation Financial Statements, “Accounting Policies,” for additional information.

• Goodwill and other intangibles – Goodwill is tested for impairment on an annual basis and between annual tests in certain circumstances, and is written down when impaired. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite.  Our purchased intangible assets are carried at cost less accumulated amortization.  Amortization is computed over the estimated useful lives of the respective assets, which ranges from three to 10 years.  Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.

New Accounting Pronouncements

We believe that we have implemented the accounting pronouncements with a material impact on our financial statements and do not believe there are any new or pending pronouncements that will materially impact our financial position or results of operations. In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods ending after December 15, 2016, and early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU No. 2014-09. We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated Financial Statements.

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Results of Operations

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013.

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

	Year ended December 31,
	2014			2013				% Change
	(in thousands, except per share and statistical data)
Revenues (gross billings of $14.187 billion and $13.462 billion, less worksite employee payroll cost of $11.829 billion and $11.206 billion, respectively)	$	2,357,788		$	2,256,112			4.5	%
Gross profit	403,805			393,251				2.7	%
Operating expenses	356,331		(1)	337,028			(2)	5.7	%
Operating income	47,474			56,223				(15.6	)%
Other income (expense)	153			(2,491		)	(3)	(106.1	)%
Net income	28,004			32,032			(4)	(12.6	)%
Diluted net income per share of common stock	1.05		(5)	1.25				(16.0	)%
Adjusted net income(6)	30,321			35,670				(15.0	)%
Adjusted diluted net income per share of common stock(6)	1.19			1.39				(14.4	)%
Adjusted EBITDA(6)	84,124			92,303				(8.9	)%
Statistical Data:
Average number of worksite employees paid per month	130,718			127,517				2.5	%
Revenues per worksite employee per month(7)	$	1,503		$	1,474			2.0	%
Gross profit per worksite employee per month	257			257				—
Operating expenses per worksite employee per month	227			220				3.2	%
Operating income per worksite employee per month	30			37				(18.9	)%
Net income per worksite employee per month	18			21				(14.3	)%

____________________________________

⁽¹⁾  Includes a non-cash impairment charge in the second quarter of 2014 of $2.5 million. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information. Also includes a non-cash charge in the fourth quarter of 2014 of $1.2 million. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

⁽²⁾  Includes a non-cash impairment charge in the fourth quarter of 2013 of $3.3 million. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.

⁽³⁾  Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

⁽⁴⁾  Includes a $2.0 million tax benefit in the fourth quarter of 2013 related to tax years 2009 through 2012. Please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

⁽⁵⁾  Includes the impact of dividends exceeding earnings under the two-class method, resulting in $0.05 earnings per share decrease in 2014.  Please read Note 12, “Net Income Per Share,” for additional information.

⁽⁶⁾  Please read Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.

⁽⁷⁾  Gross billings of $9,044 and $8,797 per worksite employee per month, less payroll cost of $7,541 and $7,323 per worksite employee per month, respectively.

Revenues

Our revenues in 2014, which represent gross billings net of worksite employee payroll cost, increased4.5% compared to 2013, due to a 2.0%, or $29, increase in revenues per worksite employee per month and a 2.5%increase in the average

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number of worksite employees paid per month.  The 2.0%increase in revenues per worksite employee per month was primarily due to increases in the benefits and payroll tax pricing to offset increases in these direct costs.

We provide our PEO HR Outsourcing solutions to small and medium-sized businesses in strategically selected markets throughout the United States.  By region, our PEO HR Outsourcing solutions revenue change from 2013 and distribution for the years ended December 31, 2014 and 2013 were as follows:

	Year ended December 31,						Year ended December 31,
	2014		2013		% Change		2014		2013
	(in thousands)						(% of total revenue)
Northeast	$	601,526	$	577,280	4.2	%	26.0	%	26.0	%
Southeast	225,709		212,664		6.1	%	9.7	%	9.6	%
Central	334,669		329,110		1.7	%	14.5	%	14.8	%
Southwest	632,356		613,175		3.1	%	27.3	%	27.6	%
West	521,139		488,047		6.8	%	22.5	%	22.0	%
	2,315,399		2,220,276		4.3	%	100.0	%	100.0	%
Other revenue(1)	42,389		35,836		18.3	%
Total revenue	$	2,357,788	$	2,256,112	4.5	%

____________________________________

⁽¹⁾     Comprised primarily of revenues generated by our SBUs

The percentage of total PEO HR Outsourcing solutions revenues in our significant markets include the following:

	Year ended December 31,
	2014		2013
Texas	25.3	%	25.6	%
California	17.8	%	17.5	%
New York	9.7	%	9.5	%
Other	47.2	%	47.4	%
Total	100.0	%	100.0	%

Our growth in the number of worksite employees paid is affected by three primary sources: new client sales, client retention and the net change in existing clients through worksite employee new hires and layoffs.  During 2014, new client sales and the net change in existing clients improved, while client retention was consistent with 2013.  As a result, our year-over-year growth in average worksite employees paid per month during 2014 was 2.5% compared to 1.5% during 2013.

Gross Profit

Gross profit was $403.8 million in 2014, a 2.7%increase over 2013.  The average gross profit per worksite employee per month was $257 in both 2014 and 2013.  Our pricing objectives attempt to maintain or improve the gross profit per worksite employee per month by increasing revenue per worksite employee to match or exceed changes in primary direct costs. Included in gross profit in 2014 is a $17 per worksite employee per month contribution from our SBUs compared to $14 per worksite employee per month in the 2013 period.

While our revenues per worksite employee per month increased 2.0% to $1,503 in 2014 versus 2013, our direct costs, which primarily include payroll taxes, benefits and workers’ compensation expenses, increased2.4% to $1,246 per worksite employee per month.  The primary direct cost components changed as follows:

• Benefits costs – The cost of group health insurance and related employee benefits increased$12 per worksite employee per month, or 2.4%, on a per covered employee basis compared to 2013.  The percentage of worksite employees covered under our health insurance plan was 71.7% in 2014 and 72.1% in 2013.  Please read “—Critical Accounting Policies and Estimates – Benefits Costs” for a discussion of our accounting for health insurance costs.

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• Workers’ compensation costs – Workers’ compensation costs increased25.2%, or $8 per worksite employee per month, compared to 2013.  As a percentage of non-bonus payroll cost, workers’ compensation costs increased to 0.67% in 2014 from 0.55% in 2013.  During 2014, we recorded reductions in workers’ compensation costs of $2.9 million, or 0.03% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $9.3 million, or 0.09% of non-bonus payroll costs in 2013.  The 2014 period costs include the impact of a 1.0% discount rate used to accrue workers’ compensation loss claims, compared to a 0.8% discount rate used in the 2013 period.  Please read “—Critical Accounting Policies and Estimates – Workers’ Compensation Costs” for a discussion of our accounting for workers’ compensation costs.

• Payroll tax costs – Payroll taxes increased4.0%, or $7 per worksite employee per month, compared to 2013, due primarily to a 5.6%increase in total payroll cost in 2014 offset by lower state unemployment tax rates.  Payroll taxes as a percentage of payroll cost decreased to 6.93% in 2014 compared to 7.04% in 2013.

Operating Expenses

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

	Year ended December 31,						Year ended December 31,
	2014		2013		% Change		2014		2013		% Change
	(in thousands)						(per worksite employee per month)
Salaries, wages and payroll taxes	$	200,118	$	181,444	10.3	%	$	127	$	119	6.7	%
Stock–based compensation	11,053		11,103		(0.5	)%	7		7		—
Commissions	15,285		14,581		4.8	%	10		9		11.1	%
Advertising	22,183		23,795		(6.8	)%	14		16		(12.5	)%
General and administrative expenses	82,618		81,699		1.1	%	53		53		—
Impairment charges	3,687		3,342		10.3	%	2		2		—
Depreciation and amortization	21,387		21,064		1.5	%	14		14		—
Total operating expenses	$	356,331	$	337,028	5.7	%	$	227	$	220	3.2	%

____________________________________

Operating expenses were $356.3 million in 2014, a 5.7%increase over 2013. We recorded $3.7 million of impairment charges in 2014 and a $3.3 million impairment charge 2013. Please read Note 1 “Accounting Policies” and Note 5 “Goodwill and Other Intangible Assets” to the Consolidated Financial Statements for additional information. Operating expenses per worksite employee per month increased to $227 in 2014 from $220 in 2013. The components of operating expenses changed as follows:

• Salaries, wages and payroll taxes of corporate and sales staff increased10.3%, or $8 per worksite employee per month, compared to 2013, primarily due to a 2.5% rise in headcount and increased incentive compensation. Our incentive compensation expense accounted for approximately one half of the 10% year over year increase. The increase in incentive compensation expense during 2014 was the result of achieving our corporate incentive goals during the year; whereas our corporate incentive goals were not achieved during 2013.

• Stock-based compensation decreased0.5%, but remained flat on a per worksite employee per month basis, compared to 2013. The stock-based compensation expense represents amortization of restricted stock awards granted to employees and the annual stock grant made to non-employee directors. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

• Commissions expense increased4.8%, or $1 per worksite employee per month, compared to 2013.

• Advertising costs decreased6.8%, or $2 per worksite employee per month, compared to 2013, primarily due to decreased spending on radio, print media and television advertising.

• General and administrative expenses increased1.1%, but remained flat on a per worksite employee per month basis, compared to 2013. The increase was primarily due to professional services costs related to our investment in Human Capital Management technology, offset by decreases in travel and training.

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• Depreciation and amortization expense increased1.5%, but remained flat on a per worksite employee per month basis compared to 2013.

Other Income (Expense)

Other income was $0.2 million in 2014 compared to other expense of $2.5 million in 2013. Included in 2013 is a $2.7 million non-cash impairment charge related to our minority investment in The Receivables Exchange. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

Income Tax Expense

During 2014 we incurred federal and state income tax expense of $19.6 million on pre-tax income of $47.6 million.  Our provision for income taxes differed from the US statutory rate of 35% primarily due to state income taxes and non-deductible expenses. Our effective income tax rate was 41.2% in 2014 compared to 40.4% in 2013.

Net Income

Net income for 2014 was $28.0 million, or $1.05 per diluted share, compared to $32.0 million, or $1.25 per diluted share in 2013.  On a per worksite employee per month basis, net income was $18 in 2014 compared to $21 in 2013. Diluted earnings per share in 2014 includes a $0.05 earnings per share decrease related to the accounting treatment under the two-class method of dividends exceeding net income.  Please read Note 12, “Net Income Per Share,” for additional information.

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Year Ended December 31, 2013 Compared to Year Ended December 31, 2012.

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

	Year ended December 31,
	2013				2012			% Change
	(in thousands, except per share and statistical data)
Revenues (gross billings of $13.462 billion and $12.992 billion, less worksite employee payroll cost of $11.206 billion and $10.833 billion, respectively)	$	2,256,112			$	2,158,824		4.5	%
Gross profit	393,251				382,221			2.9	%
Operating expenses(1)	337,028				314,727			7.1	%
Operating income	56,223				67,494			(16.7	)%
Other income (expense)	(2,491		)	(2)	796			(412.9	)%
Net income	32,032			(3)	40,402			(20.7	)%
Diluted net income per share of common stock	1.25				1.56		(4)	(19.9	)%
Adjusted net income(5)	35,670				42,862			(16.8	)%
Adjusted diluted net income per share of common stock(5)	1.39				1.67			(16.8	)%
Adjusted EBITDA(5)	92,303				100,899			(8.5	)%
Statistical Data:
Average number of worksite employees paid per month	127,517				125,650			1.5	%
Revenues per worksite employee per month(6)	$	1,474			$	1,432		2.9	%
Gross profit per worksite employee per month	257				253			1.6	%
Operating expenses per worksite employee per month	220				208			5.8	%
Operating income per worksite employee per month	37				45			(17.8	)%
Net income per worksite employee per month	21				27			(22.2	)%

____________________________________

⁽¹⁾  Includes non-cash impairment charges of $3.3 million and $4.2 million in the fourth quarters of 2013 and 2012, respectively. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.

⁽²⁾  Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

⁽³⁾  Includes a $2.0 million tax benefit in the fourth quarter of 2013 related to tax years 2009 through 2012. Please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

⁽⁴⁾  Includes the impact of dividends exceeding earnings under the two-class method, resulting in a $0.01 earnings per share decrease in 2012. Please read Note 12, “Net Income Per Share,” for additional information.

⁽⁵⁾  Please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Non-GAAP Financial Measures” for additional information.

⁽⁶⁾  Gross billings of $8,797 and $8,617 per worksite employee per month, less payroll cost of $7,323 and $7,185 per worksite employee per month, respectively.

Revenues

Our revenues in 2013, which represent gross billings net of worksite employee payroll cost, increased 4.5% compared to 2012, due to a 2.9%, or $42increase in revenues per worksite employee per month and a 1.5% increase in the average number of worksite employees paid per month.  The 2.9%increase in revenues per worksite employee per month was due primarily to increases in the benefits and payroll tax pricing to offset increases in these direct costs.

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We provide our PEO HR Outsourcing solutions to small and medium-sized businesses in strategically selected markets throughout the United States. By region, our PEO HR Outsourcing solutions revenue change from 2012 and distribution for the years ended December 31, 2013 and 2012 were as follows:

	Year ended December 31,						Year ended December 31,
	2013		2012		% Change		2013		2012
	(in thousands)						(% of total revenue)
Northeast	$	577,280	$	560,455	3.0	%	26.0	%	26.3	%
Southeast	212,664		198,049		7.4	%	9.6	%	9.3	%
Central	329,110		312,373		5.4	%	14.8	%	14.7	%
Southwest	613,175		595,379		3.0	%	27.6	%	28.0	%
West	488,047		461,427		5.8	%	22.0	%	21.7	%
	2,220,276		2,127,683		4.4	%	100.0	%	100.0	%
Other revenue(1)	35,836		31,141		15.1	%
Total revenue	$	2,256,112	$	2,158,824	4.5	%

____________________________________

⁽¹⁾    Comprised primarily of revenues generated by our SBUs

The percentage of total PEO HR Outsourcing solutions revenues in our significant markets include the following:

	Year ended December 31,
	2013		2012
Texas	25.6	%	26.0	%
California	17.5	%	17.0	%
New York	9.5	%	9.0	%
Other	47.4	%	48.0	%
Total	100.0	%	100.0	%

Our growth in the number of worksite employees paid is affected by three primary sources – new client sales, client retention and the net change in existing clients through worksite employee new hires and layoffs.  During 2013, new client sales and the net change in existing clients remained flat, while client retention declined slightly compared to 2012.  As a result, our year-over-year growth in worksite employees paid per month during 2013 was 1.5% compared to 7.5% during 2012.

Gross Profit

Gross profit was $393.3 million in 2013, a 2.9% increase over 2012.  The average gross profit per worksite employee per month increased 1.6% to $257 in 2013 versus $253 in 2012.  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. Included in gross profit in 2013 is a $14 per worksite employee per month contribution from our Strategic Businesses compared to $11 per worksite employee per month in the 2012 period.

While our revenues per worksite employee per month increased 2.9% to $1,474 in 2013 versus 2012, our direct costs, which primarily include payroll taxes, benefits and workers’ compensation expenses, increased 3.2% to $1,217 per worksite employee per month.  The primary direct cost components changed as follows:

• Benefits costs – The cost of group health insurance and related employee benefits increased $29 per worksite employee per month, or 4.7%, on a per covered employee basis compared to 2012.  The percentage of worksite employees covered under our health insurance plan was 72.1% in both 2013 and 2012.  Please read “—Critical Accounting Policies and Estimates – Benefits Costs” for a discussion of our accounting for health insurance costs.

• Workers’ compensation costs – Workers’ compensation costs increased 6.3%, or $2 per worksite employee per month compared to 2012.  As a percentage of non-bonus payroll cost, workers’ compensation costs increased to 0.55% in 2013

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from 0.54% in 2012.  During 2013, we recorded reductions in workers’ compensation costs of $9.3 million, or 0.09% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $13.1 million, or 0.14% of non-bonus payroll costs in 2012.  The 2013 period costs include the impact of a 0.8% discount rate used to accrue workers’ compensation loss claims, compared to a 0.6% discount rate used in the 2012 period.  Please read “—Critical Accounting Policies and Estimates – Workers’ Compensation Costs” for a discussion of our accounting for workers’ compensation costs.

• Payroll tax costs – Payroll taxes increased 3.2%, or $9 per worksite employee per month compared to 2012, due primarily to a 3.4% increase in total payroll cost in 2013 and a $2.9 million, or $2 per worksite employee per month credit recognized in 2012 related to a Pennsylvania tax matter. Payroll taxes as a percentage of payroll cost decreased to 7.04% in 2013 compared to 7.05% in 2012.

Operating Expenses

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

	Year ended December 31,						Year ended December 31,
	2013		2012		% Change		2013		2012		% Change
	(in thousands)						(per worksite employee per month)
Salaries, wages and payroll taxes	$	181,444	$	168,807	7.5	%	$	119	$	112	6.3	%
Stock–based compensation	11,103		9,814		13.1	%	7		7		—
Commissions	14,581		14,515		0.5	%	9		10		(10.0	)%
Advertising	23,795		21,586		10.2	%	16		14		14.3	%
General and administrative expenses	81,699		77,564		5.3	%	53		50		6.0	%
Impairment charges	3,342		4,191		(20.3	)%	2		3		(33.3	)%
Depreciation and amortization	21,064		18,250		15.4	%	14		12		16.7	%
Total operating expenses	$	337,028	$	314,727	7.1	%	$	220	$	208	5.8	%

Operating expenses were $337.0 million in 2013, a 7.1% increase over 2012.  We recorded impairment charges of $3.3 million in our Expense Management reporting unit in 2013 and $4.2 million in our Performance Management reporting unit in 2012.  Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information. Operating expenses per worksite employee per month increased to $220 in 2013 from $208 in 2012.  The components of operating expenses changed as follows:

• Salaries, wages and payroll taxes of corporate and sales staff increased7.5%, or $7 per worksite employee per month compared to 2012, primarily due to a 6.4% rise in headcount, which includes additions in Business Performance Advisors, service and technology personnel.

• Stock-based compensation increased13.1%, but remained flat on a per worksite employee per month basis compared to 2012, due primarily to an increase in the weighted average market value on the date of grant associated with restricted stock awards.  The stock-based compensation expense represents amortization of restricted stock awards granted to employees and the annual stock grant made to non-employee directors.  Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

• Commissions expense increased0.5%, but decreased $1 on a per worksite employee per month basis, compared to 2012.

• Advertising costs increased10.2%, or $2 per worksite employee per month compared to 2012, primarily due to increased spending on health care reform-related advertising and business promotions.

• General and administrative expenses increased5.3%, or $3 per worksite employee per month, primarily due to increased travel, training, utilities, and repairs and maintenance, partially offset by reductions in professional services.

• Depreciation and amortization expense increased15.4%, or $2 per worksite employee per month compared to 2012, primarily due to investments in our technology infrastructure and amortization associated with our Strategic Business investments.

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Other Income (Expense)

Other expense was $2.5 million in 2013 compared to other income of $0.8 million in 2012. Included in 2013 is a $2.7 million non-cash impairment charge related to our minority investment in The Receivables Exchange. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

Income Tax Expense

During 2013 we incurred federal and state income tax expense of $21.7 million on pre-tax income of $53.7 million.  Our provision for income taxes differed from the US statutory rate of 35% primarily due to state income taxes and non-deductible expenses, partially offset by tax benefits of $2.5 million related to tax years 2009 through 2013.  Our effective income tax rate was 40.4% in 2013 compared to 40.8% in 2012.

Net Income

Net income for 2013 was $32.0 million, or $1.25 per diluted share, compared to $40.4 million, or $1.56 per diluted share in 2012.  On a per worksite employee per month basis, net income was $21 in 2013 compared to $27 in 2012. Diluted earnings per share in 2012 includes a $0.01 earnings per share decrease related to the accounting treatment under the two-class method of dividends exceeding net income.  Please read Note 12, “Net Income Per Share,” for additional information.

Non-GAAP Financial Measures

Non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used to their most directly comparable GAAP financial measures as provided in the tables below.

Non-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. 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.

Following is a GAAP to non-GAAP reconciliation of non-bonus payroll costs:

	Year ended December 31,
	2014		2013		2012
	(in thousands, except per worksite employee)
Payroll cost (GAAP)	$	11,829,133	$	11,205,652	$	10,832,966
Less: bonus payroll cost	1,509,010		1,274,575		1,326,442
Non-bonus payroll cost	$	10,320,123	$	9,931,077	$	9,506,524
Payroll cost per worksite employee (GAAP)	$	7,541	$	7,323	$	7,185
Less: Bonus payroll cost per worksite employee	962		833		880
Non-bonus payroll cost per worksite employee	$	6,579	$	6,490	$	6,305

EBITDA represents net income computed in accordance with GAAP, plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA represents EBITDA plus non-cash impairments and stock-based compensation. Our management believes EBITDA and adjusted EBITDA are often useful measures of our operating performance, as they allow for additional analysis of our operating results separate from the impact of these items.

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Following is a GAAP to non-GAAP reconciliation of EBITDA and adjusted EBITDA:

	Year-ended December 31,
	2014		2013		2012		2011		2010
	(In thousands)
Net income (GAAP)	$	28,004	$	32,032	$	40,402	$	30,470	$	22,440
Income tax expense	19,623		21,700		27,888		20,305		15,581
Interest expense	370		383		354		108		—
Depreciation and amortization	21,387		21,064		18,250		15,218		14,907
EBITDA	69,384		75,179		86,894		66,101		52,928
Impairment charges	3,687		6,021		4,191		—		—
Stock-based compensation	11,053		11,103		9,814		8,601		8,126
Non-operational items	—		—		—		7,496		—
Adjusted EBITDA	$	84,124	$	92,303	$	100,899	$	82,198	$	61,054

Adjusted net income and adjusted diluted net income per share of common stock represent net income and diluted net income per share computed in accordance with GAAP, excluding the impact of: i) a $2.5 million impairment charge associated with the Employment Screening reporting unit in 2014; ii) a $1.2 million non-cash charge related to a revision to our office consolidation plans in 2014; iii) a $3.3 million impairment charge associated with the Expense Management reporting unit in 2013; iv) a $2.7 million impairment charge related to The Receivables Exchange in 2013; v) a $2.0 million tax credit relating to tax years 2009 - 2012 and recorded in 2013; vi) a $4.2 million impairment charge associated with the Performance Management reporting unit in 2012; and vii) non-operational expenses of $4.4 million related to aircraft exchange and $3.1 million related to the settlement of a dispute with the Employment Development Department of the State of California in 2011. Under the two-class earnings per share method, the undistributed losses resulting from dividends exceeding net income in 2014 and 2012 are not allocated to participating securities. Our management believes adjusted net income and adjusted diluted net income per share of common stock are useful measures of our operating performance, as they allow for additional analysis of our operating results separate from the impact of these items.

Following is a GAAP to non-GAAP reconciliation of adjusted net income:

	Year-ended December 31,
	2014		2013			2012		2011		2010
	(In thousands)
Net income (GAAP)	$	28,004	$	32,032		$	40,402	$	30,470	$	22,440
Impairment charges, net of tax	2,317		5,620			2,460		—		—
Non-operational items, net of tax	—		—			—		4,493		—
Tax credit	—		(1,982		)	—		—		—
Adjusted net income	$	30,321	$	35,670		$	42,862	$	34,963	$	22,440

Following is a GAAP to non-GAAP reconciliation of adjusted diluted net income per share of common stock:

	Year-ended December 31,
	2014		2013			2012		2011		2010
Diluted net income per share of common stock (GAAP)	$	1.05	$	1.25		$	1.56	$	1.16	$	0.86
Impairment charges, net of tax	0.09		0.22			0.10		—		—
Impact of dividends exceeding earnings	0.05		—			0.01		—		—
Non-operational items, net of tax	—		—			—		0.17		—
Impact of tax credit	—		(0.08		)	—		—		—
Adjusted diluted net income per share of common stock	$	1.19	$	1.39		$	1.67	$	1.33	$	0.86

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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, debt service requirements 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 $305.1 million in cash, cash equivalents and marketable securities at December 31, 2014, of which approximately $152.1 million was payable in early January 2015 for withheld federal and state income taxes, employment taxes and other payroll deductions, and $87.9 million were client prepayments that were payable in January 2015.  At December 31, 2014, we had working capital of $73.1 million compared to $128.6 million at December 31, 2013. The reduction in working capital reflects, in part, the special dividend paid in December 2014 of approximately $51 million. 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 2015.  We intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

We have a revolving credit facility (“credit facility”) with a syndicate of financial institutions.  In February 2015, the credit facility was increased from $100 million to $125 million and the expiration date was extended from September 2015 to February 2020. Please read Item 9B – Other Information and Note 8 to the Consolidated Financial Statements, “Revolving Credit Facility,” for additional information. The credit facility is available for working capital and general corporate purposes, including acquisitions, and was undrawn at December 31, 2014.

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Cash Flows from Operating Activities

Our cash flows from operating activities in 2014 were $141.7 million.  Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our PEO HR Outsourcing solutions clients.  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 and at month-end; therefore, operating cash flows decrease in the reporting periods that end on a Friday.  In the year ended December 31, 2014, the last business day of the reporting period ended on a Wednesday, client prepayments were $87.9 million and accrued worksite employee payroll was $192.4 million.  In the year ended December 31, 2013, which ended on a Tuesday, client prepayments were $24.5 million and accrued worksite employee payroll was $173.8 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 the 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 $58.3 million in 2014 and $50.0 million in 2013. However, our estimates of workers’ compensation loss costs were $54.0 million and $41.7 million in 2014 and 2013, respectively. During 2014 and 2013, we paid the insurance carrier an additional $7.2 million and $5.0 million, respectively in claim funds for prior policy years, which resulted in a decrease 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 determined solely by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows.  Since inception of the United plan, premiums paid and owed to United have exceeded Plan Costs, resulting in an $23.5 million surplus, $14.5 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 at December 31, 2014.  The premiums owed to United at December 31, 2014, were $15.0 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 decreased 12.6% to $28.0 million in 2014 from $32.0 million in 2013.  Please read “Results of Operations – Year Ended December 31, 2014 Compared to Year Ended December 31, 2013.”

Cash Flows Used in Investing Activities

Net cash flows used in investing activities were $3.2 million during 2014.  We invested $19.1 million in capital expenditures, primarily due to property and equipment purchases, offset by net proceeds of $15.8 million, from marketable securities.

Cash Flows Used in Financing Activities

Our cash flows used in financing activities were $87.8 million during 2014, primarily due to $20.8 million in share repurchases and $69.5 million in dividends paid, including a special cash dividend of $50.7 million paid in the fourth quarter.

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Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments as of

December 31, 2014, and the effect they are expected to have on our liquidity and capital resources (in thousands):

			Less than						More than
Contractual obligations	Total		1 Year		1-3 Years		3-5 Years		5 Years
Non-cancelable operating leases	$	50,042	$	13,364	$	20,355	$	11,011	$	5,312
Purchase obligations(1)	29,397		10,224		12,078		4,402		2,693
Other long-term liabilities:
Accrued workers’ compensation claim costs(2)	136,088		58,031		37,368		24,840		15,849
Total contractual cash obligations	$	215,527	$	81,619	$	69,801	$	40,253	$	23,854

____________________________________

⁽¹⁾  The table includes purchase obligations associated with non-cancelable contracts individually greater than $100,000 and one year.

⁽²⁾  Accrued workers’ compensation claim costs include the short and long-term amounts.  For more information, please read, “Critical Accounting Policies and Estimates – Workers’ Compensation Costs.”

Seasonality, Inflation and Quarterly Fluctuations

We believe the effects of inflation have not had a significant impact on our results of operations or financial condition.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash equivalent short-term investments and our available-for-sale marketable securities.  In addition, borrowings under our credit facility bear interest at a variable market rate.  As of December 31, 2014, we had not drawn on the credit facility.  Please read Please read Item 9B – Other Information and Note 8 to the Consolidated Financial Statements, “Revolving Credit Facility,” for additional information.  Our cash equivalent short-term investments consist primarily of overnight investments, which are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned on these investments.  Our available-for-sale marketable securities are subject to interest rate risk because these securities generally include a fixed interest rate.  As a result, the market values of these securities are affected by changes in prevailing interest rates.

We attempt to limit our exposure to interest rate risk primarily through diversification and low investment turnover.  Our investment policy is designed to maximize after-tax interest income while preserving our principal investment.  As a result, our marketable securities consist of tax-exempt short and intermediate-term debt securities, which are primarily pre-refunded municipal bonds that are secured by escrow funds containing U.S. Government Securities.

The following table presents information about our available-for-sale marketable securities as of December 31, 2014 (dollars in thousands):

	Principal Maturities		Coupon Interest Rate		Effective Yield
2015	$	12,895	4.72	%	0.19	%
2016	13,775		5.18	%	0.37	%
2017	1,135		5.05	%	0.58	%
Total	$	27,805
Fair Market Value	$	28,631

- 48 -

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this Item 8 is contained in a separate section of this Annual Report.  See “Index to Consolidated Financial Statements.”

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15a-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2014.

Design and Evaluation of Internal Control over Financial Reporting

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we included a report of management’s assessment of the design and effectiveness of our internal controls as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  Ernst & Young, LLP, our independent registered public accounting firm, also audited our internal control over financial reporting.  Management’s report and the independent registered public accounting firm’s audit report are included in our 2014 Consolidated Financial Statements under the captions entitled “Management’s Report on Internal Control” and “Report of Independent Registered Public Accounting Firm,” and are incorporated herein by reference.

There has been no change in our internal controls over financial reporting that occurred during the three months ended December 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B.  OTHER INFORMATION.

Recent Development

On February 6, 2015, Insperity, Inc. entered into Amendment No. 3 to that certain Credit Agreement dated as of September 15, 2011 between Insperity, Inc., Amegy Bank National Association, as agent, and the other lenders.  The amendment (a) increases the aggregate principal amount that we may borrow under the credit facility from $100 million to $125 million; (b) increases the aggregate principal amount to which the credit facility may be increased to $175 million;

(c) extends the maturity date to February 2020; and (d) makes certain other modifications.   A copy of the amendment has been filed as an exhibit to this Annual Report on Form 10-K.

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PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Some of the information required by this item is incorporated by reference to the information set forth under the captions “Proposal Number 1: Election of Directors – Nominees – Class I Directors (For Terms Expiring at the 2017 Annual Meeting),” “– Directors Remaining in Office,” and “– Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the “Insperity Proxy Statement”).

Code of Business Conduct and Ethics

Our Board of Directors adopted our Code of Business Conduct and Ethics (the “Code of Ethics”), which meets the requirements of Rule 303A.10 of the New York Stock Exchange Listed Company Manual and Item 406 of Regulation S-K. You can access our Code of Ethics on the Corporate Governance page of our website at insperity.com. Changes in and waivers to the Code of Ethics for our directors, executive officers and certain senior financial officers will be posted on our Internet website within five business days and maintained for at least 12 months.

ITEM 11.  EXECUTIVE COMPENSATION.

The information required by this item is incorporated by reference to the information set forth under the captions “Proposal Number 1: Election of Directors – Director Compensation” and “—Executive Compensation” in the Insperity Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this item is incorporated by reference to the information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Insperity Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this item is incorporated by reference to the information set forth under the caption “Proposal Number 1: Election of Directors – Certain Relationships and Related Transactions” in the Insperity Proxy Statement.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by this item is incorporated by reference to the information set forth under the caption “Proposal Number 3:  Ratification and Appointment of Independent Public Accountants – Fees of Ernst & Young LLP” and “—Finance, Risk Management and Audit Committee Pre-Approval Policy for Audit and Non-Audit Services” in the Insperity Proxy Statement.

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PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)    1.    Financial Statements of the Company

The Consolidated Financial Statements listed by the Registrant on the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report.

(a)    2.    Financial Statement Schedules

The required information is included in the Consolidated Financial Statements or Notes thereto.

(a)    3.    List of Exhibits

3.1	Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-96952)).
3.2	Certificate of Ownership and Merger dated March 3, 2011 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2011).
3.3	Amended and Restated Bylaws of Insperity, Inc. dated February 17, 2014 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 18, 2014).
3.4	Certificate of Designation of Series A Junior Participating Preferred Stock setting forth the terms of the Preferred Stock (included as Exhibit A to the Rights Agreement).
4.1	Specimen Common Stock Certificate  (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-96952)).
4.2	Rights Agreement dated as of November 13, 2007 between Insperity, Inc. and Mellon Investor Services, LLC, as Rights Agent (the “Rights Agreement”) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 16, 2007).
4.3	Form of Rights Certificate (included as Exhibit B to the Rights Agreement).
10.1†	Insperity, Inc. 2001 Incentive Plan, as amended and restated (incorporated by reference to Appendix A to the Registrant’s definitive proxy statement on Schedule 14A filed on March 18, 2009 (No. 1-13998)).
10.2†	Form of Incentive Stock Option Agreement (2001 Plan – 3 year vesting) (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-K for the year ended December 31, 2004).
10.3†	Form of Incentive Stock Option Agreement (2001 Plan – 5 year vesting) (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-K for the year ended December 31, 2004).
10.4†	Form of Director Stock Option Agreement (Annual Grant) (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-K for the year ended December 31, 2004).
10.5†	Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 10-K for the year ended December 31, 2004).
10.6†	Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
10.7†	Form of Director Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
10.8†	Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
10.9	Insperity, Inc. Nonqualified Stock Option Plan (incorporated by reference to Exhibit 99.6 to the Registrant’s Registration Statement on Form S-8 (No. 333-85151)).
10.10	First Amendment to Insperity, Inc. Nonqualified Stock Option Plan, effective August 7, 2001 (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-K for the year ended December 31, 2002).
10.11	Second Amendment to Insperity, Inc. Nonqualified Stock Option Plan, effective January 28, 2003 (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-K for the year ended December 31, 2002).
10.12†	Directors Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
10.13†	Board of Directors Compensation Arrangements (incorporated by reference to the Registrant’s Form 8-K dated February 7, 2005).

- 51 -

10.14	Insperity, Inc. 2008 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 (No. 333-151275)).
10.15	Insperity, Inc. 2012 Incentive Plan (incorporated by reference to the Registrant’s definitive proxy statement on Schedule 14A filed on March 29, 2012 (No. 1-13998)).
10.16(+)	Amendment to Various Agreements between United Healthcare Insurance Company and Insperity Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2005).
10.17	Houston Service Center Operating Lease Amendment (incorporated by reference to Exhibit 10.27 to the Registrant’s Form 10-K for the year ended December 31, 2004).
10.18(+)	Amendment to Minimum Premium Financial Agreement, as amended and restated effective January 1, 2005, by and between Insperity Holdings, Inc., and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2007).
10.19(+)	Amendment to Minimum Premium Administrative Services Agreement, as amended and restated effective January 1, 2005, by and between Insperity Holdings, Inc., and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2007).
10.20(+)	Amendment to Minimum Premium Financial Agreement, as amended effective January 1, 2009, by and between Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and United Healthcare Insurance Company (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2013).
10.21(+)	Amendment to Minimum Premium Administrative Services Agreement, as amended effective January 1, 2008, by and between Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and United Healthcare Insurance Company (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2013).
10.22(+)	Letter Agreement, dated September 2, 2014, by and between Insperity Holdings, Inc. and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-Q for the quarter ended September 30, 2014).
10.23(+)	Amendment to Minimum Premium Financial Agreement, as amended effective January 1, 2011, by and between Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and UnitedHealthcare Insurance Company, effective as of January 1, 2013 (incorporated by reference to Exhibit 10.2 to the Registrant's Form 10-Q for the quarter ended September 30, 2014).
10.24(+)	Amendment to Minimum Premium Administrative Services Agreement, as amended effective January 1, 2011, by and between Insperity Holdings, Inc. (fka Administaff of Texas, Inc.) and UnitedHealthcare Insurance Company, effective as of January 1, 2013 (incorporated by reference to Exhibit 10.3 to the Registrant's Form 10-Q for the quarter ended September 30, 2014).
10.25	Exchange Agreement for Corporate Aircraft, dated August 30, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2011).
10.26	Credit Agreement dated September 15, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 21, 2011).
10.27	Amendment No. 1 to the Credit Agreement dated December 7, 2012 (incorporated by reference to Exhibit 10.32 to the Registrant’s Form 10-K for the year ended December 31, 2012).
10.28*	Amendment No. 2 to the Credit Agreement dated December 1, 2014.
10.29*	Amendment No. 3 to the Credit Agreement dated February 6, 2015.
21.1*	Subsidiaries of Insperity, Inc.
23.1*	Consent of Independent Registered Public Accounting Firm.
24.1*	Powers of Attorney.
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 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.

- 52 -

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
*	Filed herewith.
**	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 years ended December 31, 2014, 2013 and 2012; (ii) the Consolidated Balance Sheets at December 31, 2014 and 2013; (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012; (iv) the Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012; and (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012.

† Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.

(+) Confidential treatment has been requested for this exhibit and confidential portions have been filed with the Securities and Exchange Commission.

- 53 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Insperity, Inc. has duly caused this report to be signed in its behalf by the undersigned, thereunto duly authorized, on February 10, 2015.

INSPERITY, INC.
By:	/s/ Douglas S. Sharp
	Douglas S. Sharp
	SeniorVice President of Finance
	Chief Financial Officer and Treasurer

- 54 -

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Insperity, Inc. in the capacities indicated on February 10, 2015:

Signature	Title
/s/ Paul J. Sarvadi	Chairman of the Board, Chief Executive Officer
Paul J. Sarvadi	and Director
	(Principal Executive Officer)
/s/ Richard G. Rawson	President and Director
Richard G. Rawson
/s/ Douglas S. Sharp	Senior Vice President of Finance
Douglas S. Sharp	Chief Financial Officer and Treasurer
	(Principal Financial Officer)
*	Director
Michael W. Brown
*	Director
Jack M. Fields, Jr.
*	Director
Eli Jones
*	Director
Carol R. Kaufman
*	Director
Paul S. Lattanzio
*	Director
Austin P. Young
* By: /s/ Daniel D. Herink
Daniel D. Herink, attorney-in-fact

- 55 -

INSPERITY, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Management’s Report on Internal Control	F-3
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	F-4
Consolidated Balance Sheets as of December 31, 2014 and 2013	F-5
Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012	F-7
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012	F-8
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2014, 2013 and 2012	F-9
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012	F-10
Notes to Consolidated Financial Statements	F-12

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Insperity, Inc.

We have audited the accompanying Consolidated Balance Sheets of Insperity, Inc. as of December 31, 2014 and 2013, and the related Consolidated Statements of Operations, Comprehensive Income, Stockholders’ Equity and Cash Flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Insperity, Inc. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Insperity, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(2013 framework)and our report dated February 10, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Houston, Texas

February 10, 2015

F-2

MANAGEMENT’S REPORT ON INTERNAL CONTROL

The Company has assessed the effectiveness of its internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013 framework).  The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting.  The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 has been audited by the Company’s independent registered public accounting firm, as stated in their report that is included herein.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.  Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The Company’s assessment of the effectiveness of its internal control over financial reporting included testing and evaluating the design and operating effectiveness of its internal controls.  In management’s opinion, the Company has maintained effective internal control over financial reporting as of December 31, 2014, based on criteria established in the COSO 2013 framework.

/s/ Paul J. Sarvadi	/s/ Douglas S. Sharp
Paul J. Sarvadi	Douglas S. Sharp
Chairman of the Board and	Senior Vice President of Finance
Chief Executive Officer	Chief Financial Officer and Treasurer

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Insperity, Inc.

We have audited Insperity, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Insperity, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Insperity, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of Insperity, Inc. as of December 31, 2014 and 2013, and the related Consolidated Statements of Operations, Comprehensive Income, Stockholders’ Equity and Cash Flows for each of the three years in the period ended December 31, 2014 of Insperity, Inc. and our report dated February 10, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Houston, Texas

February 10, 2015

F-4

INSPERITY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

ASSETS

	December 31, 2014			December 31, 2013
Current assets:
Cash and cash equivalents	$	276,456		$	225,755
Restricted cash	44,040			51,928
Marketable securities	28,631			46,340
Accounts receivable, net:
Trade	12,010			7,453
Unbilled	160,154			199,628
Other	2,952			2,928
Prepaid insurance	21,301			10,638
Other current assets	17,649			12,053
Income taxes receivable	—			409
Deferred income taxes	6,316			8,185
Total current assets	569,509			565,317
Property and equipment:
Land	5,214			4,115
Buildings and improvements	70,471			67,939
Computer hardware and software	89,204			85,241
Software development costs	41,314			38,522
Furniture and fixtures	38,604			36,479
Aircraft	35,879			35,879
	280,686			268,175
Accumulated depreciation and amortization	(196,341		)	(181,760		)
Total property and equipment, net	84,345			86,415
Other assets:
Prepaid health insurance	9,000			9,000
Deposits – health insurance	3,700			3,700
Deposits – workers’ compensation	113,934			81,878
Goodwill and other intangible assets, net	14,457			18,434
Other assets	1,725			1,816
Total other assets	142,816			114,828
Total assets	$	796,670		$	766,560

F-5

INSPERITY, INC.

CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY

	December 31, 2014			December 31, 2013
Current liabilities:
Accounts payable	$	4,674		$	2,678
Payroll taxes and other payroll deductions payable	176,341			165,604
Accrued worksite employee payroll cost	192,396			173,801
Accrued health insurance costs	18,329			5,103
Accrued workers’ compensation costs	45,592			52,930
Accrued corporate payroll and commissions	32,644			21,611
Other accrued liabilities	22,444			14,960
Income tax payable	4,031			—
Total current liabilities	496,451			436,687
Noncurrent liabilities:
Accrued workers’ compensation costs	92,048			68,905
Deferred income taxes	4,075			7,696
Total noncurrent liabilities	96,123			76,601
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.01 per share:
Shares authorized – 20,000
Shares issued and outstanding – none	—			—
Common stock, par value $0.01 per share:
Shares authorized – 60,000
Shares issued  – 30,758 at December 31, 2014 and 2013	308			308
Additional paid-in capital	137,769			135,653
Treasury stock, at cost  – 5,425 and 5,175 at December 31, 2014 and 2013, respectively	(148,465		)	(138,688		)
Accumulated other comprehensive income, net of tax	3			29
Retained earnings	214,481			255,970
Total stockholders’ equity	204,096			253,272
Total liabilities and stockholders’ equity	$	796,670		$	766,560

See accompanying notes.

F-6

INSPERITY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Year ended December 31,
	2014			2013			2012
Revenues (gross billings of $14.187 billion, $13.462 billion and $12.992 billion, less worksite employee payroll cost of $11.829 billion, $11.206 billion and $10.833 billion, respectively)	$	2,357,788		$	2,256,112		$	2,158,824
Direct costs:
Payroll taxes, benefits and workers’ compensation costs	1,953,983			1,862,861			1,776,603
Gross profit	403,805			393,251			382,221
Operating expenses:
Salaries, wages and payroll taxes	200,118			181,444			168,807
Stock-based compensation	11,053			11,103			9,814
Commissions	15,285			14,581			14,515
Advertising	22,183			23,795			21,586
General and administrative expenses	82,618			81,699			77,564
Impairment charges	3,687			3,342			4,191
Depreciation and amortization	21,387			21,064			18,250
	356,331			337,028			314,727
Operating income	47,474			56,223			67,494
Other income (expense):
Interest, net	106			158			609
Other, net	47			(2,649		)	187
Income before income tax expense	47,627			53,732			68,290
Income tax expense	19,623			21,700			27,888
Net income	$	28,004		$	32,032		$	40,402
Less distributed and undistributed earnings allocated to participating securities	(2,002		)	(916		)	(1,224		)
Net income allocated to common shares	$	26,002		$	31,116		$	39,178
Basic net income per share of common stock	$	1.05		$	1.25		$	1.57
Diluted net income per share of common stock	$	1.05		$	1.25		$	1.56

See accompanying notes.

F-7

INSPERITY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Year ended December 31,
	2014			2013		2012
Net income	$	28,004		$	32,032	$	40,402
Other comprehensive income:
Unrealized gain (loss) on available-for-sale securities, net of tax	(26		)	13		(8		)
Comprehensive income	$	27,978		$	32,045	$	40,394

See accompanying notes.

F-8

INSPERITY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Common Stock Issued					Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Shares		Amount															Total
Balance at December 31, 2011	30,839		$	309		$	135,871		$	(134,647	)	$	24		$	243,650		$	245,207
Purchase of treasury stock, at cost	—		—			—			(13,773		)	—			—			(13,773		)
Repurchase of common stock	(81	)	(1		)	(3,161		)	—			—			—			(3,162		)
Exercise of stock options	—		—			(1,630		)	3,879			—			—			2,249
Income tax benefit from stock-based compensation, net	—		—			1,751			—			—			—			1,751
Stock-based compensation expense	—		—			289			9,525			—			—			9,814
Other	—		—			87			1,066			—			—			1,153
Dividends paid	—		—			—			—			—			(42,728		)	(42,728		)
Unrealized loss on marketable securities, net of tax	—		—			—			—			(8		)	—			(8		)
Net income	—		—			—			—			—			40,402			40,402
Balance at December 31, 2012	30,758		$	308		$	133,207		$	(133,950	)	$	16		$	241,324		$	240,905
Purchase of treasury stock, at cost	—		—			—			(17,229		)	—			—			(17,229		)
Exercise of stock options	—		—			(790		)	2,238			—			—			1,448
Income tax benefit from stock-based compensation, net	—		—			1,259			—			—			—			1,259
Stock-based compensation expense	—		—			1,798			9,305			—			—			11,103
Other	—		—			179			948			—			—			1,127
Dividends paid	—		—			—			—			—			(17,386		)	(17,386		)
Unrealized gain on marketable securities, net of tax	—		—			—			—			13			—			13
Net income	—		—			—			—			—			32,032			32,032
Balance at December 31, 2013	30,758		$	308		$	135,653		$	(138,688	)	$	29		$	255,970		$	253,272
Purchase of treasury stock, at cost	—		—			—			(20,769		)	—			—			(20,769		)
Exercise of stock options	—		—			(180		)	459			—			—			279
Income tax benefit from stock-based compensation, net	—		—			488			—			—			—			488
Stock-based compensation expense	—		—			1,592			9,461			—			—			11,053
Other	—		—			216			1,072			—			—			1,288
Dividends paid	—		—			—			—			—			(69,493		)	(69,493		)
Unrealized loss on marketable securities, net of tax	—		—			—			—			(26		)	—			(26		)
Net income	—		—			—			—			—			28,004			28,004
Balance at December 31, 2014	30,758		$	308		$	137,769		$	(148,465	)	$	3		$	214,481		$	204,096

See accompanying notes.

F-9

INSPERITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year ended December 31,
	2014			2013			2012
Cash flows from operating activities:
Net income	$	28,004		$	32,032		$	40,402
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,387			21,064			18,250
Impairment charges	3,687			6,021			4,191
Amortization of marketable securities	1,891			2,119			2,295
Stock-based compensation	11,053			11,103			9,814
Deferred income taxes	(1,733		)	(2,288		)	(5,743		)
Changes in operating assets and liabilities, net of acquisitions:
Restricted cash	7,888			(4,779		)	(2,412		)
Accounts receivable	34,893			(19,623		)	(19,453		)
Prepaid insurance	(10,663		)	4,982			5,680
Other current assets	(5,596		)	(2,402		)	1,837
Other assets	(32,013		)	(18,091		)	(12,991		)
Accounts payable	1,996			(982		)	(1,425		)
Payroll taxes and other payroll deductions payable	10,737			(12,930		)	9,922
Accrued worksite employee payroll expense	18,595			23,731			19,753
Accrued health insurance costs	13,226			(8,839		)	4,515
Accrued workers’ compensation costs	15,805			7,815			7,418
Accrued corporate payroll, commissions and other accrued liabilities	18,517			556			2,353
Income taxes payable/receivable	4,039			(4,825		)	6,392
Total adjustments	113,709			2,632			50,396
Net cash provided by operating activities	141,713			34,664			90,798
Cash flows from investing activities:
Marketable securities:
Purchases	(69,578		)	(54,756		)	(30,680		)
Proceeds from maturities	28,494			15,201			32,619
Proceeds from dispositions	56,880			8,026			35,891
Investments and acquisitions, net of cash acquired	—			—			(2,410		)
Property and equipment:
Purchases	(19,124		)	(11,562		)	(17,631		)
Proceeds from dispositions	122			57			69
Net cash provided by (used in) investing activities	(3,206		)	(43,034		)	17,858

F-10

INSPERITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

	Year ended December 31,
	2014			2013			2012
Cash flows from financing activities:
Purchase of treasury stock	$	(20,769	)	$	(17,229	)	$	(13,773	)
Repurchase of common stock	—			—			(3,162		)
Dividends paid	(69,493		)	(17,386		)	(42,728		)
Proceeds from the exercise of stock options	279			1,448			2,249
Income tax benefit from stock-based compensation	889			1,621			2,316
Other	1,288			1,127			(222		)
Net cash used in financing activities	(87,806		)	(30,419		)	(55,320		)
Net increase (decrease) in cash and cash equivalents	50,701			(38,789		)	53,336
Cash and cash equivalents at beginning of year	225,755			264,544			211,208
Cash and cash equivalents at end of year	$	276,456		$	225,755		$	264,544
Supplemental disclosures:
Cash paid for income taxes, net	$	16,429		$	27,191		$	24,924

See accompanying notes.

F-11

INSPERITY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

1. Accounting Policies

Description of Business

Insperity, Inc. (“Insperity” or “we”, “our”, and “us”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance.  Since our formation 28 years ago, we have evolved from being solely a professional employer organization (“PEO”), an industry we pioneered, to our current position as a comprehensive business performance solutions provider. We were organized as a corporation in 1986 and have provided PEO services since inception.

Our most comprehensive HR services offerings are provided through our Workforce Optimization^® and Workforce Synchronization solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services.

In addition to our PEO HR Outsourcing solutions, we offer Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial and Expense Management services, Retirement Services and Insurance Services, (collectively “Strategic Businesses,” formerly known as “Adjacent Businesses”), many of which are offered via desktop applications and cloud-based delivery models.  These other products or services are offered separately, as a bundle, or along with PEO HR Outsourcing solutions.

We provide our PEO HR Outsourcing solutions by entering into a co-employment relationship with our clients, under which Insperity and its clients each take responsibility for certain portions of the employer-employee relationship. Insperity and its clients designate each party’s responsibilities through its Client Service Agreement (“CSA”), under which Insperity becomes the employer of the employees who work at the client’s location (“worksite employees”) for most administrative and regulatory purposes.

As a co-employer of its worksite employees, we assume many of the rights and obligations associated with being an employer.  We enter into an employment agreement with each worksite employee, thereby maintaining a variety of employer rights, including the right to hire or terminate employees, the right to evaluate employee qualifications or performance, and the right to establish employee compensation levels.  Typically, Insperity only exercises these rights in consultation with its clients or when necessary to ensure regulatory compliance.  The responsibilities associated with our role as employer include the following obligations with regard to our worksite employees: (i) to compensate its worksite employees through wages and salaries; (ii) to pay the employer portion of payroll-related taxes; (iii) to withhold and remit (where applicable) the employee portion of payroll-related taxes; (iv) to provide employee benefit programs; and (v) to provide workers’ compensation insurance coverage.

In addition to our assumption of employer status for our worksite employees, our PEO HR Outsourcing solutions also include other human resources functions for our clients to support the effective and efficient use of personnel in their business operations.  To provide these functions, we maintain a significant staff of professionals trained in a wide variety of human resources functions, including employee training, employee recruiting, employee performance management, employee compensation and employer liability management.  These professionals interact and consult with clients on a daily basis to help identify each client’s service requirements and to ensure that we are providing appropriate and timely personnel management services.

Revenue and Direct Cost Recognition

We account for our PEO HR Outsourcing solutions revenues in accordance with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition, Principal Agent Considerations.  Our PEO HR Outsourcing solutions revenues are primarily derived from our gross billings, which are based on (i) the payroll cost of its worksite employees; and (ii) a markup computed as a percentage of the payroll cost.  The gross billings are invoiced concurrently with each periodic payroll of its worksite employees.  Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as worksite employees perform their service at the client worksite.

F-12

Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on our Consolidated Balance Sheets.

In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our worksite employees, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin.  As a result, our operating results are significantly impacted by our ability to accurately estimate, control and manage our direct costs relative to the revenues derived from the markup component of our gross billings.

Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our worksite employees.  Our direct costs associated with our revenue generating activities are primarily comprised of all other costs related to our worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs.

Segment Reporting

We operate one reportable segment under ASC 280, Segment Reporting.

Principles of Consolidation

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

Use of Estimates

The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that could potentially subject us to concentration of credit risk include accounts receivable and marketable securities.

Cash, Cash Equivalents and Marketable Securities

We invest our excess cash in federal government and municipal-based money market funds and debt instruments of U.S. municipalities.  All highly liquid investments with stated maturities of three months or less from date of purchase are classified as cash equivalents.  Liquid investments with stated maturities of greater than three months are classified as marketable securities in current assets.

We account for marketable securities in accordance with ASC 320, Investments – Debt and Equity Securities. We determine the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time ofpurchase, and re-evaluate such classification as of each balance sheet date.  At December 31, 2014 and 2013, all of our investments in marketable securities were classified as available-for-sale, and as a result, were reported at fair value. Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity.  The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts from the date of purchase to maturity.  Such amortization is included in interest income as an addition to or deduction from the coupon interest earned on the investments.  We use the specific identification method of determining the cost basis in computing realized gains and losses on the sale of our available-for-sale securities. Realized gains and losses are included in other income.

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturities of these instruments.

F-13

Property and Equipment

Property and equipment are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method.  The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:

Buildings and improvements	5-30 years
Computer hardware and software	1-5 years
Software development costs	3-5 years
Furniture and fixtures	5-7 years
Aircraft	15-20 years

Software development costs relate primarily to software coding, system interfaces and testing of our proprietary professional employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Capitalized software development costs are amortized using the straight-line method over the estimated useful lives of the software, generally three years.  We recognized $4.1 million, $3.6 million and $2.8 million in amortization of capitalized computer software costs in 2014, 2013 and 2012, respectively.  Unamortized computer software costs were $6.0 million and$7.2 million in 2014 and 2013, respectively.

We account for our software products in accordance with ASC 985-20, Costs of Software to be Sold. This Topic establishes standards of financial accounting and reporting for the costs of computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process, whether internally developed and produced or purchased.

We periodically evaluate our long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment.  ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable.  If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset.  In addition, we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset.  Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. Due to a change in office consolidation plans, we recorded a $1.2 million non-cash charge related to office design fees.

Goodwill and Other Intangible Assets

Our purchased intangible assets are carried at cost less accumulated amortization.  Amortization is computed over the estimated useful lives of the respective assets, ranging from three to 10 years.

Our goodwill and intangible assets are subject to the provisions of ASC 350, Intangibles – Goodwill and Other. Accordingly, we perform our annual goodwill impairment testing as of December 31st of each calendar year or earlier if indicators of impairment exist on an interim basis. Step one of the impairment testing involves a comparison of the estimated fair value of a reporting unit to the related carrying value.  Fair value is estimated using a discounted cash flow model.  If the estimated fair value is less than its related carrying value, step two of the goodwill impairment test is completed, which involves allocating the estimated fair value of the reporting unit to individual assets and liabilities.  If the carrying value of goodwill is greater than the estimated fair value, an impairment exists, which results in a write-down of the goodwill to the estimated fair value. Furthermore, ASC 350 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite.  Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

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 cost of the United portion of the plan, including an estimate of the incurred claims, taxes and

F-14

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 each 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 December 31, 2014, and is reported as a long-term asset.

As of December 31, 2014, Plan Costs were less than the net premiums paid and owed to United by $23.5 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $14.5 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at December 31, 2014, were $15.0 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.  Under the ACE Program, we bear the economic burden for the first $1 million layer of claims per occurrence, and effective October 1, 2010, we also bear the economic burden for a maximum aggregate amount of $5 million per policy year for claim amounts that exceed the first $1 million. ACE bears the economic burden for all claims in excess of these levels.   

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 years ended December 31, 2014 and 2013, we reduced accrued workers’ compensation costs by $2.9 million and $9.3 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 rates utilized in 2014 and 2013 were 1.0% and 0.8%, respectively) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

F-15

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

	Year ended December 31,
	2014			2013
	(in thousands)
Beginning balance	$	120,833		$	111,685
Accrued claims	55,971			42,900
Present value discount	(1,998		)	(1,169		)
Paid claims	(38,718		)	(32,583		)
Ending balance	$	136,088		$	120,833
Current portion of accrued claims	$	44,040		$	51,928
Long-term portion of accrued claims	92,048			68,905
	$	136,088		$	120,833

The current portion of accrued workers’ compensation costs at December 31, 2014 and 2013 includes $1.6 million and $1.0 million, respectively, of workers’ compensation administrative fees.

As of December 31, the undiscounted accrued workers’ compensation costs were $145.8 million in 2014 and $131.2 million in 2013.

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.  In 2014, we paid the insurance carrier an additional $7.2 million in claim funds for policy years prior to 2014, which increased deposits.  As of December 31, 2014, we had restricted cash of $44.0 million and deposits of $113.9 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.

Stock-Based Compensation

At December 31, 2014, we have two stock-based employee compensation plans under which we may issue awards.  We account for these plans under the recognition and measurement principles of ASC 718, Compensation – Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.

We generally make annual grants of restricted and unrestricted stock under our stock-based incentive compensation plans to our directors, officers and other management. Restricted stock grants to officers and other management vest over three to five years from the date of grant. Restricted stock grants issued to directors upon their initial appointment to the board are one-third vested on each anniversary of the grant date. Annual stock grants issued to directors are 100% vested on the grant date.  Shares of restricted stock are based on fair value on date of grant and the associated expense, net of estimated forfeitures, is recognized over the vesting period.

Company-Sponsored 401(k) Plans

Under our 401(k) plan for corporate employees (the “Corporate Plan”), we matched 50% of eligible corporate employees’ contributions, up to 6% of the employees’ eligible compensation in 2014, 2013 and 2012. Under our separate

401(k) plan for worksite employees (the “Worksite Employee Plan”), the match percentage for worksite employees ranges from 0% to 6%, as determined by each client company.  Matching contributions under the Corporate Plan and the Worksite Employee Plan are immediately vested.  During 2014, 2013 and 2012, we made matching contributions to the Corporate and

F-16

Worksite Employee Plans of $81.5 million, $74.7 million and $65.9 million, respectively.  Of these contributions, $78.4 million, $71.7 million and $63.3 million were made under the Worksite Employee Plan on behalf of worksite employees.  The remainder represents matching contributions made under the Corporate Plan on behalf of corporate employees.

Advertising

We expense all advertising costs as incurred.

Income Taxes

We use the liability method in accounting for income taxes.  Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2014 presentation.

New Accounting Pronouncements

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

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods ending after December 15, 2016, and early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU No. 2014-09. We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated Financial Statements.

2. Cash, Cash Equivalents and Marketable Securities

The following table summarizes our investments in cash equivalents and marketable securities held by investment managers and overnight investments:

	December 31,
	2014			2013
	(in thousands)
Overnight holdings:
Money market funds (cash equivalents)	$	271,840		$	192,040
Investment holdings:
Money market funds (cash equivalents)	14,125			42,913
Marketable securities	28,631			46,340
	314,596			281,293
Cash held in demand accounts	20,369			23,054
Outstanding checks	(29,878		)	(32,252		)
Total cash, cash equivalents and marketable securities	$	305,087		$	272,095
Cash and cash equivalents	$	276,456		$	225,755
Marketable securities	28,631			46,340
	$	305,087		$	272,095

F-17

Our cash and overnight holdings fluctuate based on the timing of the client’s payroll processing cycle.  Included in the cash balance as of December 31, 2014 and December 31, 2013, are $152.1 million and $143.0 million, respectively, in withholdings associated with federal and state income taxes, employment taxes and other payroll deductions, as well as $87.9 million and $24.5 million, respectively, in client prepayments.

We account for our financial assets in accordance with ASC 820, Fair Value Measurement.  This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  The fair value measurement disclosures are grouped into three levels based on valuation factors:

• Level 1 - quoted prices in active markets using identical assets

• Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs

• Level 3 - significant unobservable inputs

The following tables summarize the levels of fair value measurements of our financial assets:

	Fair Value Measurements
			(in thousands)
	December 31, 2014		Level 1		Level 2		Level 3
Money market funds	$	285,965	$	285,965	$	—	$	—
Municipal bonds	28,631		—		28,631		—
Total	$	314,596	$	285,965	$	28,631	$	—

	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)
December 31, 2014
Municipal bonds	$	28,626	$	16	$	(11	)	$	28,631
December 31, 2013
Municipal bonds	$	46,290	$	51	$	(1	)	$	46,340

F-18

As of December 31, 2014, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	12,728	$	12,737
One to five years	15,898		15,894
Total	$	28,626	$	28,631

3. Accounts Receivable

Our accounts receivable is primarily composed of trade receivables and unbilled receivables.  Our trade receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $1.2 million and $0.9 million as of December 31, 2014 and 2013, respectively.  We establish an allowance for doubtful accounts based on management’s assessment of the collectability of specific accounts and by making a general provision for other potentially uncollectible amounts.

We make an accrual at the end of each accounting period for our obligations associated with the earned but unpaid wages of our worksite employees and for the accrued gross billings associated with such wages. These accruals are included in accrued worksite employee payroll cost and unbilled accounts receivable; however, these amounts are presented net in the Consolidated Statements of Operations. We generally require clients to pay invoices for service fees no later than one day prior to the applicable payroll date. As such, we generally do not require collateral. Client prepayments directly attributable to unbilled accounts receivable have been netted against such receivables as the gross billings have been earned and the payroll cost has been incurred, thus we have the legal right of offset for these amounts. Unbilled accounts receivable consisted of the following:

	December 31,
	2014			2013
	(in thousands)
Accrued worksite employee payroll cost	$	192,396		$	173,801
Unbilled revenues	55,645			50,286
Customer prepayments	(87,887		)	(24,459		)
Unbilled accounts receivable	$	160,154		$	199,628

4. Deposits

The contractual arrangement with United for health insurance coverage requires us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported as long-term prepaid health insurance. Please read Note 1, “Accounting Policies,” for a discussion of our accounting policies for health insurance costs.

As of December 31, 2014, we had $3.7 million in health insurance long-term deposits. Please read Note 1 “Accounting Policies” for a discussion of our accounting policies for health insurance costs.

As of December 31, 2014, we had $113.9 million in workers’ compensation long-term deposits. Please read Note 1 “Accounting Policies” for a discussion of our accounting policies for workers’ compensation costs.

5. Goodwill and Other Intangible Assets

We perform our annual asset impairment test as of December 31, the end of our calendar year. During the fourth quarters of 2014, 2013 and 2012, we performed step one of the annual impairment test for each of our reporting units. We concluded the estimated fair value of our Expense Management unit in 2013 and our Performance Management unit in 2012, were below their respective carrying values.

F-19

Additionally, any time impairment indicators are identified, we perform an interim impairment test. During the second quarter of 2014, impairment indicators were identified in our Employment Screening business, due to changes in management, the reporting unit’s financial results and the loss of certain customers.

The declines in the estimated fair values of Employment Screening, Expense Management and Performance Management resulted primarily from lower projected revenue growth rates and profitability levels. Upon completion of step two of the goodwill impairment tests, we recognized goodwill and other intangible asset impairments of $2.5 million in 2014 related to our Employment Screening business unit, $3.3 million in 2013 related to our Expense Management reporting unit and $4.2 million in 2012 related to our Performance Management reporting unit. The fair values of the reporting units were estimated using a discounted cash flow model. The material assumptions used in the model included the weighted average cost of capital and long-term growth rates.  We consider this a Level 3 fair value measure.

The following table presents the gross carrying amount and accumulated amortization for each class of intangible assets and the gross carrying amount and accumulated impairment for goodwill:

	December 31, 2013			Twelve Months Ended   December 31, 2014						December 31, 2014
	Balance			Impairment			Amortization Expense			Balance
	(in thousands)
Gross carrying amount:
Trademarks	$	1,230		$	(1,010	)	$	—		$	220
Customer relationships	7,784			(1,392		)	—			6,392
Aggregate goodwill acquired:
Goodwill	21,156			—			—			21,156
Total	$	30,170		$	(2,402	)	$	—		$	27,768
Accumulated amortization:
Trademarks	$	(680	)	$	695		$	(77	)	$	(62	)
Customer relationships	(4,340		)	976			(1,415		)	(4,779		)
Accumulated impairment:
Goodwill	(6,716		)	(1,754		)	—			(8,470		)
Total	$	(11,736	)	$	(83	)	$	(1,492	)	$	(13,311	)
Net carrying amount:
Trademarks	$	550		$	(315	)	$	(77	)	$	158
Customer relationships	3,444			(416		)	(1,415		)	1,613
Goodwill	14,440			(1,754		)	—			12,686
Total goodwill and other intangible assets	$	18,434		$	(2,485	)	$	(1,492	)	$	14,457

Our amortization expense related to purchased intangible assets other than goodwill was $1.5 million in 2014, $2.0 million in 2013 and $1.8 million in 2012, and is estimated to be $0.9 million in 2015, $0.5 million in 2016, $0.3 million in 2017, $36,000 in 2018 and $19,000 in 2019.

F-20

6. 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 in 2013, which is included in other income (expense) in our Consolidated Statements of Operations. Due to federal income tax limitations on capital losses, no tax benefit associated with the impairment was recognized.

7. Acquisitions

We account for our acquisitions in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on the fair value at the date of purchase.  All acquisition related costs are expensed as incurred and recorded in operating expenses.  We include operations associated with acquisitions from the date of acquisition forward.

Included in our 2012 Consolidated Statements of Cash Flows are payments related to our 2011 acquisition of HumanConcepts and our 2010 acquisition of Galaxy Technologies, Inc. During 2012, we paid $1.2 million related to the HumanConcepts acquisition and $1.4 million related to Galaxy Technologies, Inc. acquisition, based on the terms of their respective agreements.

8. Revolving Credit Facility

On September 15, 2011, we entered into a four-year, $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”). In February 2015, the credit facility was increased from $100 million to $125 million and the expiration date was extended from September 2015 to February 2020. The Facility is available for working capital and general corporate purposes, including acquisitions, and issuances of letters of credit. Our obligations under the Facility are secured by 65% of the stock of our captive insurance subsidiary and are guaranteed by all of our domestic subsidiaries. At December 31, 2014, we had not drawn on the Facility. As of December 31, 2014, we had an outstanding $0.6 million letter of credit issued under the Facility.

Borrowings under the Facility bear interest at an alternate base rate or LIBOR, at our option, plus an applicable margin.  Depending on our leverage ratio, the applicable margin varies (i) in the case of LIBOR loans, from 2.00% to 2.75% and (ii) in the case of alternate base rate loans, from 0.00% to 0.75%.  The alternate base rate is the highest of (i) the prime rate most recently published in The Wall Street Journal, (ii) the federal funds rate plus 0.50% and (iii) the 30-day LIBOR rate plus 2.00%.  We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25%. Interest expense and unused commitment fees are recorded in other income (expense).

The Facility contains both affirmative and negative covenants, which we believe are customary for arrangements of this nature.  Covenants include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire our capital stock, acquire the capital stock or assets of another business, make investments and pay dividends.  In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio.  In December 2014 and 2012, the Credit Agreement was amended to modify the interest coverage ratio covenant to exclude the impact of special dividends paid of $50.7 million and $25.7 million, respectively.  We were in compliance with all financial covenants under the Credit Agreement at December 31, 2014.

F-21

9. Income Taxes

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes.  Significant components of the net deferred tax assets and net deferred tax liabilities as reflected on the Consolidated Balance Sheets are as follows:

	December 31,
	2014			2013
	(in thousands)
Deferred tax liabilities:
Prepaid assets	$	(9,291	)	$	(5,084	)
Depreciation	(8,083		)	(8,937		)
Software development costs	(2,252		)	(2,739		)
Total deferred tax liabilities	(19,626		)	(16,760		)
Deferred tax assets:
Accrued incentive compensation	7,204			3,909
Net operating loss carryforward	1,556			1,773
Workers’ compensation accruals	6,308			5,568
Accrued rent	1,058			1,008
Stock-based compensation	3,615			3,742
Intangibles	1,575			837
Minority investment impairment	1,003			991
Other	551			412
Total deferred tax assets	22,870			18,240
Valuation allowance	(1,003		)	(991		)
Total net deferred tax assets	21,867			17,249
Net deferred tax assets	$	2,241		$	489
Net current deferred tax assets	$	6,316		$	8,185
Net noncurrent deferred tax liabilities	(4,075		)	(7,696		)
	$	2,241		$	489

The components of income tax expense are as follows:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Current income tax expense:
Federal	$	18,034		$	20,476		$	29,280
State	3,322			3,512			4,351
Total current income tax expense	21,356			23,988			33,631
Deferred income tax (benefit) expense:
Federal	(1,764		)	(2,258		)	(5,363		)
State	31			(30		)	(380		)
Total deferred income tax benefit	(1,733		)	(2,288		)	(5,743		)
Total income tax expense	$	19,623		$	21,700		$	27,888

F-22

As a result of nonqualified stock option exercises, disqualifying dispositions of certain employee incentive stock options and vesting of restricted stock awards, we had a net income tax benefit of $0.5 million in 2014, $1.3 million in 2013 and $1.8 million in 2012.  The excess income tax benefit is reported as a component of additional paid-in capital.

The reconciliation of income tax expense computed at U.S. federal statutory tax rates to the reported income tax expense from continuing operations is as follows:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Expected income tax expense at 35%	$	16,670		$	18,806		$	23,901
State income taxes, net of federal benefit	2,204			2,286			2,497
Nondeductible expenses	1,939			1,993			1,663
Section 199 benefits	(592		)	(2,531		)	—
Expense Management non-cash impairment	—			797			—
Valuation allowance related to TRE impairment	—			938			—
Research and development credit	(455		)	(534		)	—
Other, net	(143		)	(55		)	(173		)
Reported total income tax expense	$	19,623		$	21,700		$	27,888

We have developed customer facing software that is included as a component of the PEO HR Outsourcing solutions. In addition, several Strategic Business Units (“SBU”) market both software products and cloud based offerings. Prior to 2013, we were not certain that these software offerings met the IRS “Qualified Production Activities Deduction” requirements. As a result, no such tax deduction was taken on the annual tax returns filed with the IRS. However, in 2013, we engaged tax specialists to conduct a study of our various software offerings to assess the qualifications with IRS guidelines. Based on this study, we concluded certain of our software offerings met the IRS requirements, resulting in amendments to previously filed open year tax returns. Accordingly, in 2013 we recognized $2.0 million in tax benefits for the years 2009 to 2012, and $0.5 million in tax benefits for the 2013 tax year.

At December 31, 2014, we have net operating loss carryforwards totaling approximately $4.2 million that expire from 2023 to 2030 related to our acquisition of ExpensAble.

We recognize interest and penalties related to uncertain tax positions in income tax expense.  As of December 31, 2014, 2013 and 2012, we made no provisions for interest or penalties related to uncertain tax positions.  The tax years 2011 through 2014 remain open to examination by the Internal Revenue Service of the United States. The tax years 2010 through 2014 remain open to examination by various state tax authorities.

10. Stockholders’ Equity

Repurchase Program

Our Board of Directors (the “Board”) has authorized a program to repurchase up to 15,500,000 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 or other factors.  We repurchased 580,804 shares under the Repurchase Program during 2014.  In addition, 112,458 shares were withheld during 2014 to satisfy minimum tax withholding obligations for the vesting of restricted stock awards.  These purchases are not subject to the Repurchase Program.  During 2013, we repurchased 479,903 shares under the Repurchase Program and 116,931 shares were withheld to satisfy minimum tax withholding obligations for the vesting of restricted stock awards.  As of December 31, 2014, we were authorized to repurchase an additional 768,765 shares under the Repurchase Program.  Shares repurchased under the Repurchase Program and shares withheld to satisfy minimum tax withholding obligations for the vesting of restricted stock awards are recorded in treasury.

F-23

Dividends

The Board declared quarterly dividends in 2014 and 2013 as follows:

	2014			2013
	(amounts per share)
First quarter	$	0.17		$	0.17
Second quarter	0.19			0.17
Third quarter	0.19			0.17
Fourth quarter	2.19		(1)	0.17

____________________________________

⁽¹⁾    Includes a $2.00 per share special dividend

During 2014 and 2013, we paid a total of $69.5 million and $17.4 million, respectively in dividends. The dividends paid in 2014 includes a one-time special dividend of $50.7 million.

Preferred Stock

At December 31, 2014, 20 million shares of preferred stock were authorized, of which 600,000 shares were designated as Series A Junior Participating Preferred Stock that is reserved for issuance on exercise of preferred stock purchase rights under our Share Purchase Rights Plan (the “Rights Plan”).  Each issued share of our common stock has one preferred stock purchase right attached to it.  No preferred shares have been issued and the rights are not currently exercisable.  The Rights Plan expires on November 13, 2017.

11. Incentive Plans

The Insperity, Inc. 2001 Incentive Plan, as amended, and the 2012 Incentive Plan, as amended, (collectively, the “Incentive Plans”) provide for options and other stock-based awards that have been and may be granted to eligible employees and non-employee directors of Insperity or its subsidiaries.  The 2012 Incentive Plan is currently the only plan under which new stock-based awards may be granted.  The Incentive Plans are administered by the Compensation Committee of the Board of Directors (the “Committee”).  The Committee has the power to determine which eligible employees will receive awards, the timing and manner of the grant of such awards, the exercise price of stock options (which may not be less than market value on the date of grant), the number of shares and all of the terms of the awards.  The Board may at any time amend or terminate the Incentive Plans.  However, no amendment that would impair the rights of any participant, with respect to outstanding grants, can be made without the participant’s prior consent.  Stockholder approval of amendments to the Incentive Plans is necessary only when required by applicable law or stock exchange rules.  At December 31, 2014, 1,299,470 shares of common stock were available for future grants under the 2012 Incentive Plan.  The Incentive Plans permit stock options, including nonqualified stock options and options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, stock awards, phantom stock awards, stock appreciation rights, performance units, and other stock-based awards and cash awards, all of which may or may not be subject to the achievement of one or more performance objectives.  The purposes of the Incentive Plans generally are to retain and attract persons of training, experience and ability to serve as employees of Insperity and its subsidiaries and to serve as non-employee directors of Insperity, to encourage the sense of proprietorship of such persons and to stimulate the active interest of such persons in the development and financial success of Insperity and its subsidiaries.

The Insperity Nonqualified Stock Option Plan (the “Nonqualified Plan”) provided for options to purchase shares of Insperity’s common stock that were granted to employees who were not officers.  An aggregate of 3,600,000 shares of common stock of Insperity were authorized to be issued under the Nonqualified Plan.  As of December 31, 2014, there were no outstanding unexercised shares under the Nonqualified Plan, and although there are unissued shares remaining, no new awards may be granted under the Nonqualified Plan.  The Committee may at any time terminate or amend the Nonqualified Plan.

We recognized $11.1 million, $11.1 million and $9.8 million of compensation expense associated with the restricted stock awards in 2014, 2013 and 2012, respectively. We recognized $4.6 million, $4.5 million and $4.0 million of tax benefits associated with stock-based compensation in 2014, 2013 and 2012, respectively.

F-24

Stock Option Awards

The following is a summary of stock option award activity for 2014:

	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Outstanding - December 31, 2013	61		$	24.24
Granted	—		—
Exercised	(18	)	15.28
Canceled	—		—
Outstanding - December 31, 2014	43		28.04		5.3	$	253
Exercisable - December 31, 2014	43		28.04		5.3	$	253

The intrinsic value of options exercised during the year was $0.3 million in 2014, $1.5 million in 2013 and $2.5 million in 2012.

Restricted Stock Awards

Restricted common shares, under equity plan accounting, are generally measured at fair value on the date of grant based on the number of shares granted, estimated forfeitures and the quoted price of the common stock.  Such value is recognized as compensation expense over the corresponding vesting period, three to five years for our shares currently outstanding.  The total fair value of shares vested during the years ended December 31, 2014, 2013, and 2012 was $10.8 million, $12.3 million and $11.7 million, respectively.  The weighted average grant date fair value of restricted stock awards during the years ended December 31, 2014, 2013 and 2012 was $28.22, $29.25 and $30.47, respectively.  As of December 31, 2014, unrecognized compensation expense associated with the unvested shares outstanding was $12.7 million and is expected to be recognized over a weighted average period of 21 months.

The following is a summary of restricted stock award activity for 2014:

	Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested - December 31, 2013	740		$	29.66
Granted	410		28.22
Vested	(382	)	29.79
Canceled/Forfeited	(28	)	28.45
Non-vested - December 31, 2014	740		28.84

Employee Stock Purchase Plan

Our employee stock purchase plan (the “ESPP”) enables employees to purchase shares of Insperity stock at a 5% discount. The ESPP is a non-compensatory plan under generally accepted accounting principles of stock-based compensation. As a result, no compensation expense is recognized in conjunction with this plan. Approximately 37,000, 34,000 and 37,000 shares were issued under the ESPP during fiscal years 2014, 2013 and 2012, respectively.

F-25

12. 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 includes 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.  We declared special dividends of $2.00 per share in 2014 and $1.00 per share in 2012. As a result, dividends exceeded earnings in both periods, which resulted in decreased earnings per share of $0.05 per share in 2014 and $0.01 per share in 2012. 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:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Net income	$	28,004		$	32,032		$	40,402
Less distributed and undistributed earnings allocated to participating securities	(2,002		)	(916		)	(1,224		)
Net income allocated to common shares	$	26,002		$	31,116		$	39,178
Weighted average common shares outstanding	24,708			24,850			25,007
Incremental shares from assumed conversions of common stock options	4			22			60
Adjusted weighted average common shares outstanding	24,712			24,872			25,067
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect	4			8			29

13. Leases

We lease various office facilities, equipment and vehicles under operating lease arrangements, some of which contain rent escalation clauses.  Most of the leases contain purchase and/or renewal options at fair market and fair rental value, respectively.  Rental expense relating to all operating leases was $13.4 million, $13.9 million and $13.8 million in 2014, 2013 and 2012, respectively.  At December 31, 2014, future minimum rental payments under noncancelable operating leases are as follows:

	Operating Leases
	(in thousands)
2015	$	13,364
2016	11,821
2017	8,534
2018	6,822
2019	4,189
Thereafter	5,312
Total minimum lease payments	$	50,042

F-26

14. Commitments and Contingencies

We enter into non-cancelable fixed purchase and service obligations in the ordinary course of business.  These arrangements primarily consist of advertising commitments and service contracts.  At December 31, 2014, future non-cancelable purchase and service obligations greater than $100,000 and one year were as follows (in thousands):

2015	$	10,224
2016	7,899
2017	4,179
2018	2,628
2019	1,774
Thereafter	2,693
Total obligations	$	29,397

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, except as set forth below, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.

Federal Unemployment Taxes

Employers in certain states are experiencing higher Federal Unemployment Tax Act (“FUTA”) tax rates as a result of certain states not repaying their unemployment loans from the federal government in a timely manner.  The Benefit Cost Ratio Add-On (“BCR”) is an additional tax on the FUTA wage base for employers in states that continue to have outstanding federal unemployment insurance loans beginning with the fifth year in which there is a balance due on the loan.  States had the option to apply for a waiver before July 1 of the year in which the BCR is applicable. There are currently seven states with outstanding unemployment loans and of those, all but one, Connecticut, have filed and received a BCR waiver. Accordingly, the potential impact of the BCR on our financial statements is not material.

Texas Sales and Use Tax Assessments

In July 2008, we purchased a used aircraft (the “2008 Aircraft”) with the intent to immediately lease it to an aircraft charter service under 14 C.F.R. Part 135 (the “2008 Aircraft Purchase”). In connection with the 2008 Aircraft Purchase, we sought and received a letter ruling from the State of Texas Comptroller’s Tax Policy Division (the “Comptroller’s Ruling”). The Comptroller’s Ruling concluded that the 2008 Aircraft Purchase and lease qualified for the “sale for resale” exemption to sales and use taxes. In 2011, we purchased a used aircraft in a transaction that included the trade-in of the 2008 Aircraft with the intent to immediately lease the newly-purchased aircraft to the same aircraft charter service under Part 135 (“the 2011 Aircraft Purchase”). The structure of the 2011 Aircraft Purchase and lease transaction was patterned after the 2008 Aircraft Purchase. In accordance with the Comptroller’s Ruling, we did not pay sales or use tax on either the 2008 Aircraft Purchase or the 2011 Aircraft Purchase.

The Comptroller’s Office has since changed its view as expressed in the Comptroller’s Ruling and is now asserting that the 2008 Aircraft Purchase and the 2011 Aircraft Purchase are subject to sales and use tax. In May 2012, the Comptroller’s Office issued a notification of examination results regarding the 2008 Aircraft Purchase. It has assessed approximately $0.8 million in taxes but waived any claim for interest and did not assess any penalty. In a separate matter regarding the 2011 Aircraft Purchase, the Comptroller’s Office issued its notification of examination results in December 2013 and assessed approximately $0.9 million in taxes, penalties and interest.

F-27

We have filed requests for redetermination disputing both assessments and are seeking hearings concerning them. We believe the assessments are without merit and intend to vigorously contest them. At this time, we are unable to determine the ultimate outcome of these matters. However, in the event the State of Texas succeeds with enforcement of the assessments, we may be required to pay some or all of the assessments, which would reduce net income in the reported period.

Massachusetts Tax Assessment

During the fourth quarter of 2012, we received assessments of approximately $2.5 million, including interest and penalties, related to the alleged underpayment of corporate income taxes to the State of Massachusetts for tax years 2006 through 2008.  We believe the assessments are without merit and intend to vigorously contest them.  At this time, we are unable to determine the ultimate outcome of this matter.  However, in the event the State of Massachusetts succeeds with enforcement of the assessments, we may be required to pay some or all of the assessments, which would reduce net income and could have a material adverse effect on net income in the reported period.

15. Quarterly Financial Data (Unaudited)

	Quarter ended
	March 31		June 30			Sept. 30		Dec. 31
	(in thousands, except per share amounts)
2014
Revenues	$	636,999	$	564,621		$	560,303	$	595,865
Gross profit	106,176		95,453			100,817		101,359
Operating income	16,591		3,414		(1)	14,460		13,009		(2)
Net income	9,564		1,891			8,385		8,164
Basic net income per share	0.37		0.07			0.33		0.27		(3)
Diluted net income per share	0.37		0.07			0.33		0.27		(3)
2013
Revenues	$	611,836	$	547,274		$	539,869	$	557,133
Gross profit	108,118		97,746			97,409		89,978
Operating income	22,009		10,228			17,112		6,874		(4)
Net income	13,173		3,488		(5)	10,082		5,289		(6)
Basic net income per share	0.51		0.14			0.39		0.21
Diluted net income per share	0.51		0.14			0.39		0.21

____________________________________

⁽¹⁾  Includes a non-cash impairment charge in the second quarter of 2014 of $2.5 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

⁽²⁾  Includes a $1.2 million non-cash charge in the fourth quarter of 2014. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

⁽³⁾  Includes the impact of dividends exceeding earnings under the two-class method, resulting in a $0.05 earnings per share decrease in the fourth quarter of 2014.  Please read Note 12, “Net Income Per Share,” for additional information.

⁽⁴⁾  Includes a non-cash impairment charge in the fourth quarter of 2013 of $3.3 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

⁽⁵⁾  Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

⁽⁶⁾  Includes a $2.0 million tax benefit related to tax years 2009 through 2012. Please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

F-28

EX-10.28

Exhibit 10.28

EXECUTION VERSION

AMENDMENT NO. 2 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Amendment") is effective as of December 1, 2014 by and among INSPERITY, INC., a Delaware corporation ("Borrower"), each of the Lenders (as defined below) listed on the signature pages attached hereto and AMEGY BANK NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent").

RECITALS:

WHEREAS, reference is made to that certain Credit Agreement dated as of September 15, 2011 (as amended by Amendment No. 1 thereto dated as of December 7, 2012 and as otherwise heretofore amended, restated, supplemented or modified, the "Credit Agreement") by and among the Borrower, each of the financial institutions from time to time party thereto (the "Lenders") and the Agent;

WHEREAS, the Borrower has expressed that its board of directors desires to declare a special cash dividend payable to each of its stockholders of record as of December 15, 2014 in the amount of $2.00 per share of common stock of the Borrower, to be paid on or about December 26, 2014 (the "2014 Special Dividend");

WHEREAS, the Borrower desires to amend the definition of "Special Dividend " in the Credit Agreement as hereinafter described in order to, among other things, exclude the 2014 Special Dividend from the calculation of Cash Distributions thereunder, and the Lenders party hereto are willing to do so on the terms and subject to the conditions set forth herein;

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.    Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement, as amended hereby.

Section 2.    Amendment to Credit Agreement.

(a)    The definition of "Special Dividend" in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

"Special Dividend" means (a) that certain special cash dividend declared by the board of directors of the Borrower on November 23, 2012 and payable to each

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of its stockholders of record as of December 7, 2012 in the amount of $1.00 per share of common stock of the Borrower, paid on or about December 21, 2012 and (b) that certain special cash dividend declared by the board of directors of the Borrower effective on December 1, 2014, and payable to each of its stockholders of record as of December 15, 2014 in the amount of $2.00 per share of common stock of the Borrower, to be paid on or about December 26, 2014.

Section 3.    Amendment Effective Date; Conditions Precedent. This Amendment shall become effective on the date (the "Amendment Effective Date") on which the Agent shall have received a counterpart of this Amendment executed by the Borrower and the Majority Lenders, but shall not be effective before December 1, 2014.

Section 4.    Representations and Warranties. To induce the other parties hereto to enter into this Amendment, the Borrower represents and warrants that, after giving effect to each of the amendments set forth in this Amendment:

(a)    the representations and warranties contained in Article VI of the Credit Agreement and the other Loan Documents are, to the Borrower's knowledge, true and correct as of the Amendment Effective Date with the same force and effect as if such representations and warranties had been made on and as of the Amendment Effective Date, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall continue to be true and correct as of such earlier date;

(b)    no Event of Default or Unmatured Event of Default has occurred and is continuing on the Amendment Effective Date; and

(c)    this Amendment constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles of general applicability.

Section 5.    Confirmation of Loan Documents. Except as expressly contemplated hereby, the terms, provisions, conditions and covenants of the Credit Agreement, as amended by this Amendment, and the other Loan Documents remain in full force and effect and are hereby ratified and confirmed, and the execution, delivery and performance of this Amendment shall not, except as expressly set forth in this Amendment, operate as a waiver of, consent to or amendment of any term, provision, condition or covenant thereof.

Section 6.    Effect of Amendment. From and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereof', or "hereunder" or words of like import, and all references to the Credit Agreement in any and all agreements, instruments, documents, notes, certificates, guaranties and other writings of every kind and nature shall be deemed to mean the Credit Agreement as modified by this Amendment. This Amendment shall constitute a Loan Document for all purposes of the Credit Agreement and the other Loan Documents.

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Section 7.    Choice of Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America.

Section 8.    Counterparts. This Amendment may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.     

Delivery of an executed counterpart of a signature page to this Amendment by facsimile transmission or electronic transmission (in .pdf form) shall be effective for all purposes as delivery of a manually executed counterpart of this Amendment.

[Remainder of page intentionally left blank; signature pages follow.]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.

BORROWER:

INSPERITY, INC.

By:    /s/ Douglas S. Sharp                            

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

Signature Page to Amendment No. 2 to Credit Agreement

AGENT:

AMEGY BANK NATIONAL ASSOCIATION

By:    /s/ Laif Afseth                    

Name:    Laif Afseth                    

Title:    EVP                        

Signature Page to Amendment No. 2 to Credit Agreement

LENDERS:

AMEGY BANK NATIONAL ASSOCIATION

By:    /s/ Laif Afseth                    

Name:    Laif Afseth                    

Title:    EVP                        

Signature Page to Amendment No. 2 to Credit Agreement

BANK OF AMERICA, N.A.

By:    /s/ Anthony A. Eastman            

Name:    Anthony A. Eastman                

Title:    VP                        

Signature Page to Amendment No. 2 to Credit Agreement

WOODFOREST NATIONAL BANK

By:    /s/ John Ellis                    

Name:    John Ellis                    

Title:    Senior Vice President                

Signature Page to Amendment No. 2 to Credit Agreement

EX-10.29

Exhibit 10.29

AMENDMENT NO. 3 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this "Amendment"), dated as of February 6, 2015, is by and among INSPERITY, INC., a Delaware corporation ("Borrower"), each of the financial institutions which is or may from time to time become a party to the Agreement (hereinafter defined) (collectively, "Lenders", and each a "Lender "), and AMEGY BANK NATIONAL ASSOCIATION, a national banking association, as agent (the "Agent").

RECITALS:

A.    Borrower, Lenders and Agent entered into that certain Credit Agreement dated as of September 15, 2011, as amended by that certain Amendment No. 1 to Credit Agreement dated as of December 7, 2012, and Amendment No. 2 to Credit Agreement dated as of December 1, 2014 (as amended, the "Agreement").

B.    Pursuant to the Agreement, (a) Insperity Holdings, Inc., a Delaware corporation, Insperity Retirement Services, L.P., a Delaware limited partnership, Administaff Partnerships Holding, Inc., a Delaware corporation, Insperity Business Services, L.P., a Delaware limited partnership, Insperity Services, L.P., a Delaware limited partnership, Administaff Partnerships Holding II, Inc., a Delaware corporation, Insperity GP, Inc., a Delaware corporation, Insperity Support Services, L.P., a Delaware limited partnership, Insperity Enterprises, Inc., a Texas corporation, Administaff Companies, Inc., a Delaware corporation, Administaff Partnerships Holding III, Inc., a Delaware corporation, Insperity PEO Services, L.P., a Delaware limited partnership, Insperity Insurance Services, L.L.C., a Delaware limited liability company, Insperity Expense Management, Inc., a California corporation, and Insperity Employment Screening, L.L.C., a Delaware limited liability company (collectively, "Closing Date Guarantors") executed those certain Guaranty Agreements dated as of September 15, 2011 (collectively, the "Closing Date Guaranty Agreements") pursuant to which Closing Date Guarantors guaranteed to Agent and Lenders the payment and performance of the Obligations (as defined in the Agreement), and (b) Insperity Payroll Services, L.L.C., a Delaware limited liability company ("IPS", and collectively with the Closing Date Guarantors, the "Guarantors") executed that certain Guaranty Agreement dated as of February 17, 2012 ("IPS-Guaranty Agreement", and collectively with the Closing Date Guaranty Agreements, the "Guaranty Agreements") pursuant to which IPS guaranteed to Agent and Lenders the payment and performance of the Obligations.

C.    Borrower, Lenders and Agent now desire to amend the Agreement as herein set forth.

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE II.

Definitions

Section 2.1.    Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the meanings given to such terms in the Agreement, as amended hereby.

ARTICLE III.

Amendments

Section 3.1.    Amendment to Recitals. Effective as of the date hereof, the first paragraph of the Recital contained in the Agreement is amended to read in its entirety as follows:

Borrower has requested that Lenders extend credit to Borrower in the form of a revolving line of credit in the amount of $125,000,000.00 (which may be increased upon the terms and conditions hereinafter set forth to $175,000,000.00 and which includes a swing line in the amount of $10,000,000.00). Lenders are willing to make such extensions of credit to Borrower upon the terms and conditions hereinafter set forth.

Section 3.2.    Amendment to Certain Definitions. (a) Effective as of the date hereof, the definition of each of the following terms contained in Section 1.1 of the Agreement is amended to read in its respective entirety as follows:

"Applicable Margin" means, for the Levels described below, the applicable rate per annum set forth below.

	Level I	Level II	Level III	Level IV
LIBOR Margin	1.75%	2.00%	2.25%	2.50%
Alternate Base Rate Margin	0.00%	0.00%	0.25%	0.50%

Level I applies when the Leverage Ratio is less than or equal to 1.00 to 1.00.

Level II applies when the Leverage Ratio is greater than 1.00 to 1.00 but less than or equal to 1.50 to 1.00.

Level III applies when the Leverage Ratio is greater than 1.50 to 1.00 but less than or equal to 2.00 to 1.00.

Level IV applies when the Leverage Ratio is greater than 2.00 to 1.00.

The applicable Level shall be adjusted, to the extent applicable, forty-five (45) days after the end of each fiscal quarter of Borrower (or, in the case of any change reflected by the audited financial statements delivered pursuant to Section 7.1(a), one hundred twenty (120) days after the end of any fiscal year) based on the Leverage Ratio tested for the period of four (4) consecutive fiscal quarters ending on the last day of such fiscal quarter or such fiscal year, as applicable; provided that if Borrower fails to deliver the financial statements required by Section 7.1(a) or (b), as applicable, or the related No Default Certificate required by Section 7.1(c) by the forty-fifth (45^th) day (or, if applicable, the one hundred twentieth (120^th) day) after the end of any fiscal quarter or any fiscal year, as applicable, Level IV or the Default Rate, if applicable, shall apply until such financial statements are delivered.

"Combined Commitments" means, at any time, the sum of the Commitments of all Lenders at such time. The Combined Commitments shall be $125,000,000.00 as of February 6, 2015.

"EBITDA" means for Borrower and its Subsidiaries, on a consolidated basis for any period, the sum of (a) Operating Income for such period, plus (b) depreciation and amortization for such period, plus (c) non-cash stock based compensation expense for such period, plus (d) Interest Income for such period, plus (e) extraordinary or non-recurring expenses or charges, in an aggregate amount not to exceed $15,000,000.00 during the term of this Agreement, incurred in connection with any transaction or other strategic events approved by the board of directors of Borrower, including any related advisory fees, during such period, plus (f) any non-cash write-off for impairment of long lived assets (including goodwill, intangible assets and fixed assets such as property, plant and equipment), or of deferred financing fees or investments in debt and equity securities during such period, plus (g) any non-cash impact of accounting changes or restatements during such period; provided, however, that the amounts of each of the items set forth in the clauses above shall include, for the first twelve (12) months after any Acquisition, the actual historical amounts of such items for any Person which is acquired by Borrower or any Subsidiary in such Acquisition.

"Floating Thirty Day LIBOR Rate" means, as of any day, the rate per annum offered for Dollar deposits in an amount comparable to the principal amount of the outstanding Alternate Base Rate Loans for a period of thirty (30) days as of 11:00 a.m. City of London, England time two (2) Business Days prior to such day as quoted on that page of the Reuters or Bloomberg System ("Bloomberg") reporting service (as then being used by Agent to obtain such interest rate quotes) that displays the London interbank offered rate administered by Intercontinental Exchange Group (ICE) Benchmark Administration Limited ("ICE") (or the successor thereto) for such Dollar deposits; provided, however, that if such rate is not available on Bloomberg or Reuters, then such offered rate shall be otherwise independently determined by Agent from an alternate, substantially similar independent source available to Agent and recognized in the banking industry.

"Guaranty Agreement" means a Guaranty Agreement executed by a Domestic Subsidiary in favor of Agent in substantially the form of Exhibit "F", as the same may be amended, supplemented or modified from time to time, and "Guaranty Agreements" shall mean, collectively, all such agreements.

"LIBOR Rate" means, for any LIBOR Loan, for any Interest Period therefor, (a) the rate per annum quoted on that page of the Reuters or Bloomberg reporting service (as then being used by Agent to obtain such interest rate quotes) that displays the London interbank rate administered by Intercontinental Exchange Group (ICE) Benchmark Administration Limited ("ICE") (or the successor thereto) for Dollar deposits in an amount comparable to the outstanding principal amount of such LIBOR Loan for a period of time equal to such Interest Period as of 11:00 a.m. City of London, England time two (2) London Business Days prior to the first date of such Interest Period;provided, however, that if such rate is not available on Bloomberg or Reuters, then such rate shall be otherwise independently determined by Agent from an alternate, substantially similar independent source available to Agent and recognized in the banking industry; dividedby (b) one (1) minus the Reserve Requirement.

"Obligations" means (a) all obligations, indebtedness and liabilities of Borrower to Agent, Issuing Bank and Lenders, or any of them, arising pursuant to this Agreement or any of the other Loan Documents, now existing or hereafter arising, including, without limitation, all of Borrower=s contingent reimbursement obligations in respect of Letters of Credit, (b) all interest accruing thereon and all attorneys= fees and other expenses incurred in the enforcement or collection thereof and (c) all Rate Management Transaction Obligations. Notwithstanding the foregoing, the definition of "Obligations" shall not create any guarantee by any Guarantor of (or grant of security interest by any Guarantor to support, as applicable) any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of any Guarantor.

"Proprietary Accounts" shall mean all the depository accounts of Borrower and its Subsidiaries which are not used to hold client-related payroll and payroll tax funds. The Proprietary Accounts of Borrower and its Subsidiaries as of the date of each No Default Certificate are listed on such No Default Certificate.

"Termination Date" means 11:00 a.m. on February 6, 2020, or such earlier date on which the Commitments terminate as provided in this Agreement.

(b)    Effective as of the date hereof, the following definitions shall be added to Section 1.1 of the Agreement in proper alphabetical order:

"Commodity Exchange Act" means the Commodity Exchange Act (7 U.S.C. ' 1 et seq.), as amended from time to time, and any successor statute.

"Eligible Contract Participant" shall have the meaning given to such term in the Commodity Exchange Act and the regulations thereunder.

"Excluded Swap Obligation" means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty Agreement of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor's failure for any reason to constitute an Eligible Contract Participant at the time the Guaranty Agreement of such Guarantor or the grant of such security interest becomes or would become effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty Agreement or security interest is or becomes illegal.

"Qualified ECP Guarantor" means, in respect of any Swap Obligation, each Guarantor that at the time the relevant Swap Obligation is incurred constitutes an Eligible Contract Participant and can cause another Person to qualify as an Eligible Contract Participant at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

"Sanctions" shall have the meaning given to such term in Section 6.21.

"Swap Obligation" means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a "swap" within the meaning of section 1a(47) of the Commodity Exchange Act.

Section 3.3.    Amendment to Section 4.2. Effective as of the date hereof, Section 4.2 of the Agreement is amended to read in its entirety as follows:

Section 4.2.    Guaranty Agreements. Each Domestic Subsidiary shall unconditionally and irrevocably guarantee payment and performance of the Obligations by execution and delivery of a Guaranty Agreement. Notwithstanding the foregoing, amounts received from any Guarantor that is not an Eligible Contract Participant shall not be applied to any Obligations that are Excluded Swap Obligations.

Section 3.4.    Amendment to Section 6.20. Effective as of the date hereof, Section 6.20 of the Agreement is amended to read in its entirety as follows:

Section 6.20.    Proprietary Accounts. The most recently delivered No Default Certificate, commencing with the No Default Certificate delivered for the fiscal quarter ending March 31, 2015, contains a list of all ofthe Proprietary Accounts of Borrower and its Subsidiaries as of the date of such No Default Certificate, and, as of the date of a No Default Certificate, neither Borrower nor any Subsidiary maintains any Proprietary Account which is not listed on such No Default Certificate.

Section 3.5.    Addition of Section 6.21. Effective as of the date hereof, Section 6.21 shall be added to the Agreement and shall read in its entirety as follows:

Section 6.21.    Sanctions. Neither Borrower nor any Subsidiary or, to the knowledge of Borrower, any director, officer, employee, agent, or Affiliate of Borrower or any Subsidiary is a Person that is, or is owned or controlled by Persons that are: (a) the subject of any sanctions administered or enforced by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty's Treasury, or other sanctions authority having jurisdiction over Borrower or any Subsidiary (collectively, "Sanctions"), or (b) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions.

Section 3.6.    Addition of Section 6.22. Effective as of the date hereof, Section 6.22 shall be added to the Agreement and shall read in its entirety as follows:

Section 6.22.    Anti-Corruption. Neither Borrower nor any Subsidiary, nor, to the knowledge of Borrower, any director, officer, employee, agent, or Affiliate of Borrower or any Subsidiary has (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (b) made any direct or indirect unlawful payment to any government official or employee from corporate funds, (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977 or the Bribery Act 2010 of the United Kingdom or similar law of the European Union or any European Union Member State or similar law of a jurisdiction in which Borrower or any Subsidiary conduct their business and to which they are lawfully subject or (d) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment which is unlawful under any law of a jurisdiction in which Borrower or any Subsidiary conduct their business and to which they are lawfully subject.

Section 3.7.    Addition of Section 8.16. Effective as of the date hereof, Section 8.16 shall be added to the Agreement and shall read in its entirety as follows:

Section 8.16.    Sanctions. Borrower will not knowingly, directly or indirectly, use the proceeds of the Revolving Advances or any Letter of Credit, or lend, contribute or otherwise knowingly make available such proceeds to any Subsidiary, joint venture partner or other Person, (a) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (b) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Revolving Advances or Letters of Credit, whether as underwriter, advisor, investor, or otherwise).

Section 3.8.    Addition of Section 8.17. Effective as of the date hereof, Section 8.17 shall be added to the Agreement and shall read in its entirety as follows:

Section 8.17.    Anti-Corruption. Borrower will not knowingly use, or permit the use, of any proceeds of the Revolving Advances or Letters of Credit, directly or indirectly, to fund any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977.

Section 3.9.    Amendment to Section 10.5. Effective as of the date hereof, the last sentence contained in Section 10.5 of the Agreement is amended to read in its entirety as follows:

The provisions of this Section 10.5 shall govern and control over any conflicting provisions in this Agreement or any Loan Document, except that, to the extent Agent receives any amounts from any Guarantor that is not an Eligible Contract Participant, such amounts shall not be applied to any Obligations that are Excluded Swap Obligations.

Section 3.10.    Amendment to Exhibits. Effective as of the date hereof, (a) Exhibit "C" (Form of Revolving Advance Request Form) to the Agreement is amended to conform in its entirety to Annex "A" to this Amendment, (b) Exhibit "D" (Form of No Default Certificate) to the Agreement is amended to conform in its entirety to Annex "B" to this Amendment, and (c) Exhibit "F" (Form of Guaranty Agreement) to the Agreement is amended to conform in its entirety to Annex "C" to this Amendment.

Section 3.11.    Amendment to Annexes. Effective as of the date hereof, (a) Annex "I" (Commitments) to the Agreement is amended to conform in its entirety to Annex "D" to this Amendment and (b) Schedule 1.1 to the Agreement and all references thereto are hereby deleted from the Agreement.

ARTICLE IV.

Conditions Precedent

Section 4.1.    Conditions. The effectiveness of this Amendment is subject to the receipt by Agent of the following in form and substance satisfactory to Agent:

(c)    Certificate. A certificate of the Secretary or Assistant Secretary of Borrower (or another officer of Borrower reasonably acceptable to Agent) certifying (i) resolutions of the board of directors of Borrower which authorize the execution, delivery and performance by Borrower of this Amendment and the other Loan Documents to which Borrower is or is to be a party, and (ii) the names of the officers of Borrower authorized to sign this Amendment and each of the other Loan Documents to which Borrower is or is to be a party as of the date hereof, together with specimen signatures of such officers.

(d)    Governmental Certificates. Certificates issued by the appropriate government officials of the state of organization or incorporation, as applicable, of Borrower and Guarantors as to the existence and good or active, as applicable, standing of Borrower and Guarantors.

(e)    Revolving Notes. The Revolving Notes executed by Borrower payable to the order of the Lenders, respectively (which promissory notes are in renewal, extension and increase of, but not in discharge or novation of, that certain promissory note executed by Borrower on September 15, 2011, in the original principal amount of $40,000,000.00 and payable to the order of Amegy Bank National Association, as a Lender, that certain promissory note executed by Borrower on September 15, 2011, in the original principal amount of $40,000,000.00 and payable to the order of Bank of America, N.A., as a Lender and that certain promissory note executed by Borrower on September 15, 2011, in the original principal amount of $20,000,000.00 and payable to the order of Woodforest National Bank, as a Lender (collectively, the "Prior Revolving Notes"). Each Lender agrees to use commercially reasonable efforts to return its original Prior Revolving Note to Borrower within fifteen (15) days of the date of this Amendment.

(f)    Fees and Expenses. (i) Evidence that the costs and expenses (including reasonable attorneys' fees) referred to in Section 5.3, to the extent invoiced prior to the date hereof have been paid in full by Borrower.

(ii)    Evidence that all fees referenced in the agent fee letter dated as of even date herewith between Borrower and Agent have been paid in full by Borrower.

(iii)    Evidence that all fees referenced in the lenders fee letter dated as of even date herewith between Borrower and Agent have been paid in full by Borrower.

(g)    Additional Information. Such additional documents, instruments and information as Agent has reasonably requested at least two (2) days prior to the date hereof.

Section 4.2.    Additional Conditions. The effectiveness of this Amendment is also subject to the satisfaction of the additional conditions precedent that (a) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct as of the date hereof as if made on the date hereof, except to the extent that any such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct as of such earlier date, and (b) no Event of Default or Unmatured Event of Default shall have occurred and be continuing.

ARTICLE V.

Ratifications, Representations, and Warranties

Section 5.1.    Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement are ratified and confirmed and shall continue in full force and effect. Borrower, Lenders and Agent agree that the Agreement as amended hereby shall continue to be the legal, valid and binding obligation of such Persons enforceable against such Persons in accordance with its terms.

Section 5.2.    Representations, Warranties and Agreements. Borrower hereby represents and warrants to Agent and Lenders that, as of the date hereof, (a) the execution, delivery, and performance of this Amendment and any and all other Loan Documents executed or delivered in connection herewith have been authorized by all requisite corporate action on the part of Borrower and will not violate the Organizational Documents of Borrower, (b) the representations and warranties contained in Article VI of the Agreement as amended hereby, and all other Loan Documents are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent that any such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct as of such earlier date, (c)no Event of Default or Unmatured Event of Default has occurred and is continuing, (d) Borrower is indebted to Lenders pursuant to the terms of the Notes, as the same may have been renewed, modified, extended or rearranged, including, without limitation, any renewals, modifications and extensions made pursuant to this Amendment, and (e) Borrower has no claims, credits, offsets, defenses or counterclaims arising from the Loan Documents or Agent's or any Lender's performance under the Loan Documents.

ARTICLE VI.

Miscellaneous

Section 6.1.    Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Documents including any Loan Document furnished in connection with this Amendment shall fully survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender or any closing shall affect the representations and warranties or the right of Agent or any Lender to rely on them.

Section 6.2.    Reference to Agreement. Each of the Loan Documents, including the Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby.

Section 6.3.    Expenses. Borrower agrees that this Amendment is a Loan Document to which Section 12.1 of the Agreement shall apply.

Section 6.4.    Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

Section 6.5.    APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN HOUSTON, HARRIS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

Section 6.6.    Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Lenders, Agent and Borrower and their respective successors and assigns, except Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent and Lenders.

Section 6.7.    Counterparts. This Amendment and the other Loan Documents may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. Delivery of an executed signature page of this Amendment and/or any other Loan Document by a scanned PDF attached to an e-mail or facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

Section 6.8.    Effect of Waiver. No consent or waiver, express or implied, by Agent or any Lender to or for any breach of or deviation from any covenant, condition or duty by Borrower shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

Section 6.9.    Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 6.10.    ENTIRE AGREEMENT. THIS AMENDMENT, THE AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER INSTRUMENTS, DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT AND THE AGREEMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, THE AGREEMENT OR THE OTHER LOAN DOCUMENTS AND THE OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT AND THE AGREEMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

Executed as of the date first written above.

BORROWER:

INSPERITY, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT

AGENT:

AMEGY BANK NATIONAL ASSOCIATION,

as Agent

By: /s/ Ryan K. Hightower    

Ryan K. Hightower

Senior Vice President

SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT

LENDERS:

AMEGY BANK NATIONAL ASSOCIATION

By: /s/ Ryan K. Hightower    

Ryan K. Hightower

Senior Vice President

BANK OF AMERICA, N.A.

By: /s/ Anthony A. Eastman    

Anthony A. Eastman

Vice President

WOODFOREST NATIONAL BANK

By: /s/ John Ellis    

John Ellis

Senior Vice President

SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT

Each of the undersigned Guarantors hereby consents and agrees to this Amendment and agrees that the Guaranty Agreement executed by such Guarantor shall remain in full force and effect and shall continue to be the legal, valid and binding obligations of such Guarantor, enforceable against such Guarantor in accordance with its terms and shall evidence such Guarantor's guaranty of the Notes as increased, renewed and extended from time to time, including, without limitation, the increase, renewal and extension evidenced by the Revolving Notes executed in connection with this Amendment.

In addition, each of the undersigned Guarantors hereby agrees that in the event such Guarantor is a Qualified ECP Guarantor (as defined in the Agreement), such Guarantor hereby absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other guarantor of the Obligations (as defined the Agreement) (each a "Credit Agreement Guarantor") to honor all of its obligations under the Guaranty Agreements (as defined in the Agreement) in respect of Swap Obligations (as defined in the Agreement) (provided, however, that Guarantor shall only be liable under this Paragraph for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Paragraph, or otherwise under the Guaranty Agreement executed by such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Guarantor under this Paragraph shall remain in full force and effect until all Obligations have been paid in full and all commitments of Lenders to advance funds to Borrower have been terminated. Each Guarantor intends that this Paragraph constitute, and this Paragraph shall be deemed to constitute, a "keepwell, support, or other agreement" for the benefit of each other Credit Agreement Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act (as defined in the Agreement).                

INSPERITY HOLDINGS, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY RETIREMENT SERVICES, L.P.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT

ADMINISTAFF PARTNERSHIPS HOLDING, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY BUSINESS SERVICES, L.P.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY SERVICES, L.P.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING II, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY GP, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT

INSPERITY SUPPORT SERVICES, L.P.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY ENTERPRISES, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

ADMINISTAFF COMPANIES, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

ADMINISTAFF PARTNERSHIPS HOLDING III, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY PEO SERVICES, L.P.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT

INSPERITY INSURANCE SERVICES, L.L.C.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY EXPENSE MANAGEMENT, INC.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY EMPLOYMENT SCREENING, L.L.C.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

INSPERITY PAYROLL SERVICES, L.L.C.

By: /s/ Douglas S. Sharp    

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

SIGNATURE PAGE TO AMENDMENT NO. 3 TO CREDIT AGREEMENT

LIST OF ANNEXES

AnnexDocument

A                Form of Revolving Advance Request Form

B                Form of No Default Certificate

C Form of Guaranty Agreement

D Annex "I" (Commitments)

Annex "D"

Annex I

COMMITMENTS

February 6, 2015

Name of Lender Percentage Share as of February 6, 2015 Commitment Amounts as of February 6, 2015

1.    Amegy Bank National Association        40%            $50,000,000.00

2.    Bank of America, N.A.            40%            $50,000,000.00

3.    Woodforest National Bank            20%            $25,000,000.00

Total                    100%            $125,000,000.00

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF INSPERITY, INC.

• Insperity Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Insperity, Inc.

• Insperity Enterprises, Inc., a Texas corporation and wholly owned subsidiary of Insperity Holdings, Inc.

• Administaff Partnerships Holding, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.

• Insperity Captive Insurance Companies Limited, a Bermuda corporation and wholly owned subsidiary of Administaff Partnerships Holding, Inc.

• Insperity Business Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.

• Insperity Retirement Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.

• Insperity Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.

• Administaff Partnerships Holding II, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.

• Insperity GP, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.

• Insperity Support Services, L.P., a Delaware limited partnership, with Insperity GP, Inc. being a 1% general partner and Administaff Partnerships Holding II, Inc. being a 99% limited partner.

• Administaff Companies, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.

• Administaff Partnerships Holding III, Inc., a Delaware corporation and wholly owned subsidiary of Administaff Companies, Inc.

• Insperity PEO Services, L.P., a Delaware limited partnership, with Administaff Companies, Inc. being a 1% general partner and Administaff Partnerships Holding III, Inc. being a 99% limited partner.

• Insperity Insurance Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity PEO Services, L.P.

• Insperity Employment Screening, L.L.C, a Delaware limited liability company and wholly owned subsidiary of Insperity Holdings, Inc.

• Insperity Expense Management, Inc. a California corporation and wholly owned subsidiary of Insperity Holdings, Inc.

• Insperity Payroll Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity Business Services, L.P.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No.333-181569) pertaining to the Insperity, Inc. 2012 Incentive Plan,

(2) Registration Statements (Form S-8 No. 333-159007, 333-140602, 333-66344) pertaining to the Insperity, Inc. 2001 Incentive Plan,

(3) Registration Statement (Form S-8 No. 333-151275) pertaining to the Insperity, Inc. 2008 Employee Stock Purchase Plan,

(4) Registration Statement (Form S-8 No. 333-118790) pertaining to the Insperity, Inc. Directors Compensation Plan, and

(5) Registration Statements (Form S-8 Nos. 333-85151, 333-66342) pertaining to the Insperity, Inc. Non-Qualified Stock Option Plan;

of our reports dated February 10, 2015, with respect to the consolidated financial statements of Insperity, Inc. and the effectiveness of internal control over financial reporting of Insperity, Inc. included in this Annual Report (Form 10-K) of Insperity, Inc. for the year ended December 31, 2014.

	/s/Ernst & Young LLP
Houston, Texas
February 10, 2015

EX-24.1

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the "Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and DANIEL D. HERINK and each of them, severally, as my true and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and any and all amendments thereto as said attorneys or any of them shall deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ M. W. Brown	January 9, 2015
Michael W. Brown	Date

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the "Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and DANIEL D. HERINK and each of them, severally, as my true and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and any and all amendments thereto as said attorneys or any of them shall deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Jack Fields	February 8, 2015
Jack M. Fields	Date

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the "Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and DANIEL D. HERINK and each of them, severally, as my true and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and any and all amendments thereto as said attorneys or any of them shall deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Eli Jones	January 26, 2015
Eli Jones	Date

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the "Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and DANIEL D. HERINK and each of them, severally, as my true and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and any and all amendments thereto as said attorneys or any of them shall deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Carol R. Kaufman	January 8, 2015
Carol R. Kaufman	Date

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the "Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and DANIEL D. HERINK and each of them, severally, as my true and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and any and all amendments thereto as said attorneys or any of them shall deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Paul Lattanzio	February 6, 2015
Paul S. Lattanzio	Date

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, in my capacity as a director of Insperity, Inc., a Delaware corporation (the "Company") appoints PAUL J. SARVADI, DOUGLAS S. SHARP and DANIEL D. HERINK and each of them, severally, as my true and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall be authorized to act with or without the other, with full power of substitution and resubstitution, to execute, in my capacity as a director of the Company, and to file or cause to be filed, with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and any and all amendments thereto as said attorneys or any of them shall deem necessary or incidental in connection therewith, and all materials required by the Securities Exchange Act of 1934, as amended, with full power and authority to each of said attorneys-in-fact and agents to do and perform in the name and on behalf of the undersigned, each and every act and thing whatsoever that is necessary, appropriate or advisable in connection with any or all the above-described matters and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Austin P. Young	January 8, 2015
Austin P. Young	Date

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Paul J. Sarvadi, certify that:

1. I have reviewed this annual report on Form 10-K 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:     February 10, 2015

/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 annual report on Form 10-K 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:      February 10, 2015

/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 Annual Report of Insperity, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2014, (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

February 10, 2015

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 Annual Report of Insperity, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2014, (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

February 10, 2015

XML

Deposits (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Deposits [Abstract]
Prepaid health insurance	$ 9,000	$ 9,000
Deposits – health insurance	3,700	3,700
Deposits – workers’ compensation	$ 113,934	$ 81,878

XML

Leases (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Leases [Abstract]
Rental expense	$ 13,400,000	$ 13,900,000	$ 13,800,000
Operating leases minimum payments due [Abstract]
2015	13,364,000
2016	11,821,000
2017	8,534,000
2018	6,822,000
2019	4,189,000
Thereafter	5,312,000
Total minimum lease payments	$ 50,042,000

XML

Incentive Plans (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation [Abstract]
Number of common shares available for grant under the incentive plan (in shares)	1,299,470
Number of shares of stock authorized for issuance under the Nonqualified Plan (in shares)	3,600,000
Stock option activity [Roll Forward]
Outstanding, beginning balance (in shares)	61,000
Granted (in shares)	0
Exercised (in shares)	(18,000)
Canceled (in shares)	0
Outstanding, ending balance (in shares)	43,000	61,000
Exercisable, ending balance (in shares)	43,000
Weighted average exercise price [Abstract]
Outstanding, beginning balance (in dollars per share)	$ 24.24
Granted (in dollars per share)	$ 0.00
Exercised (in dollars per share)	$ 15.28
Canceled (in dollars per share)	$ 0.00
Outstanding, ending balance (in dollars per share)	$ 28.04	$ 24.24
Exercisable, ending balance (in dollars per share)	$ 28.04
Weighted average remaining contractual life, stock option awards outstanding at end of year (in years)	5 years 3 months
Weighted average remaining contractual life, stock option awards exercisable at end of year (in years)	5 years 3 months
Aggregate intrinsic value of options outstanding, ending balance	$ 253,000
Aggregate intrinsic value of options exercisable ending balance	253,000
Intrinsic value of options exercised during the year	300,000	1,500,000	2,500,000
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	11,053,000	11,103,000	9,814,000
Tax benefits (expense) associated with stock-based compensation	4,600,000	4,500,000	4,000,000
Fair value of shares vested during the year	10,800,000	12,300,000	11,700,000
Weighted average grant date fair value of restricted stock awards during the year (in dollars per share)	$ 28.22	$ 29.25	$ 30.47
Unrecognized compensation expense associated with the unvested shares outstanding	$ 12,700,000
Unrecognized compensation expense, period for recognition (in months)	21 months
Restricted Stock [Roll Forward]
Outstanding beginning balance (in shares)	740,000
Grants (in shares)	410,000
Vests (in shares)	(382,000)
Canceled (in shares)	(28,000)
Outstanding ending balance (in shares)	740,000	740,000
Weighted-average market value [Abstract]
Non-vested, beginning balance (in dollars per share)	$ 29.66
Granted (in dollars per share)	$ 28.22	$ 29.25	$ 30.47
Vested (in dollars per share)	$ 29.79
Canceled/forfeited (in dollars per share)	$ 28.45
Non-vested, ending balance (in dollars per share)	$ 28.84	$ 29.66
Employee Stock Purchase Plan (ESPP) [Abstract]
ESPP Stock Issued During Period (in shares)	37,000	34,000	37,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock awards vesting period	3 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock awards vesting period	5 years

XML

Leases (Tables)

12 Months Ended

Dec. 31, 2014

Leases [Abstract]

Future minimum rental payments under non cancelable operating leases

We lease various office facilities, equipment and vehicles under operating lease arrangements, some of which contain rent escalation clauses.  Most of the leases contain purchase and/or renewal options at fair market and fair rental value, respectively.  Rental expense relating to all operating leases was $13.4 million, $13.9 million and $13.8 million in 2014, 2013 and 2012, respectively.  At December 31, 2014, future minimum rental payments under noncancelable operating leases are as follows:

	Operating Leases
	(in thousands)
2015	$	13,364
2016	11,821
2017	8,534
2018	6,822
2019	4,189
Thereafter	5,312
Total minimum lease payments	$	50,042

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Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Estimated Useful Lives of Property and Equipment

Property and Equipment

Property and equipment are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method.  The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:

Buildings and improvements	5-30 years
Computer hardware and software	1-5 years
Software development costs	3-5 years
Furniture and fixtures	5-7 years
Aircraft	15-20 years

Software development costs relate primarily to software coding, system interfaces and testing of our proprietary professional employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Capitalized software development costs are amortized using the straight-line method over the estimated useful lives of the software, generally three years.  We recognized $4.1 million, $3.6 million and $2.8 million in amortization of capitalized computer software costs in 2014, 2013 and 2012, respectively.  Unamortized computer software costs were $6.0 million and$7.2 million in 2014 and 2013, respectively.

We account for our software products in accordance with ASC 985-20, Costs of Software to be Sold. This Topic establishes standards of financial accounting and reporting for the costs of computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process, whether internally developed and produced or purchased.

We periodically evaluate our long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment.  ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable.  If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset.  In addition, we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset.  Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. Due to a change in office consolidation plans, we recorded a $1.2 million non-cash charge related to office design fees.

Activity and Balances Related to Incurred But Not Paid Worker's Compensation Claims

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

	Year ended December 31,
	2014			2013
	(in thousands)
Beginning balance	$	120,833		$	111,685
Accrued claims	55,971			42,900
Present value discount	(1,998		)	(1,169		)
Paid claims	(38,718		)	(32,583		)
Ending balance	$	136,088		$	120,833
Current portion of accrued claims	$	44,040		$	51,928
Long-term portion of accrued claims	92,048			68,905
	$	136,088		$	120,833

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Quarterly Financial Data (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended												12 Months Ended
	Dec. 31, 2014		Sep. 30, 2014	Jun. 30, 2014		Mar. 31, 2014	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Selected Quarterly Financial Information [Abstract]
Revenues	$ 595,865		$ 560,303	$ 564,621		$ 636,999	$ 557,133		$ 539,869	$ 547,274		$ 611,836	$ 2,357,788	$ 2,256,112	$ 2,158,824
Gross profit	101,359		100,817	95,453		106,176	89,978		97,409	97,746		108,118	403,805	393,251	382,221
Operating income	13,009	[1]	14,460	3,414	[2]	16,591	6,874	[3]	17,112	10,228		22,009	47,474	56,223	67,494
Net income	$ 8,164		$ 8,385	$ 1,891		$ 9,564	$ 5,289	[4]	$ 10,082	$ 3,488	[5]	$ 13,173	$ 28,004	$ 32,032	$ 40,402
Basic net income per share of common stock (in dollars per share)	$ 0.27	[6]	$ 0.33	$ 0.07		$ 0.37	$ 0.21		$ 0.39	$ 0.14		$ 0.51	$ 1.05	$ 1.25	$ 1.57
Diluted net income per share (in dollars per share)	$ 0.27	[6]	$ 0.33	$ 0.07		$ 0.37	$ 0.21		$ 0.39	$ 0.14		$ 0.51	$ 1.05	$ 1.25	$ 1.56

[1] Includes a $1.2 million non-cash charge in the fourth quarter of 2014. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

[2] Includes a non-cash impairment charge in the second quarter of 2014 of $2.5 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

[3] Includes a non-cash impairment charge in the fourth quarter of 2013 of $3.3 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

[4] Includes a $2.0 million tax benefit related to tax years 2009 through 2012. Please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

[5] Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

[6] Includes the impact of dividends exceeding earnings under the two-class method, resulting in a $0.05 earnings per share decrease in the fourth quarter of 2014. Please read Note 12, “Net Income Per Share,” for additional information.

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Acquisitions (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
Human Concepts [Member]
Business Acquisition [Line Items]
Current year or prior year payment based on terms of the agreement	$ 1.2
Galaxy Technologies, Inc. [Member]
Business Acquisition [Line Items]
Current year or prior year payment based on terms of the agreement	$ 1.4

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Cash, Cash Equivalents and Marketable Securities (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Available-for-sale Securities [Abstract]
Amortized Cost	$ 28,626,000	$ 46,290,000
Gross Unrealized Gains	16,000	51,000
Gross Unrealized Losses	(11,000)	(1,000)
Fair Value	28,631,000	46,340,000
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Less than one year	12,728,000
One to five years	15,898,000
Amortized cost	28,626,000
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Less than one year	12,737,000
One to five years	15,894,000
Fair Value	28,631,000	46,340,000
Overnight holdings:
Money market funds (cash equivalents)	271,840,000	192,040,000
Investment holdings:
Money market funds (cash equivalents)	14,125,000	42,913,000
Marketable securities	28,631,000	46,340,000
Total cash equivalents and marketable securities	314,596,000	281,293,000
Cash held in demand accounts	20,369,000	23,054,000
Outstanding checks	(29,878,000)	(32,252,000)
Total cash, cash equivalents and marketable securities	305,087,000	272,095,000
Cash and cash equivalents	276,456,000	225,755,000	264,544,000	211,208,000
Marketable securities	28,631,000	46,340,000
Withholding associated with federal and state income taxes, employment taxes and other payroll deductions included in cash balance	152,100,000	143,000,000
Customer prepayments included in cash balance	87,887,000	24,459,000
Assets, Fair Value Disclosure [Abstract]
Money market funds	285,965,000	234,953,000
Fair Value	28,631,000	46,340,000
Total	314,596,000	281,293,000
Level 1 [Member]
Available-for-sale Securities [Abstract]
Fair Value	0	0
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Fair Value	0	0
Assets, Fair Value Disclosure [Abstract]
Money market funds	285,965,000	234,953,000
Fair Value	0	0
Total	285,965,000	234,953,000
Level 2 [Member]
Available-for-sale Securities [Abstract]
Fair Value	28,631,000	46,340,000
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Fair Value	28,631,000	46,340,000
Assets, Fair Value Disclosure [Abstract]
Money market funds	0	0
Fair Value	28,631,000	46,340,000
Total	28,631,000	46,340,000
Level 3 [Member]
Available-for-sale Securities [Abstract]
Fair Value	0	0
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Fair Value	0	0
Assets, Fair Value Disclosure [Abstract]
Money market funds	0	0
Fair Value	0	0
Total	$ 0	$ 0

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Net Income Per Share (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended										12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Net income	$ 8,164	$ 8,385	$ 1,891	$ 9,564	$ 5,289	[1]	$ 10,082	$ 3,488	[2]	$ 13,173	$ 28,004	$ 32,032	$ 40,402
Less distributed and undistributed earnings allocated to participating securities											(2,002)	(916)	(1,224)
Net income allocated to common shares											$ 26,002	$ 31,116	$ 39,178
Weighted average common shares outstanding											24,708	24,850	25,007
Incremental shares from assumed conversions of common stock options											4	22	60
Adjusted weighted average common shares outstanding											24,712	24,872	25,067
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect											4	8	29

[1] Includes a $2.0 million tax benefit related to tax years 2009 through 2012. Please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

[2] Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

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Accounting Policies

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Accounting Policies

1. Accounting Policies

Description of Business

Insperity, Inc. (“Insperity” or “we”, “our”, and “us”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance.  Since our formation 28 years ago, we have evolved from being solely a professional employer organization (“PEO”), an industry we pioneered, to our current position as a comprehensive business performance solutions provider. We were organized as a corporation in 1986 and have provided PEO services since inception.

Our most comprehensive HR services offerings are provided through our Workforce Optimization^® and Workforce Synchronization solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services.

In addition to our PEO HR Outsourcing solutions, we offer Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial and Expense Management services, Retirement Services and Insurance Services, (collectively “Strategic Businesses,” formerly known as “Adjacent Businesses”), many of which are offered via desktop applications and cloud-based delivery models.  These other products or services are offered separately, as a bundle, or along with PEO HR Outsourcing solutions.

We provide our PEO HR Outsourcing solutions by entering into a co-employment relationship with our clients, under which Insperity and its clients each take responsibility for certain portions of the employer-employee relationship. Insperity and its clients designate each party’s responsibilities through its Client Service Agreement (“CSA”), under which Insperity becomes the employer of the employees who work at the client’s location (“worksite employees”) for most administrative and regulatory purposes.

As a co-employer of its worksite employees, we assume many of the rights and obligations associated with being an employer.  We enter into an employment agreement with each worksite employee, thereby maintaining a variety of employer rights, including the right to hire or terminate employees, the right to evaluate employee qualifications or performance, and the right to establish employee compensation levels.  Typically, Insperity only exercises these rights in consultation with its clients or when necessary to ensure regulatory compliance.  The responsibilities associated with our role as employer include the following obligations with regard to our worksite employees: (i) to compensate its worksite employees through wages and salaries; (ii) to pay the employer portion of payroll-related taxes; (iii) to withhold and remit (where applicable) the employee portion of payroll-related taxes; (iv) to provide employee benefit programs; and (v) to provide workers’ compensation insurance coverage.

In addition to our assumption of employer status for our worksite employees, our PEO HR Outsourcing solutions also include other human resources functions for our clients to support the effective and efficient use of personnel in their business operations.  To provide these functions, we maintain a significant staff of professionals trained in a wide variety of human resources functions, including employee training, employee recruiting, employee performance management, employee compensation and employer liability management.  These professionals interact and consult with clients on a daily basis to help identify each client’s service requirements and to ensure that we are providing appropriate and timely personnel management services.

Revenue and Direct Cost Recognition

We account for our PEO HR Outsourcing solutions revenues in accordance with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition, Principal Agent Considerations.  Our PEO HR Outsourcing solutions revenues are primarily derived from our gross billings, which are based on (i) the payroll cost of its worksite employees; and (ii) a markup computed as a percentage of the payroll cost.  The gross billings are invoiced concurrently with each periodic payroll of its worksite employees.  Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as worksite employees perform their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on our Consolidated Balance Sheets.

In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our worksite employees, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin.  As a result, our operating results are significantly impacted by our ability to accurately estimate, control and manage our direct costs relative to the revenues derived from the markup component of our gross billings.

Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our worksite employees.  Our direct costs associated with our revenue generating activities are primarily comprised of all other costs related to our worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs.

Segment Reporting

We operate one reportable segment under ASC 280, Segment Reporting.

Principles of Consolidation

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

Use of Estimates

The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that could potentially subject us to concentration of credit risk include accounts receivable and marketable securities.

Cash, Cash Equivalents and Marketable Securities

We invest our excess cash in federal government and municipal-based money market funds and debt instruments of U.S. municipalities.  All highly liquid investments with stated maturities of three months or less from date of purchase are classified as cash equivalents.  Liquid investments with stated maturities of greater than three months are classified as marketable securities in current assets.

We account for marketable securities in accordance with ASC 320, Investments – Debt and Equity Securities. We determine the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time ofpurchase, and re-evaluate such classification as of each balance sheet date.  At December 31, 2014 and 2013, all of our investments in marketable securities were classified as available-for-sale, and as a result, were reported at fair value. Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity.  The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts from the date of purchase to maturity.  Such amortization is included in interest income as an addition to or deduction from the coupon interest earned on the investments.  We use the specific identification method of determining the cost basis in computing realized gains and losses on the sale of our available-for-sale securities. Realized gains and losses are included in other income.

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturities of these instruments.

Property and Equipment

Property and equipment are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method.  The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:

Buildings and improvements	5-30 years
Computer hardware and software	1-5 years
Software development costs	3-5 years
Furniture and fixtures	5-7 years
Aircraft	15-20 years

Software development costs relate primarily to software coding, system interfaces and testing of our proprietary professional employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Capitalized software development costs are amortized using the straight-line method over the estimated useful lives of the software, generally three years.  We recognized $4.1 million, $3.6 million and $2.8 million in amortization of capitalized computer software costs in 2014, 2013 and 2012, respectively.  Unamortized computer software costs were $6.0 million and$7.2 million in 2014 and 2013, respectively.

We account for our software products in accordance with ASC 985-20, Costs of Software to be Sold. This Topic establishes standards of financial accounting and reporting for the costs of computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process, whether internally developed and produced or purchased.

We periodically evaluate our long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment.  ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable.  If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset.  In addition, we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset.  Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. Due to a change in office consolidation plans, we recorded a $1.2 million non-cash charge related to office design fees.

Goodwill and Other Intangible Assets

Our purchased intangible assets are carried at cost less accumulated amortization.  Amortization is computed over the estimated useful lives of the respective assets, ranging from three to 10 years.

Our goodwill and intangible assets are subject to the provisions of ASC 350, Intangibles – Goodwill and Other. Accordingly, we perform our annual goodwill impairment testing as of December 31st of each calendar year or earlier if indicators of impairment exist on an interim basis. Step one of the impairment testing involves a comparison of the estimated fair value of a reporting unit to the related carrying value.  Fair value is estimated using a discounted cash flow model.  If the estimated fair value is less than its related carrying value, step two of the goodwill impairment test is completed, which involves allocating the estimated fair value of the reporting unit to individual assets and liabilities.  If the carrying value of goodwill is greater than the estimated fair value, an impairment exists, which results in a write-down of the goodwill to the estimated fair value. Furthermore, ASC 350 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite.  Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

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 cost of the United portion of the 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 each 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 December 31, 2014, and is reported as a long-term asset.

As of December 31, 2014, Plan Costs were less than the net premiums paid and owed to United by $23.5 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $14.5 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at December 31, 2014, were $15.0 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.  Under the ACE Program, we bear the economic burden for the first $1 million layer of claims per occurrence, and effective October 1, 2010, we also bear the economic burden for a maximum aggregate amount of $5 million per policy year for claim amounts that exceed the first $1 million. ACE bears the economic burden for all claims in excess of these levels.   

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 years ended December 31, 2014 and 2013, we reduced accrued workers’ compensation costs by $2.9 million and $9.3 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 rates utilized in 2014 and 2013 were 1.0% and 0.8%, respectively) 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 reported workers’ compensation claims:

	Year ended December 31,
	2014			2013
	(in thousands)
Beginning balance	$	120,833		$	111,685
Accrued claims	55,971			42,900
Present value discount	(1,998		)	(1,169		)
Paid claims	(38,718		)	(32,583		)
Ending balance	$	136,088		$	120,833
Current portion of accrued claims	$	44,040		$	51,928
Long-term portion of accrued claims	92,048			68,905
	$	136,088		$	120,833

The current portion of accrued workers’ compensation costs at December 31, 2014 and 2013 includes $1.6 million and $1.0 million, respectively, of workers’ compensation administrative fees.

As of December 31, the undiscounted accrued workers’ compensation costs were $145.8 million in 2014 and $131.2 million in 2013.

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.  In 2014, we paid the insurance carrier an additional $7.2 million in claim funds for policy years prior to 2014, which increased deposits.  As of December 31, 2014, we had restricted cash of $44.0 million and deposits of $113.9 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.

Stock-Based Compensation

At December 31, 2014, we have two stock-based employee compensation plans under which we may issue awards.  We account for these plans under the recognition and measurement principles of ASC 718, Compensation – Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.

We generally make annual grants of restricted and unrestricted stock under our stock-based incentive compensation plans to our directors, officers and other management. Restricted stock grants to officers and other management vest over three to five years from the date of grant. Restricted stock grants issued to directors upon their initial appointment to the board are one-third vested on each anniversary of the grant date. Annual stock grants issued to directors are 100% vested on the grant date.  Shares of restricted stock are based on fair value on date of grant and the associated expense, net of estimated forfeitures, is recognized over the vesting period.

Company-Sponsored 401(k) Plans

Under our 401(k) plan for corporate employees (the “Corporate Plan”), we matched 50% of eligible corporate employees’ contributions, up to 6% of the employees’ eligible compensation in 2014, 2013 and 2012. Under our separate

401(k) plan for worksite employees (the “Worksite Employee Plan”), the match percentage for worksite employees ranges from 0% to 6%, as determined by each client company.  Matching contributions under the Corporate Plan and the Worksite Employee Plan are immediately vested.  During 2014, 2013 and 2012, we made matching contributions to the Corporate and Worksite Employee Plans of $81.5 million, $74.7 million and $65.9 million, respectively.  Of these contributions, $78.4 million, $71.7 million and $63.3 million were made under the Worksite Employee Plan on behalf of worksite employees.  The remainder represents matching contributions made under the Corporate Plan on behalf of corporate employees.

Advertising

We expense all advertising costs as incurred.

Income Taxes

We use the liability method in accounting for income taxes.  Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2014 presentation.

New Accounting Pronouncements

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

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods ending after December 15, 2016, and early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU No. 2014-09. We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated Financial Statements.

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Revolving Credit Facility (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2012	Feb. 06, 2015
Line of Credit Facility [Line Items]
Term of revolving credit facility (in years)	4 years
Line of credit facility	$ 100,000,000
Maximum borrowing capacity	150,000,000
Percentage of subsidiary stock securing debt (in hundredths)	65.00%
Unused commitment fee on the average daily unused portion (in hundredths)	0.25%
Letters of Credit Outstanding, Amount	600,000
Special dividend	50,664,000	25,700,000
Alternate base rates, applicable margins [Abstract]
Applicable margin, federal funds rate (in hundredths)	0.50%
Applicable margin, 30-day LIBOR (in hundredths)	2.00%
Subsequent Event [Member]
Line of Credit Facility [Line Items]
Line of credit facility			$ 125,000,000
LIBOR Borrowings [Member]
Line of Credit Facility [Line Items]
Description of basis for variable rate	LIBOR
Applicable margin on variable rate on borrowings, minimum (in hundredths)	2.00%
Applicable margin on variable rate on borrowings, maximum (in hundredths)	2.75%
Alternate Base Rate Borrowings [Member]
Line of Credit Facility [Line Items]
Description of basis for variable rate	alternate base rate
Applicable margin on variable rate on borrowings, minimum (in hundredths)	0.00%
Applicable margin on variable rate on borrowings, maximum (in hundredths)	0.75%

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Significant components of net deferred tax assets and net deferred tax liabilities

Significant components of the net deferred tax assets and net deferred tax liabilities as reflected on the Consolidated Balance Sheets are as follows:

	December 31,
	2014			2013
	(in thousands)
Deferred tax liabilities:
Prepaid assets	$	(9,291	)	$	(5,084	)
Depreciation	(8,083		)	(8,937		)
Software development costs	(2,252		)	(2,739		)
Total deferred tax liabilities	(19,626		)	(16,760		)
Deferred tax assets:
Accrued incentive compensation	7,204			3,909
Net operating loss carryforward	1,556			1,773
Workers’ compensation accruals	6,308			5,568
Accrued rent	1,058			1,008
Stock-based compensation	3,615			3,742
Intangibles	1,575			837
Minority investment impairment	1,003			991
Other	551			412
Total deferred tax assets	22,870			18,240
Valuation allowance	(1,003		)	(991		)
Total net deferred tax assets	21,867			17,249
Net deferred tax assets	$	2,241		$	489
Net current deferred tax assets	$	6,316		$	8,185
Net noncurrent deferred tax liabilities	(4,075		)	(7,696		)
	$	2,241		$	489

Components of income tax expense

The components of income tax expense are as follows:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Current income tax expense:
Federal	$	18,034		$	20,476		$	29,280
State	3,322			3,512			4,351
Total current income tax expense	21,356			23,988			33,631
Deferred income tax (benefit) expense:
Federal	(1,764		)	(2,258		)	(5,363		)
State	31			(30		)	(380		)
Total deferred income tax benefit	(1,733		)	(2,288		)	(5,743		)
Total income tax expense	$	19,623		$	21,700		$	27,888

Reconciliation of income tax expense

The reconciliation of income tax expense computed at U.S. federal statutory tax rates to the reported income tax expense from continuing operations is as follows:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Expected income tax expense at 35%	$	16,670		$	18,806		$	23,901
State income taxes, net of federal benefit	2,204			2,286			2,497
Nondeductible expenses	1,939			1,993			1,663
Section 199 benefits	(592		)	(2,531		)	—
Expense Management non-cash impairment	—			797			—
Valuation allowance related to TRE impairment	—			938			—
Research and development credit	(455		)	(534		)	—
Other, net	(143		)	(55		)	(173		)
Reported total income tax expense	$	19,623		$	21,700		$	27,888

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill [Table Text Block]

The following table presents the gross carrying amount and accumulated amortization for each class of intangible assets and the gross carrying amount and accumulated impairment for goodwill:

	December 31, 2013			Twelve Months Ended   December 31, 2014						December 31, 2014
	Balance			Impairment			Amortization Expense			Balance
	(in thousands)
Gross carrying amount:
Trademarks	$	1,230		$	(1,010	)	$	—		$	220
Customer relationships	7,784			(1,392		)	—			6,392
Aggregate goodwill acquired:
Goodwill	21,156			—			—			21,156
Total	$	30,170		$	(2,402	)	$	—		$	27,768
Accumulated amortization:
Trademarks	$	(680	)	$	695		$	(77	)	$	(62	)
Customer relationships	(4,340		)	976			(1,415		)	(4,779		)
Accumulated impairment:
Goodwill	(6,716		)	(1,754		)	—			(8,470		)
Total	$	(11,736	)	$	(83	)	$	(1,492	)	$	(13,311	)
Net carrying amount:
Trademarks	$	550		$	(315	)	$	(77	)	$	158
Customer relationships	3,444			(416		)	(1,415		)	1,613
Goodwill	14,440			(1,754		)	—			12,686
Total goodwill and other intangible assets	$	18,434		$	(2,485	)	$	(1,492	)	$	14,457

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Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Deferred tax liabilities:
Prepaid assets	$ (9,291,000)	$ (5,084,000)
Depreciation	(8,083,000)	(8,937,000)
Software development costs	(2,252,000)	(2,739,000)
Total deferred tax liabilities	(19,626,000)	(16,760,000)
Deferred tax assets:
Accrued incentive compensation	7,204,000	3,909,000
Net operating loss carryforward	1,556,000	1,773,000
Workers’ compensation accruals	6,308,000	5,568,000
Accrued rent	1,058,000	1,008,000
Stock-based compensation	3,615,000	3,742,000
Intangibles	1,575,000	837,000
Minority investment impairment	1,003,000	991,000
Other	551,000	412,000
Total deferred tax assets	22,870,000	18,240,000
Valuation allowance	(1,003,000)	(991,000)
Total net deferred tax assets	21,867,000	17,249,000
Net deferred tax assets	2,241,000	489,000
Net current deferred tax assets	6,316,000	8,185,000
Net noncurrent deferred tax liabilities	(4,075,000)	(7,696,000)
Current income tax expense:
Federal	18,034,000	20,476,000	29,280,000
State	3,322,000	3,512,000	4,351,000
Total current income tax expense	21,356,000	23,988,000	33,631,000
Deferred income tax (benefit) expense:
Federal	(1,764,000)	(2,258,000)	(5,363,000)
State	31,000	(30,000)	(380,000)
Total deferred income tax benefit	(1,733,000)	(2,288,000)	(5,743,000)
Total income tax expense	19,623,000	21,700,000	27,888,000
Net income tax expense (benefit) on nonqualified stock option exercises	488,000	1,259,000	1,751,000
Reconciliation of income tax expense [Abstract]
Assumed income tax rate (in hundredths)	35.00%
Expected income tax expense at 35%	16,670,000	18,806,000	23,901,000
State income taxes, net of federal benefit	2,204,000	2,286,000	2,497,000
Nondeductible expenses	1,939,000	1,993,000	1,663,000
Section 199 benefits	(592,000)	(2,531,000)	0
Expense Management non-cash impairment	0	797,000	0
Valuation allowance related to TRE impairment	0	938,000	0
Research and development credit	(455,000)	(534,000)	0
Other, net	(143,000)	(55,000)	(173,000)
Total income tax expense	19,623,000	21,700,000	27,888,000
Business Acquisition [Line Items]
Section 199 tax benefits for the tax year 2013		530,000
Section 199 Tax Benefits for Tax Years 2009 to 2012		2,000,000
Liability for Uncertain Tax Positions, Current	0	0	0
ExpensAble [Member]
Business Acquisition [Line Items]
Operating Loss Carryforwards	$ 4,200,000
Minimum [Member] | ExpensAble [Member]
Business Acquisition [Line Items]
Net operating loss carryforwards, expiration date	Jan. 01, 2023
Maximum [Member] | ExpensAble [Member]
Business Acquisition [Line Items]
Net operating loss carryforwards, expiration date	Jan. 01, 2030

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Stockholders' Equity Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2014

Stockholders' Equity Attributable to Parent [Abstract]

QuarterlydividendsdeclaredTableTextBlock [Table Text Block]

Dividends

The Board declared quarterly dividends in 2014 and 2013 as follows:

	2014			2013
	(amounts per share)
First quarter	$	0.17		$	0.17
Second quarter	0.19			0.17
Third quarter	0.19			0.17
Fourth quarter	2.19		(1)	0.17

____________________________________

⁽¹⁾    Includes a $2.00 per share special dividend

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Incentive Plans (Tables)

12 Months Ended

Dec. 31, 2014

Share-based Compensation [Abstract]

Summary of stock option award activity

The following is a summary of stock option award activity for 2014:

	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Outstanding - December 31, 2013	61		$	24.24
Granted	—		—
Exercised	(18	)	15.28
Canceled	—		—
Outstanding - December 31, 2014	43		28.04		5.3	$	253
Exercisable - December 31, 2014	43		28.04		5.3	$	253

Summary of restricted stock awards activity

The following is a summary of restricted stock award activity for 2014:

	Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested - December 31, 2013	740		$	29.66
Granted	410		28.22
Vested	(382	)	29.79
Canceled/Forfeited	(28	)	28.45
Non-vested - December 31, 2014	740		28.84

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities:
Net income	$ 28,004	$ 32,032	$ 40,402
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,387	21,064	18,250
Total Impairments - Goodwill, Intangibles and Assets	3,687	6,021	4,191
Amortization of marketable securities	1,891	2,119	2,295
Stock-based compensation	11,053	11,103	9,814
Deferred income taxes	(1,733)	(2,288)	(5,743)
Changes in operating assets and liabilities, net of acquisitions:
Restricted cash	7,888	(4,779)	(2,412)
Accounts receivable	34,893	(19,623)	(19,453)
Prepaid insurance	(10,663)	4,982	5,680
Other current assets	(5,596)	(2,402)	1,837
Other assets	(32,013)	(18,091)	(12,991)
Accounts payable	1,996	(982)	(1,425)
Payroll taxes and other payroll deductions payable	10,737	(12,930)	9,922
Accrued worksite employee payroll expense	18,595	23,731	19,753
Accrued health insurance costs	13,226	(8,839)	4,515
Accrued workers’ compensation costs	15,805	7,815	7,418
Accrued corporate payroll, commissions and other accrued liabilities	18,517	556	2,353
Income taxes payable/receivable	4,039	(4,825)	6,392
Total adjustments	113,709	2,632	50,396
Net cash provided by operating activities	141,713	34,664	90,798
Marketable securities:
Purchases	(69,578)	(54,756)	(30,680)
Proceeds from maturities	28,494	15,201	32,619
Proceeds from dispositions	56,880	8,026	35,891
Investments and acquisitions, net of cash acquired	0	0	(2,410)
Property and equipment:
Purchases	(19,124)	(11,562)	(17,631)
Proceeds from dispositions	122	57	69
Net cash provided by (used in) investing activities	(3,206)	(43,034)	17,858
Cash flows from financing activities:
Purchase of treasury stock	(20,769)	(17,229)	(13,773)
Repurchase of common stock	0	0	(3,162)
Payments of Ordinary Dividends, Common Stock	(69,493)	(17,386)	(42,728)
Proceeds from the exercise of stock options	279	1,448	2,249
Income tax benefit from stock-based compensation	889	1,621	2,316
Other	1,288	1,127	(222)
Net cash used in financing activities	(87,806)	(30,419)	(55,320)
Net increase (decrease) in cash and cash equivalents	50,701	(38,789)	53,336
Cash and cash equivalents at beginning of year	225,755	264,544	211,208
Cash and cash equivalents at end of year	276,456	225,755	264,544
Supplemental disclosures:
Cash paid for income taxes, net	$ 16,429	$ 27,191	$ 24,924

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Net Income Per Share (Tables)

12 Months Ended

Dec. 31, 2014

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:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Net income	$	28,004		$	32,032		$	40,402
Less distributed and undistributed earnings allocated to participating securities	(2,002		)	(916		)	(1,224		)
Net income allocated to common shares	$	26,002		$	31,116		$	39,178
Weighted average common shares outstanding	24,708			24,850			25,007
Incremental shares from assumed conversions of common stock options	4			22			60
Adjusted weighted average common shares outstanding	24,712			24,872			25,067
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect	4			8			29

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Goodwill and Other Intangible Assets (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Schedule of Goodwill and Other Intangible Assets [Line Items]
Goodwill and Other Intangibles Impairment	$ (2,485,000)
Goodwill and Intangible Asset Impairment	2,485,000		4,191,000
Impairment charges	3,687,000	3,342,000	4,191,000
Gross Carrying Amount [Roll Forward]
Goodwill and Other Intangibles Impairment, gross	(2,402,000)
Total gross carrying amount and aggregate goodwill acquired [Abstract]
Beg Bal Total gross carrying amount and aggregate goodwill acquired	30,170,000
Goodwill and Other Intangibles Impairment, gross	(2,402,000)
End Bal Total gross carrying amount and aggregate goodwill acquired	27,768,000	30,170,000
Accumulated amortization [Abstract]
Adj to accumulated amortization and accumulated impairment for goodwill and other intangibles	(83,000)
Amortization Expense	(1,492,000)	(2,000,000)	(1,800,000)
Total accumulated amortization and accumulated impairment [Abstract]
Beg Bal Total accumulated amortization and accumulated impairment	(11,736,000)
Adj to accumulated amortization and accumulated impairment for goodwill and other intangibles	(83,000)
Amortization Expense	(1,492,000)	(2,000,000)	(1,800,000)
End Bal Total accumulated amortization and accumulated impairment	(13,311,000)	(11,736,000)
Intangible Assets, Net (Including Goodwill) [Abstract]
Amortization Expense	(1,492,000)	(2,000,000)	(1,800,000)
Beg Bal Goodwill and other intangible assets, net	18,434,000
Goodwill and Other Intangibles Impairment	(2,485,000)
End Bal Goodwill and other intangible assets, net	14,457,000	18,434,000
Amortization [Abstract]
Amortization expense related to purchased intangible assets	(1,492,000)	(2,000,000)	(1,800,000)
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	900,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	500,000
Finite-Lived Intangible Assets, Amortization Expense, Year Three	326,000
Finite-Lived Intangible Assets, Amortization Expense, Year Four	36,000
Finite-Lived Intangible Assets, Amortization Expense, Year Five	19,000
Trademarks [Member]
Gross Carrying Amount [Roll Forward]
Beg Bal Finite-Lived Intangible Assets, Gross	1,230,000
Goodwill and Other Intangibles Impairment, gross	(1,010,000)
End Bal Finite-Lived Intangible Assets, Gross	220,000
Total gross carrying amount and aggregate goodwill acquired [Abstract]
Goodwill and Other Intangibles Impairment, gross	(1,010,000)
Accumulated amortization [Abstract]
Beg Bal Finite-Lived Intangible Assets, Accumulated Amortization	(680,000)
Adj to accumulated amortization and accumulated impairment for goodwill and other intangibles	695,000
Amortization Expense	(77,000)
End Bal Finite-Lived Intangible Assets, Accumulated Amortization	(62,000)
Total accumulated amortization and accumulated impairment [Abstract]
Adj to accumulated amortization and accumulated impairment for goodwill and other intangibles	695,000
Amortization Expense	(77,000)
Intangible Assets, Net (Including Goodwill) [Abstract]
Beg Bal Intangible Assets, Net (Excluding Goodwill)	550,000
Impairment of Intangible Assets (Excluding Goodwill)	(315,000)
Amortization Expense	(77,000)
End Bal Intangible Assets, Net (Excluding Goodwill)	158,000
Amortization [Abstract]
Amortization expense related to purchased intangible assets	(77,000)
Customer Relationships [Member]
Gross Carrying Amount [Roll Forward]
Beg Bal Finite-Lived Intangible Assets, Gross	7,784,000
Goodwill and Other Intangibles Impairment, gross	(1,392,000)
End Bal Finite-Lived Intangible Assets, Gross	6,392,000
Total gross carrying amount and aggregate goodwill acquired [Abstract]
Goodwill and Other Intangibles Impairment, gross	(1,392,000)
Accumulated amortization [Abstract]
Beg Bal Finite-Lived Intangible Assets, Accumulated Amortization	(4,340,000)
Adj to accumulated amortization and accumulated impairment for goodwill and other intangibles	976,000
Amortization Expense	(1,415,000)
End Bal Finite-Lived Intangible Assets, Accumulated Amortization	(4,779,000)
Total accumulated amortization and accumulated impairment [Abstract]
Adj to accumulated amortization and accumulated impairment for goodwill and other intangibles	976,000
Amortization Expense	(1,415,000)
Intangible Assets, Net (Including Goodwill) [Abstract]
Beg Bal Intangible Assets, Net (Excluding Goodwill)	3,444,000
Impairment of Intangible Assets (Excluding Goodwill)	(416,000)
Amortization Expense	(1,415,000)
End Bal Intangible Assets, Net (Excluding Goodwill)	1,613,000
Amortization [Abstract]
Amortization expense related to purchased intangible assets	(1,415,000)
Goodwill [Member]
Aggregrate goodwill acquired [Roll Forward]
Beg Bal Goodwill, Gross	21,156,000
End Bal Goodwill, Gross	21,156,000
Goodwill, Impaired, Accumulated Impairment Loss [Abstract]
Beg Bal Goodwill, Impaired, Accumulated Impairment Loss	(6,716,000)
Goodwill, Impairment Loss	(1,754,000)
End Bal Goodwill, Impaired, Accumulated Impairment Loss	(8,470,000)
Intangible Assets, Net (Including Goodwill) [Abstract]
Beg Bal Goodwill, net balance	14,440,000
Goodwill, Impairment Loss	(1,754,000)
End Bal Goodwill, net balance	$ 12,686,000

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 276,456	$ 225,755
Restricted cash	44,040	51,928
Marketable securities	28,631	46,340
Accounts receivable, net:
Trade	12,010	7,453
Unbilled	160,154	199,628
Other	2,952	2,928
Prepaid insurance	21,301	10,638
Other current assets	17,649	12,053
Income taxes receivable	0	409
Deferred income taxes	6,316	8,185
Total current assets	569,509	565,317
Property and equipment:
Land	5,214	4,115
Buildings and improvements	70,471	67,939
Computer hardware and software	89,204	85,241
Software development costs	41,314	38,522
Furniture and fixtures	38,604	36,479
Aircraft	35,879	35,879
Total property and equipment, gross	280,686	268,175
Accumulated depreciation and amortization	(196,341)	(181,760)
Total property and equipment, net	84,345	86,415
Other assets:
Prepaid health insurance	9,000	9,000
Deposits – health insurance	3,700	3,700
Deposits – workers’ compensation	113,934	81,878
Goodwill and other intangible assets, net	14,457	18,434
Other assets	1,725	1,816
Total other assets	142,816	114,828
Total assets	796,670	766,560
Current liabilities:
Accounts payable	4,674	2,678
Payroll taxes and other payroll deductions payable	176,341	165,604
Accrued worksite employee payroll cost	192,396	173,801
Accrued health insurance costs	18,329	5,103
Accrued workers’ compensation costs	45,592	52,930
Accrued corporate payroll and commissions	32,644	21,611
Other accrued liabilities	22,444	14,960
Income tax payable	4,031	0
Total current liabilities	496,451	436,687
Noncurrent liabilities:
Accrued workers’ compensation costs	92,048	68,905
Deferred income taxes	4,075	7,696
Total noncurrent liabilities	96,123	76,601
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.01 per share: Shares authorized - 20,000 Shares issued and outstanding - none	0	0
Common stock, par value $0.01 per share: Shares authorized - 60,000 Shares issued - 30,758 at December 31, 2014 and 2013	308	308
Additional paid-in capital	137,769	135,653
Treasury stock, at cost – 5,425 and 5,175 at December 31, 2014 and 2013, respectively	(148,465)	(138,688)
Accumulated other comprehensive income, net of tax	3	29
Retained earnings	214,481	255,970
Total stockholders’ equity	204,096	253,272
Total liabilities and stockholders’ equity	$ 796,670	$ 766,560

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Stockholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended									12 Months Ended
	Dec. 31, 2014		Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Stockholders' Equity Note [Abstract]
Authorized number of shares to be repurchased (in shares)	15,500,000									15,500,000
Repurchase of treasury stock (in shares)										580,804	479,903
Shares withheld for tax withholding obligations for the vesting of restricted stock awards (in shares)										112,458	116,931
Remaining number of shares authorized to be repurchased (in shares)	768,765									768,765
Payments of Dividends [Abstract]
Dividends declared per share of common stock (in dollars per share)	$ 0.19		$ 0.19	$ 0.19	$ 0.17	$ 0.17	$ 0.17	$ 0.17	$ 0.17
Special dividends declared, per share of commong stock (in dollars per share)	$ 2.00
Total regular and special quarterly dIvidend declared, per share of common stock (in dollars per share)	$ 2.19	[1]
Payments of Ordinary Dividends, Common Stock										$ 69,493	$ 17,386	$ 42,728
Special dividend										50,664		25,700
Total Dividends Paid, Ordinary and Special										$ 69,493
Class of Stock [Line Items]
Preferred stock, authorized (in shares)	20,000,000					20,000,000				20,000,000	20,000,000
Common stock purchase right per preferred stock share (in shares)										1
Series A Junior Participating Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, authorized (in shares)	600,000									600,000

[1] 1) Includes a $2.00 per share special dividend

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
Net income	$ 28,004	$ 32,032	$ 40,402
Other comprehensive income:
Unrealized gain (loss) on available-for-sale securities, net of tax	(26)	13	(8)
Comprehensive income	$ 27,978	$ 32,045	$ 40,394

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data

	Quarter ended
	March 31		June 30			Sept. 30		Dec. 31
	(in thousands, except per share amounts)
2014
Revenues	$	636,999	$	564,621		$	560,303	$	595,865
Gross profit	106,176		95,453			100,817		101,359
Operating income	16,591		3,414		(1)	14,460		13,009		(2)
Net income	9,564		1,891			8,385		8,164
Basic net income per share	0.37		0.07			0.33		0.27		(3)
Diluted net income per share	0.37		0.07			0.33		0.27		(3)
2013
Revenues	$	611,836	$	547,274		$	539,869	$	557,133
Gross profit	108,118		97,746			97,409		89,978
Operating income	22,009		10,228			17,112		6,874		(4)
Net income	13,173		3,488		(5)	10,082		5,289		(6)
Basic net income per share	0.51		0.14			0.39		0.21
Diluted net income per share	0.51		0.14			0.39		0.21

____________________________________

⁽¹⁾  Includes a non-cash impairment charge in the second quarter of 2014 of $2.5 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

⁽²⁾  Includes a $1.2 million non-cash charge in the fourth quarter of 2014. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

⁽³⁾  Includes the impact of dividends exceeding earnings under the two-class method, resulting in a $0.05 earnings per share decrease in the fourth quarter of 2014.  Please read Note 12, “Net Income Per Share,” for additional information.

⁽⁴⁾  Includes a non-cash impairment charge in the fourth quarter of 2013 of $3.3 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

⁽⁵⁾  Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

⁽⁶⁾  Includes a $2.0 million tax benefit related to tax years 2009 through 2012. Please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

14. Commitments and Contingencies

We enter into non-cancelable fixed purchase and service obligations in the ordinary course of business.  These arrangements primarily consist of advertising commitments and service contracts.  At December 31, 2014, future non-cancelable purchase and service obligations greater than $100,000 and one year were as follows (in thousands):

2015	$	10,224
2016	7,899
2017	4,179
2018	2,628
2019	1,774
Thereafter	2,693
Total obligations	$	29,397

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, except as set forth below, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.

Federal Unemployment Taxes

Employers in certain states are experiencing higher Federal Unemployment Tax Act (“FUTA”) tax rates as a result of certain states not repaying their unemployment loans from the federal government in a timely manner.  The Benefit Cost Ratio Add-On (“BCR”) is an additional tax on the FUTA wage base for employers in states that continue to have outstanding federal unemployment insurance loans beginning with the fifth year in which there is a balance due on the loan.  States had the option to apply for a waiver before July 1 of the year in which the BCR is applicable. There are currently seven states with outstanding unemployment loans and of those, all but one, Connecticut, have filed and received a BCR waiver. Accordingly, the potential impact of the BCR on our financial statements is not material.

Texas Sales and Use Tax Assessments

In July 2008, we purchased a used aircraft (the “2008 Aircraft”) with the intent to immediately lease it to an aircraft charter service under 14 C.F.R. Part 135 (the “2008 Aircraft Purchase”). In connection with the 2008 Aircraft Purchase, we sought and received a letter ruling from the State of Texas Comptroller’s Tax Policy Division (the “Comptroller’s Ruling”). The Comptroller’s Ruling concluded that the 2008 Aircraft Purchase and lease qualified for the “sale for resale” exemption to sales and use taxes. In 2011, we purchased a used aircraft in a transaction that included the trade-in of the 2008 Aircraft with the intent to immediately lease the newly-purchased aircraft to the same aircraft charter service under Part 135 (“the 2011 Aircraft Purchase”). The structure of the 2011 Aircraft Purchase and lease transaction was patterned after the 2008 Aircraft Purchase. In accordance with the Comptroller’s Ruling, we did not pay sales or use tax on either the 2008 Aircraft Purchase or the 2011 Aircraft Purchase.

The Comptroller’s Office has since changed its view as expressed in the Comptroller’s Ruling and is now asserting that the 2008 Aircraft Purchase and the 2011 Aircraft Purchase are subject to sales and use tax. In May 2012, the Comptroller’s Office issued a notification of examination results regarding the 2008 Aircraft Purchase. It has assessed approximately $0.8 million in taxes but waived any claim for interest and did not assess any penalty. In a separate matter regarding the 2011 Aircraft Purchase, the Comptroller’s Office issued its notification of examination results in December 2013 and assessed approximately $0.9 million in taxes, penalties and interest.

We have filed requests for redetermination disputing both assessments and are seeking hearings concerning them. We believe the assessments are without merit and intend to vigorously contest them. At this time, we are unable to determine the ultimate outcome of these matters. However, in the event the State of Texas succeeds with enforcement of the assessments, we may be required to pay some or all of the assessments, which would reduce net income in the reported period.

Massachusetts Tax Assessment

During the fourth quarter of 2012, we received assessments of approximately $2.5 million, including interest and penalties, related to the alleged underpayment of corporate income taxes to the State of Massachusetts for tax years 2006 through 2008.  We believe the assessments are without merit and intend to vigorously contest them.  At this time, we are unable to determine the ultimate outcome of this matter.  However, in the event the State of Massachusetts succeeds with enforcement of the assessments, we may be required to pay some or all of the assessments, which would reduce net income and could have a material adverse effect on net income in the reported period.

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Accounting Policies (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Oct. 01, 2010	Sep. 30, 2010
Description of Business [Abstract]
Number of years transition to comprehensive business performance solutions provider	28 years
Segment Reporting [Abstract]
Number of reportable segments	1
Property, Plant and Equipment [Abstract]
Amortization of capitalized computer software costs	$ 4,100,000	$ 3,600,000	$ 2,800,000
Unamortized computer software costs	6,000,000	7,200,000
Property and Equipment, Estimated Useful Lives [Abstract]
Asset Impairment Charges	1,200,000
Health Insurance Costs [Abstract]
Number of days cash in advance of beginning of reporting quarter United establishes cash funding rates	90 days
Prepaid health insurance	9,000,000	9,000,000
Required deposit for health care costs	3,500,000
Amount which Plan Costs were less than the net premiums paid and owed	23,500,000
Prepaid health insurance, current	14,500,000
Premiums owed to United	15,000,000
Workers' Compensation Costs [Abstract]
Company's maximum economic burden for the first layer of claims per occurrence					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	2,900,000	9,300,000
U.S. Treasury rates that correspond with the weighted average estimated claim payout period (in hundredths)	1.00%	0.80%
Incurred but not paid workers' compensation liabilities
Beginning balance	120,833,000	111,685,000
Accrued claims	55,971,000	42,900,000
Present value discount	(1,998,000)	(1,169,000)
Paid claims	(38,718,000)	(32,583,000)
Ending balance	136,088,000	120,833,000	111,685,000
Current portion of accrued claims	44,040,000	51,928,000
Long-term portion of accrued claims	92,048,000	68,905,000
Ending Balance	136,088,000	120,833,000	111,685,000
Current portion of workers' compensation administrative fees accrued	1,600,000	1,000,000
Undiscounted accrued workers' compensation costs	145,800,000	131,200,000
Time period incurred claims expected to be paid recorded as restricted cash	1 year
Time period incurred claims expected to be paid, included in deposits, a long-term asset	Greater than 1 year
Additional claim funds paid related to ACE Program	7,200,000
Restricted Cash and Cash Equivalents, Current	44,040,000	51,928,000
Deposits - workers' compensation	113,934,000	81,878,000
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
Stock-Based Compensation [Abstract]
Number of stock-based employee compensation plans	2
Vesting period for Initial grants to new members of the Board of Directors	3 years
Vesting period for officers and other management to be eligible for restricted stock grants, minimum	3 years
Vesting period for officers and other management to be eligible for restricted stock grants, maximum	5 years
Percentage of annual grants issued to directors that are vested (in hundredths)	100.00%
Worksite Employees [Member]
Company-Sponsored 401 (k) Plans [Abstract]
Percentage of eligible compensation matched, minimum (in hundredths)	0.00%
Percentage of eligible compensation matched, maximum (in hundredths)	6.00%
Matching contributions to the Plans	78,400,000	71,700,000	63,300,000
Corporate Employees [Member]
Company-Sponsored 401 (k) Plans [Abstract]
Percentage match of eligible corporate employees' contributions (in hundredths)	50.00%
Percentage of eligible compensation matched, minimum (in hundredths)	0.00%
Percentage of eligible compensation matched, maximum (in hundredths)	6.00%
Corporate Plan and Worksite Employee Plan [Member]
Company-Sponsored 401 (k) Plans [Abstract]
Matching contributions to the Plans	$ 81,500,000	$ 74,700,000	$ 65,900,000
Minimum [Member]
Other Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	3 years
Maximum [Member]
Other Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	10 years
Buildings and Improvements [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	5 years
Buildings and Improvements [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	30 years
Computer Hardware and Software and Acquired Technologies [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	1 year
Computer Hardware and Software and Acquired Technologies [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	5 years
Software Development Costs [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	3 years
Software Development Costs [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	5 years
Furniture and Fixtures [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	5 years
Furniture and Fixtures [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	7 years
Aircraft [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	15 years
Aircraft [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives [Abstract]
Estimated useful lives of property and equipment	20 years

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Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Description of Business

Description of Business

Insperity, Inc. (“Insperity” or “we”, “our”, and “us”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance.  Since our formation 28 years ago, we have evolved from being solely a professional employer organization (“PEO”), an industry we pioneered, to our current position as a comprehensive business performance solutions provider. We were organized as a corporation in 1986 and have provided PEO services since inception.

Our most comprehensive HR services offerings are provided through our Workforce Optimization^® and Workforce Synchronization solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services.

In addition to our PEO HR Outsourcing solutions, we offer Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial and Expense Management services, Retirement Services and Insurance Services, (collectively “Strategic Businesses,” formerly known as “Adjacent Businesses”), many of which are offered via desktop applications and cloud-based delivery models.  These other products or services are offered separately, as a bundle, or along with PEO HR Outsourcing solutions.

We provide our PEO HR Outsourcing solutions by entering into a co-employment relationship with our clients, under which Insperity and its clients each take responsibility for certain portions of the employer-employee relationship. Insperity and its clients designate each party’s responsibilities through its Client Service Agreement (“CSA”), under which Insperity becomes the employer of the employees who work at the client’s location (“worksite employees”) for most administrative and regulatory purposes.

As a co-employer of its worksite employees, we assume many of the rights and obligations associated with being an employer.  We enter into an employment agreement with each worksite employee, thereby maintaining a variety of employer rights, including the right to hire or terminate employees, the right to evaluate employee qualifications or performance, and the right to establish employee compensation levels.  Typically, Insperity only exercises these rights in consultation with its clients or when necessary to ensure regulatory compliance.  The responsibilities associated with our role as employer include the following obligations with regard to our worksite employees: (i) to compensate its worksite employees through wages and salaries; (ii) to pay the employer portion of payroll-related taxes; (iii) to withhold and remit (where applicable) the employee portion of payroll-related taxes; (iv) to provide employee benefit programs; and (v) to provide workers’ compensation insurance coverage.

In addition to our assumption of employer status for our worksite employees, our PEO HR Outsourcing solutions also include other human resources functions for our clients to support the effective and efficient use of personnel in their business operations.  To provide these functions, we maintain a significant staff of professionals trained in a wide variety of human resources functions, including employee training, employee recruiting, employee performance management, employee compensation and employer liability management.  These professionals interact and consult with clients on a daily basis to help identify each client’s service requirements and to ensure that we are providing appropriate and timely personnel management services.

Revenue and Direct Cost Recognition

Revenue and Direct Cost Recognition

We account for our PEO HR Outsourcing solutions revenues in accordance with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition, Principal Agent Considerations.  Our PEO HR Outsourcing solutions revenues are primarily derived from our gross billings, which are based on (i) the payroll cost of its worksite employees; and (ii) a markup computed as a percentage of the payroll cost.  The gross billings are invoiced concurrently with each periodic payroll of its worksite employees.  Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as worksite employees perform their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on our Consolidated Balance Sheets.

In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our worksite employees, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin.  As a result, our operating results are significantly impacted by our ability to accurately estimate, control and manage our direct costs relative to the revenues derived from the markup component of our gross billings.

Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our worksite employees.  Our direct costs associated with our revenue generating activities are primarily comprised of all other costs related to our worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs.

Segment Reporting

Segment Reporting

We operate one reportable segment under ASC 280, Segment Reporting.

Principles of Consolidation

Principles of Consolidation

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

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments that could potentially subject us to concentration of credit risk include accounts receivable and marketable securities.

Cash, Cash Equivalents and Marketable Securities

Cash, Cash Equivalents and Marketable Securities

We invest our excess cash in federal government and municipal-based money market funds and debt instruments of U.S. municipalities.  All highly liquid investments with stated maturities of three months or less from date of purchase are classified as cash equivalents.  Liquid investments with stated maturities of greater than three months are classified as marketable securities in current assets.

We account for marketable securities in accordance with ASC 320, Investments – Debt and Equity Securities. We determine the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time ofpurchase, and re-evaluate such classification as of each balance sheet date.  At December 31, 2014 and 2013, all of our investments in marketable securities were classified as available-for-sale, and as a result, were reported at fair value. Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity.  The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts from the date of purchase to maturity.  Such amortization is included in interest income as an addition to or deduction from the coupon interest earned on the investments.  We use the specific identification method of determining the cost basis in computing realized gains and losses on the sale of our available-for-sale securities. Realized gains and losses are included in other income.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturities of these instruments.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method.  The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:

Buildings and improvements	5-30 years
Computer hardware and software	1-5 years
Software development costs	3-5 years
Furniture and fixtures	5-7 years
Aircraft	15-20 years

Software development costs relate primarily to software coding, system interfaces and testing of our proprietary professional employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Capitalized software development costs are amortized using the straight-line method over the estimated useful lives of the software, generally three years.  We recognized $4.1 million, $3.6 million and $2.8 million in amortization of capitalized computer software costs in 2014, 2013 and 2012, respectively.  Unamortized computer software costs were $6.0 million and$7.2 million in 2014 and 2013, respectively.

We account for our software products in accordance with ASC 985-20, Costs of Software to be Sold. This Topic establishes standards of financial accounting and reporting for the costs of computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process, whether internally developed and produced or purchased.

We periodically evaluate our long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment.  ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable.  If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset.  In addition, we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset.  Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Our purchased intangible assets are carried at cost less accumulated amortization.  Amortization is computed over the estimated useful lives of the respective assets, ranging from three to 10 years.

Our goodwill and intangible assets are subject to the provisions of ASC 350, Intangibles – Goodwill and Other. Accordingly, we perform our annual goodwill impairment testing as of December 31st of each calendar year or earlier if indicators of impairment exist on an interim basis. Step one of the impairment testing involves a comparison of the estimated fair value of a reporting unit to the related carrying value.  Fair value is estimated using a discounted cash flow model.  If the estimated fair value is less than its related carrying value, step two of the goodwill impairment test is completed, which involves allocating the estimated fair value of the reporting unit to individual assets and liabilities.  If the carrying value of goodwill is greater than the estimated fair value, an impairment exists, which results in a write-down of the goodwill to the estimated fair value. Furthermore, ASC 350 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite.  Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

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 cost of the United portion of the 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 each 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 December 31, 2014, and is reported as a long-term asset.

As of December 31, 2014, Plan Costs were less than the net premiums paid and owed to United by $23.5 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $14.5 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at December 31, 2014, were $15.0 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.  Under the ACE Program, we bear the economic burden for the first $1 million layer of claims per occurrence, and effective October 1, 2010, we also bear the economic burden for a maximum aggregate amount of $5 million per policy year for claim amounts that exceed the first $1 million. ACE bears the economic burden for all claims in excess of these levels.   

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 years ended December 31, 2014 and 2013, we reduced accrued workers’ compensation costs by $2.9 million and $9.3 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 rates utilized in 2014 and 2013 were 1.0% and 0.8%, respectively) 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 reported workers’ compensation claims:

	Year ended December 31,
	2014			2013
	(in thousands)
Beginning balance	$	120,833		$	111,685
Accrued claims	55,971			42,900
Present value discount	(1,998		)	(1,169		)
Paid claims	(38,718		)	(32,583		)
Ending balance	$	136,088		$	120,833
Current portion of accrued claims	$	44,040		$	51,928
Long-term portion of accrued claims	92,048			68,905
	$	136,088		$	120,833

The current portion of accrued workers’ compensation costs at December 31, 2014 and 2013 includes $1.6 million and $1.0 million, respectively, of workers’ compensation administrative fees.

As of December 31, the undiscounted accrued workers’ compensation costs were $145.8 million in 2014 and $131.2 million in 2013.

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.  In 2014, we paid the insurance carrier an additional $7.2 million in claim funds for policy years prior to 2014, which increased deposits.  As of December 31, 2014, we had restricted cash of $44.0 million and deposits of $113.9 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.

Stock-Based Compensation

Stock-Based Compensation

At December 31, 2014, we have two stock-based employee compensation plans under which we may issue awards.  We account for these plans under the recognition and measurement principles of ASC 718, Compensation – Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.

We generally make annual grants of restricted and unrestricted stock under our stock-based incentive compensation plans to our directors, officers and other management. Restricted stock grants to officers and other management vest over three to five years from the date of grant. Restricted stock grants issued to directors upon their initial appointment to the board are one-third vested on each anniversary of the grant date. Annual stock grants issued to directors are 100% vested on the grant date.  Shares of restricted stock are based on fair value on date of grant and the associated expense, net of estimated forfeitures, is recognized over the vesting period.

Company-Sponsored 401(k) Plans

Company-Sponsored 401(k) Plans

Under our 401(k) plan for corporate employees (the “Corporate Plan”), we matched 50% of eligible corporate employees’ contributions, up to 6% of the employees’ eligible compensation in 2014, 2013 and 2012. Under our separate

401(k) plan for worksite employees (the “Worksite Employee Plan”), the match percentage for worksite employees ranges from 0% to 6%, as determined by each client company.  Matching contributions under the Corporate Plan and the Worksite Employee Plan are immediately vested.  During 2014, 2013 and 2012, we made matching contributions to the Corporate and Worksite Employee Plans of $81.5 million, $74.7 million and $65.9 million, respectively.  Of these contributions, $78.4 million, $71.7 million and $63.3 million were made under the Worksite Employee Plan on behalf of worksite employees.  The remainder represents matching contributions made under the Corporate Plan on behalf of corporate employees.

Advertising

Advertising

We expense all advertising costs as incurred.

Income Taxes

Income Taxes

We use the liability method in accounting for income taxes.  Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse.

Reclassification, Policy

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2014 presentation.

New Accounting Pronouncements

New Accounting Pronouncements

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

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods ending after December 15, 2016, and early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU No. 2014-09. We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]
Balance at Dec. 31, 2011	$ 245,207,000	$ 309,000	$ 135,871,000	$ (134,647,000)	$ 24,000	$ 243,650,000
Balance (shares) at Dec. 31, 2011		30,839,000
Purchase of treasury stock, at cost	(13,773,000)	0	0	(13,773,000)	0	0
Repurchase of common stock	(3,162,000)	(1,000)	(3,161,000)	0	0	0
Repurchase of common stock (in shares)		(81,000)
Exercise of stock options	2,249,000	0	(1,630,000)	3,879,000	0	0
Income tax benefit from stock-based compensation, net	1,751,000	0	1,751,000	0	0	0
Stock-based compensation expense	9,814,000	0	289,000	9,525,000	0	0
Other	1,153,000	0	87,000	1,066,000	0	0
Dividends paid	(42,728,000)	0	0	0	0	(42,728,000)
Unrealized gain (loss) on marketable securities, net of tax	(8,000)	0	0	0	(8,000)	0
Net income	40,402,000	0	0	0	0	40,402,000
Balance at Dec. 31, 2012	240,905,000	308,000	133,207,000	(133,950,000)	16,000	241,324,000
Balance (shares) at Dec. 31, 2012		30,758,000
Purchase of treasury stock, at cost	(17,229,000)	0	0	(17,229,000)	0	0
Repurchase of treasury stock (in shares)	479,903
Exercise of stock options	1,448,000	0	(790,000)	2,238,000	0	0
Income tax benefit from stock-based compensation, net	1,259,000	0	1,259,000	0	0	0
Stock-based compensation expense	11,103,000	0	1,798,000	9,305,000	0	0
Other	1,127,000	0	179,000	948,000	0	0
Dividends paid	(17,386,000)	0	0	0	0	(17,386,000)
Unrealized gain (loss) on marketable securities, net of tax	13,000	0	0	0	13,000	0
Net income	32,032,000	0	0	0	0	32,032,000
Balance at Dec. 31, 2013	253,272,000	308,000	135,653,000	(138,688,000)	29,000	255,970,000
Balance (shares) at Dec. 31, 2013		30,758,000
Purchase of treasury stock, at cost	(20,769,000)	0	0	(20,769,000)	0	0
Repurchase of treasury stock (in shares)	580,804
Exercise of stock options	279,000	0	(180,000)	459,000	0	0
Income tax benefit from stock-based compensation, net	488,000	0	488,000	0	0	0
Stock-based compensation expense	11,053,000	0	1,592,000	9,461,000	0	0
Other	1,288,000	0	216,000	1,072,000	0	0
Dividends paid	(69,493,000)	0	0	0	0	(69,493,000)
Unrealized gain (loss) on marketable securities, net of tax	(26,000)	0	0	0	(26,000)	0
Net income	28,004,000	0	0	0	0	28,004,000
Balance at Dec. 31, 2014	$ 204,096,000	$ 308,000	$ 137,769,000	$ (148,465,000)	$ 3,000	$ 214,481,000
Balance (shares) at Dec. 31, 2014		30,758,000

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	20,000	20,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	60,000	60,000
Common stock, issued (in shares)	30,758	30,758
Treasury stock, shares (in shares)	5,425	5,175

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Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes.  Significant components of the net deferred tax assets and net deferred tax liabilities as reflected on the Consolidated Balance Sheets are as follows:

	December 31,
	2014			2013
	(in thousands)
Deferred tax liabilities:
Prepaid assets	$	(9,291	)	$	(5,084	)
Depreciation	(8,083		)	(8,937		)
Software development costs	(2,252		)	(2,739		)
Total deferred tax liabilities	(19,626		)	(16,760		)
Deferred tax assets:
Accrued incentive compensation	7,204			3,909
Net operating loss carryforward	1,556			1,773
Workers’ compensation accruals	6,308			5,568
Accrued rent	1,058			1,008
Stock-based compensation	3,615			3,742
Intangibles	1,575			837
Minority investment impairment	1,003			991
Other	551			412
Total deferred tax assets	22,870			18,240
Valuation allowance	(1,003		)	(991		)
Total net deferred tax assets	21,867			17,249
Net deferred tax assets	$	2,241		$	489
Net current deferred tax assets	$	6,316		$	8,185
Net noncurrent deferred tax liabilities	(4,075		)	(7,696		)
	$	2,241		$	489

The components of income tax expense are as follows:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Current income tax expense:
Federal	$	18,034		$	20,476		$	29,280
State	3,322			3,512			4,351
Total current income tax expense	21,356			23,988			33,631
Deferred income tax (benefit) expense:
Federal	(1,764		)	(2,258		)	(5,363		)
State	31			(30		)	(380		)
Total deferred income tax benefit	(1,733		)	(2,288		)	(5,743		)
Total income tax expense	$	19,623		$	21,700		$	27,888

As a result of nonqualified stock option exercises, disqualifying dispositions of certain employee incentive stock options and vesting of restricted stock awards, we had a net income tax benefit of $0.5 million in 2014, $1.3 million in 2013 and $1.8 million in 2012.  The excess income tax benefit is reported as a component of additional paid-in capital.

The reconciliation of income tax expense computed at U.S. federal statutory tax rates to the reported income tax expense from continuing operations is as follows:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Expected income tax expense at 35%	$	16,670		$	18,806		$	23,901
State income taxes, net of federal benefit	2,204			2,286			2,497
Nondeductible expenses	1,939			1,993			1,663
Section 199 benefits	(592		)	(2,531		)	—
Expense Management non-cash impairment	—			797			—
Valuation allowance related to TRE impairment	—			938			—
Research and development credit	(455		)	(534		)	—
Other, net	(143		)	(55		)	(173		)
Reported total income tax expense	$	19,623		$	21,700		$	27,888

We have developed customer facing software that is included as a component of the PEO HR Outsourcing solutions. In addition, several Strategic Business Units (“SBU”) market both software products and cloud based offerings. Prior to 2013, we were not certain that these software offerings met the IRS “Qualified Production Activities Deduction” requirements. As a result, no such tax deduction was taken on the annual tax returns filed with the IRS. However, in 2013, we engaged tax specialists to conduct a study of our various software offerings to assess the qualifications with IRS guidelines. Based on this study, we concluded certain of our software offerings met the IRS requirements, resulting in amendments to previously filed open year tax returns. Accordingly, in 2013 we recognized $2.0 million in tax benefits for the years 2009 to 2012, and $0.5 million in tax benefits for the 2013 tax year.

At December 31, 2014, we have net operating loss carryforwards totaling approximately $4.2 million that expire from 2023 to 2030 related to our acquisition of ExpensAble.

We recognize interest and penalties related to uncertain tax positions in income tax expense.  As of December 31, 2014, 2013 and 2012, we made no provisions for interest or penalties related to uncertain tax positions.  The tax years 2011 through 2014 remain open to examination by the Internal Revenue Service of the United States. The tax years 2010 through 2014 remain open to examination by various state tax authorities.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2014	Feb. 03, 2015	Jun. 30, 2014
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	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 749,000,000
Entity Common Stock, Shares Outstanding		25,338,512
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2014

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Stockholders' Equity

12 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity

10. Stockholders’ Equity

Repurchase Program

Our Board of Directors (the “Board”) has authorized a program to repurchase up to 15,500,000 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 or other factors.  We repurchased 580,804 shares under the Repurchase Program during 2014.  In addition, 112,458 shares were withheld during 2014 to satisfy minimum tax withholding obligations for the vesting of restricted stock awards.  These purchases are not subject to the Repurchase Program.  During 2013, we repurchased 479,903 shares under the Repurchase Program and 116,931 shares were withheld to satisfy minimum tax withholding obligations for the vesting of restricted stock awards.  As of December 31, 2014, we were authorized to repurchase an additional 768,765 shares under the Repurchase Program.  Shares repurchased under the Repurchase Program and shares withheld to satisfy minimum tax withholding obligations for the vesting of restricted stock awards are recorded in treasury.

Dividends

The Board declared quarterly dividends in 2014 and 2013 as follows:

	2014			2013
	(amounts per share)
First quarter	$	0.17		$	0.17
Second quarter	0.19			0.17
Third quarter	0.19			0.17
Fourth quarter	2.19		(1)	0.17

____________________________________

⁽¹⁾    Includes a $2.00 per share special dividend

During 2014 and 2013, we paid a total of $69.5 million and $17.4 million, respectively in dividends. The dividends paid in 2014 includes a one-time special dividend of $50.7 million.

Preferred Stock

At December 31, 2014, 20 million shares of preferred stock were authorized, of which 600,000 shares were designated as Series A Junior Participating Preferred Stock that is reserved for issuance on exercise of preferred stock purchase rights under our Share Purchase Rights Plan (the “Rights Plan”).  Each issued share of our common stock has one preferred stock purchase right attached to it.  No preferred shares have been issued and the rights are not currently exercisable.  The Rights Plan expires on November 13, 2017.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Statement [Abstract]
Revenues (gross billings of $14.187 billion, $13.462 billion and $12.992 billion, less worksite employee payroll cost of $11.829 billion, $11.206 billion and $10.833 billion, respectively)	$ 2,357,788	$ 2,256,112	$ 2,158,824
Direct costs:
Payroll taxes, benefits and workers’ compensation costs	1,953,983	1,862,861	1,776,603
Gross profit	403,805	393,251	382,221
Operating expenses:
Salaries, wages and payroll taxes	200,118	181,444	168,807
Stock-based compensation	11,053	11,103	9,814
Commissions	15,285	14,581	14,515
Advertising	22,183	23,795	21,586
General and administrative expenses	82,618	81,699	77,564
Impairment charges	3,687	3,342	4,191
Depreciation and amortization	21,387	21,064	18,250
Total operating expenses	356,331	337,028	314,727
Operating income	47,474	56,223	67,494
Other income (expense):
Interest, net	106	158	609
Other, net	47	(2,649)	187
Income before income tax expense	47,627	53,732	68,290
Income tax expense	19,623	21,700	27,888
Net income	28,004	32,032	40,402
Less distributed and undistributed earnings allocated to participating securities	(2,002)	(916)	(1,224)
Net income allocated to common shares	$ 26,002	$ 31,116	$ 39,178
Basic net income per share of common stock (in dollars per share)	$ 1.05	$ 1.25	$ 1.57
Diluted net income per share of common stock (in dollars per share)	$ 1.05	$ 1.25	$ 1.56

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Deposits

12 Months Ended

Dec. 31, 2014

Deposits [Abstract]

Deposits

4. Deposits

The contractual arrangement with United for health insurance coverage requires us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported as long-term prepaid health insurance. Please read Note 1, “Accounting Policies,” for a discussion of our accounting policies for health insurance costs.

As of December 31, 2014, we had $3.7 million in health insurance long-term deposits. Please read Note 1 “Accounting Policies” for a discussion of our accounting policies for health insurance costs.

As of December 31, 2014, we had $113.9 million in workers’ compensation long-term deposits. Please read Note 1 “Accounting Policies” for a discussion of our accounting policies for workers’ compensation costs.

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Accounts Receivable

12 Months Ended

Dec. 31, 2014

Accounts Receivable Additional Disclosures [Abstract]

Accounts Receivable

3. Accounts Receivable

Our accounts receivable is primarily composed of trade receivables and unbilled receivables.  Our trade receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $1.2 million and $0.9 million as of December 31, 2014 and 2013, respectively.  We establish an allowance for doubtful accounts based on management’s assessment of the collectability of specific accounts and by making a general provision for other potentially uncollectible amounts.

We make an accrual at the end of each accounting period for our obligations associated with the earned but unpaid wages of our worksite employees and for the accrued gross billings associated with such wages. These accruals are included in accrued worksite employee payroll cost and unbilled accounts receivable; however, these amounts are presented net in the Consolidated Statements of Operations. We generally require clients to pay invoices for service fees no later than one day prior to the applicable payroll date. As such, we generally do not require collateral. Client prepayments directly attributable to unbilled accounts receivable have been netted against such receivables as the gross billings have been earned and the payroll cost has been incurred, thus we have the legal right of offset for these amounts. Unbilled accounts receivable consisted of the following:

	December 31,
	2014			2013
	(in thousands)
Accrued worksite employee payroll cost	$	192,396		$	173,801
Unbilled revenues	55,645			50,286
Customer prepayments	(87,887		)	(24,459		)
Unbilled accounts receivable	$	160,154		$	199,628

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

15. Quarterly Financial Data (Unaudited)

	Quarter ended
	March 31		June 30			Sept. 30		Dec. 31
	(in thousands, except per share amounts)
2014
Revenues	$	636,999	$	564,621		$	560,303	$	595,865
Gross profit	106,176		95,453			100,817		101,359
Operating income	16,591		3,414		(1)	14,460		13,009		(2)
Net income	9,564		1,891			8,385		8,164
Basic net income per share	0.37		0.07			0.33		0.27		(3)
Diluted net income per share	0.37		0.07			0.33		0.27		(3)
2013
Revenues	$	611,836	$	547,274		$	539,869	$	557,133
Gross profit	108,118		97,746			97,409		89,978
Operating income	22,009		10,228			17,112		6,874		(4)
Net income	13,173		3,488		(5)	10,082		5,289		(6)
Basic net income per share	0.51		0.14			0.39		0.21
Diluted net income per share	0.51		0.14			0.39		0.21

____________________________________

⁽¹⁾  Includes a non-cash impairment charge in the second quarter of 2014 of $2.5 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

⁽²⁾  Includes a $1.2 million non-cash charge in the fourth quarter of 2014. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.

⁽³⁾  Includes the impact of dividends exceeding earnings under the two-class method, resulting in a $0.05 earnings per share decrease in the fourth quarter of 2014.  Please read Note 12, “Net Income Per Share,” for additional information.

⁽⁴⁾  Includes a non-cash impairment charge in the fourth quarter of 2013 of $3.3 million. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.

⁽⁵⁾  Includes a non-cash impairment charge in the second quarter of 2013 of $2.7 million. Please read Note 6 to the Consolidated Financial Statements, “Other Assets,” for additional information.

⁽⁶⁾  Includes a $2.0 million tax benefit related to tax years 2009 through 2012. Please read Note 9 to the Consolidated Financial Statements, “Income Taxes,” for additional information.

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Incentive Plans

12 Months Ended

Dec. 31, 2014

Share-based Compensation [Abstract]

Incentive Plans

11. Incentive Plans

The Insperity, Inc. 2001 Incentive Plan, as amended, and the 2012 Incentive Plan, as amended, (collectively, the “Incentive Plans”) provide for options and other stock-based awards that have been and may be granted to eligible employees and non-employee directors of Insperity or its subsidiaries.  The 2012 Incentive Plan is currently the only plan under which new stock-based awards may be granted.  The Incentive Plans are administered by the Compensation Committee of the Board of Directors (the “Committee”).  The Committee has the power to determine which eligible employees will receive awards, the timing and manner of the grant of such awards, the exercise price of stock options (which may not be less than market value on the date of grant), the number of shares and all of the terms of the awards.  The Board may at any time amend or terminate the Incentive Plans.  However, no amendment that would impair the rights of any participant, with respect to outstanding grants, can be made without the participant’s prior consent.  Stockholder approval of amendments to the Incentive Plans is necessary only when required by applicable law or stock exchange rules.  At December 31, 2014, 1,299,470 shares of common stock were available for future grants under the 2012 Incentive Plan.  The Incentive Plans permit stock options, including nonqualified stock options and options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, stock awards, phantom stock awards, stock appreciation rights, performance units, and other stock-based awards and cash awards, all of which may or may not be subject to the achievement of one or more performance objectives.  The purposes of the Incentive Plans generally are to retain and attract persons of training, experience and ability to serve as employees of Insperity and its subsidiaries and to serve as non-employee directors of Insperity, to encourage the sense of proprietorship of such persons and to stimulate the active interest of such persons in the development and financial success of Insperity and its subsidiaries.

The Insperity Nonqualified Stock Option Plan (the “Nonqualified Plan”) provided for options to purchase shares of Insperity’s common stock that were granted to employees who were not officers.  An aggregate of 3,600,000 shares of common stock of Insperity were authorized to be issued under the Nonqualified Plan.  As of December 31, 2014, there were no outstanding unexercised shares under the Nonqualified Plan, and although there are unissued shares remaining, no new awards may be granted under the Nonqualified Plan.  The Committee may at any time terminate or amend the Nonqualified Plan.

We recognized $11.1 million, $11.1 million and $9.8 million of compensation expense associated with the restricted stock awards in 2014, 2013 and 2012, respectively. We recognized $4.6 million, $4.5 million and $4.0 million of tax benefits associated with stock-based compensation in 2014, 2013 and 2012, respectively.

Stock Option Awards

The following is a summary of stock option award activity for 2014:

	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Outstanding - December 31, 2013	61		$	24.24
Granted	—		—
Exercised	(18	)	15.28
Canceled	—		—
Outstanding - December 31, 2014	43		28.04		5.3	$	253
Exercisable - December 31, 2014	43		28.04		5.3	$	253

The intrinsic value of options exercised during the year was $0.3 million in 2014, $1.5 million in 2013 and $2.5 million in 2012.

Restricted Stock Awards

Restricted common shares, under equity plan accounting, are generally measured at fair value on the date of grant based on the number of shares granted, estimated forfeitures and the quoted price of the common stock.  Such value is recognized as compensation expense over the corresponding vesting period, three to five years for our shares currently outstanding.  The total fair value of shares vested during the years ended December 31, 2014, 2013, and 2012 was $10.8 million, $12.3 million and $11.7 million, respectively.  The weighted average grant date fair value of restricted stock awards during the years ended December 31, 2014, 2013 and 2012 was $28.22, $29.25 and $30.47, respectively.  As of December 31, 2014, unrecognized compensation expense associated with the unvested shares outstanding was $12.7 million and is expected to be recognized over a weighted average period of 21 months.

The following is a summary of restricted stock award activity for 2014:

	Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested - December 31, 2013	740		$	29.66
Granted	410		28.22
Vested	(382	)	29.79
Canceled/Forfeited	(28	)	28.45
Non-vested - December 31, 2014	740		28.84

Employee Stock Purchase Plan

Our employee stock purchase plan (the “ESPP”) enables employees to purchase shares of Insperity stock at a 5% discount. The ESPP is a non-compensatory plan under generally accepted accounting principles of stock-based compensation. As a result, no compensation expense is recognized in conjunction with this plan. Approximately 37,000, 34,000 and 37,000 shares were issued under the ESPP during fiscal years 2014, 2013 and 2012, respectively.

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Acquisitions

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Acquisitions

7. Acquisitions

We account for our acquisitions in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on the fair value at the date of purchase.  All acquisition related costs are expensed as incurred and recorded in operating expenses.  We include operations associated with acquisitions from the date of acquisition forward.

Included in our 2012 Consolidated Statements of Cash Flows are payments related to our 2011 acquisition of HumanConcepts and our 2010 acquisition of Galaxy Technologies, Inc. During 2012, we paid $1.2 million related to the HumanConcepts acquisition and $1.4 million related to Galaxy Technologies, Inc. acquisition, based on the terms of their respective agreements.

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

5. Goodwill and Other Intangible Assets

We perform our annual asset impairment test as of December 31, the end of our calendar year. During the fourth quarters of 2014, 2013 and 2012, we performed step one of the annual impairment test for each of our reporting units. We concluded the estimated fair value of our Expense Management unit in 2013 and our Performance Management unit in 2012, were below their respective carrying values.

Additionally, any time impairment indicators are identified, we perform an interim impairment test. During the second quarter of 2014, impairment indicators were identified in our Employment Screening business, due to changes in management, the reporting unit’s financial results and the loss of certain customers.

The declines in the estimated fair values of Employment Screening, Expense Management and Performance Management resulted primarily from lower projected revenue growth rates and profitability levels. Upon completion of step two of the goodwill impairment tests, we recognized goodwill and other intangible asset impairments of $2.5 million in 2014 related to our Employment Screening business unit, $3.3 million in 2013 related to our Expense Management reporting unit and $4.2 million in 2012 related to our Performance Management reporting unit. The fair values of the reporting units were estimated using a discounted cash flow model. The material assumptions used in the model included the weighted average cost of capital and long-term growth rates.  We consider this a Level 3 fair value measure.

The following table presents the gross carrying amount and accumulated amortization for each class of intangible assets and the gross carrying amount and accumulated impairment for goodwill:

	December 31, 2013			Twelve Months Ended   December 31, 2014						December 31, 2014
	Balance			Impairment			Amortization Expense			Balance
	(in thousands)
Gross carrying amount:
Trademarks	$	1,230		$	(1,010	)	$	—		$	220
Customer relationships	7,784			(1,392		)	—			6,392
Aggregate goodwill acquired:
Goodwill	21,156			—			—			21,156
Total	$	30,170		$	(2,402	)	$	—		$	27,768
Accumulated amortization:
Trademarks	$	(680	)	$	695		$	(77	)	$	(62	)
Customer relationships	(4,340		)	976			(1,415		)	(4,779		)
Accumulated impairment:
Goodwill	(6,716		)	(1,754		)	—			(8,470		)
Total	$	(11,736	)	$	(83	)	$	(1,492	)	$	(13,311	)
Net carrying amount:
Trademarks	$	550		$	(315	)	$	(77	)	$	158
Customer relationships	3,444			(416		)	(1,415		)	1,613
Goodwill	14,440			(1,754		)	—			12,686
Total goodwill and other intangible assets	$	18,434		$	(2,485	)	$	(1,492	)	$	14,457

Our amortization expense related to purchased intangible assets other than goodwill was $1.5 million in 2014, $2.0 million in 2013 and $1.8 million in 2012, and is estimated to be $0.9 million in 2015, $0.5 million in 2016, $0.3 million in 2017, $36,000 in 2018 and $19,000 in 2019.

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Other Assets (Notes)

12 Months Ended

Dec. 31, 2014

Other Assets [Abstract]

Cost-method Investments, Description [Text Block]

6. 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 in 2013, which is included in other income (expense) in our Consolidated Statements of Operations. Due to federal income tax limitations on capital losses, no tax benefit associated with the impairment was recognized.

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Revolving Credit Facility

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Revolving Credit Facility

8. Revolving Credit Facility

On September 15, 2011, we entered into a four-year, $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”). In February 2015, the credit facility was increased from $100 million to $125 million and the expiration date was extended from September 2015 to February 2020. The Facility is available for working capital and general corporate purposes, including acquisitions, and issuances of letters of credit. Our obligations under the Facility are secured by 65% of the stock of our captive insurance subsidiary and are guaranteed by all of our domestic subsidiaries. At December 31, 2014, we had not drawn on the Facility. As of December 31, 2014, we had an outstanding $0.6 million letter of credit issued under the Facility.

Borrowings under the Facility bear interest at an alternate base rate or LIBOR, at our option, plus an applicable margin.  Depending on our leverage ratio, the applicable margin varies (i) in the case of LIBOR loans, from 2.00% to 2.75% and (ii) in the case of alternate base rate loans, from 0.00% to 0.75%.  The alternate base rate is the highest of (i) the prime rate most recently published in The Wall Street Journal, (ii) the federal funds rate plus 0.50% and (iii) the 30-day LIBOR rate plus 2.00%.  We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25%. Interest expense and unused commitment fees are recorded in other income (expense).

The Facility contains both affirmative and negative covenants, which we believe are customary for arrangements of this nature.  Covenants include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire our capital stock, acquire the capital stock or assets of another business, make investments and pay dividends.  In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio.  In December 2014 and 2012, the Credit Agreement was amended to modify the interest coverage ratio covenant to exclude the impact of special dividends paid of $50.7 million and $25.7 million, respectively.  We were in compliance with all financial covenants under the Credit Agreement at December 31, 2014.

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Future non-cancelable purchase and service obligations

We enter into non-cancelable fixed purchase and service obligations in the ordinary course of business.  These arrangements primarily consist of advertising commitments and service contracts.  At December 31, 2014, future non-cancelable purchase and service obligations greater than $100,000 and one year were as follows (in thousands):

2015	$	10,224
2016	7,899
2017	4,179
2018	2,628
2019	1,774
Thereafter	2,693
Total obligations	$	29,397

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Leases

12 Months Ended

Dec. 31, 2014

Leases [Abstract]

Leases

13. Leases

We lease various office facilities, equipment and vehicles under operating lease arrangements, some of which contain rent escalation clauses.  Most of the leases contain purchase and/or renewal options at fair market and fair rental value, respectively.  Rental expense relating to all operating leases was $13.4 million, $13.9 million and $13.8 million in 2014, 2013 and 2012, respectively.  At December 31, 2014, future minimum rental payments under noncancelable operating leases are as follows:

	Operating Leases
	(in thousands)
2015	$	13,364
2016	11,821
2017	8,534
2018	6,822
2019	4,189
Thereafter	5,312
Total minimum lease payments	$	50,042

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Cash, Cash Equivalents and Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2014

Cash, Cash Equivalents and Marketable Securities [Abstract]

Summary of investments in cash, cash equivalents and marketable securities

The following table summarizes our investments in cash equivalents and marketable securities held by investment managers and overnight investments:

	December 31,
	2014			2013
	(in thousands)
Overnight holdings:
Money market funds (cash equivalents)	$	271,840		$	192,040
Investment holdings:
Money market funds (cash equivalents)	14,125			42,913
Marketable securities	28,631			46,340
	314,596			281,293
Cash held in demand accounts	20,369			23,054
Outstanding checks	(29,878		)	(32,252		)
Total cash, cash equivalents and marketable securities	$	305,087		$	272,095
Cash and cash equivalents	$	276,456		$	225,755
Marketable securities	28,631			46,340
	$	305,087		$	272,095

Summary of fair value measurements of financial assets

The following tables summarize the levels of fair value measurements of our financial assets:

	Fair Value Measurements
			(in thousands)
	December 31, 2014		Level 1		Level 2		Level 3
Money market funds	$	285,965	$	285,965	$	—	$	—
Municipal bonds	28,631		—		28,631		—
Total	$	314,596	$	285,965	$	28,631	$	—

	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	$	—

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)
December 31, 2014
Municipal bonds	$	28,626	$	16	$	(11	)	$	28,631
December 31, 2013
Municipal bonds	$	46,290	$	51	$	(1	)	$	46,340

Contractual maturities of marketable securities

As of December 31, 2014, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	12,728	$	12,737
One to five years	15,898		15,894
Total	$	28,626	$	28,631

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Commitments and Contingencies (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Disclosure threshold for future non-cancelable purchase and service obligations	greater than $100,000 and one year
Non-cancelable purchase and service obligations [Abstract]
2015	$ 10,224,000
2016	7,899,000
2017	4,179,000
2018	2,628,000
2019	1,774,000
Thereafter	2,693,000
Total obligations	29,397,000
Texas Sales and Use Tax Assessment [Abstract]
Texas Sales and Use Tax Assessment		933,000	782,000
Massachusetts Tax Assessment [Abstract]
Provision for interest or penalties related to uncertain tax positions			$ 2,500,000

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Other Assets (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Dec. 31, 2011
Other Assets [Abstract]
Cost Method Investments		$ 2.8
TRE Impairment	$ 2.7

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CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Statement [Abstract]
Gross billings	$ 14,187	$ 13,462	$ 12,992
Worksite employee payroll costs	$ 11,829	$ 11,206	$ 10,833

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Cash, Cash Equivalents and Marketable Securities

12 Months Ended

Dec. 31, 2014

Cash, Cash Equivalents and Marketable Securities [Abstract]

Cash, Cash Equivalents and Marketable Securities

2. Cash, Cash Equivalents and Marketable Securities

The following table summarizes our investments in cash equivalents and marketable securities held by investment managers and overnight investments:

	December 31,
	2014			2013
	(in thousands)
Overnight holdings:
Money market funds (cash equivalents)	$	271,840		$	192,040
Investment holdings:
Money market funds (cash equivalents)	14,125			42,913
Marketable securities	28,631			46,340
	314,596			281,293
Cash held in demand accounts	20,369			23,054
Outstanding checks	(29,878		)	(32,252		)
Total cash, cash equivalents and marketable securities	$	305,087		$	272,095
Cash and cash equivalents	$	276,456		$	225,755
Marketable securities	28,631			46,340
	$	305,087		$	272,095

Our cash and overnight holdings fluctuate based on the timing of the client’s payroll processing cycle.  Included in the cash balance as of December 31, 2014 and December 31, 2013, are $152.1 million and $143.0 million, respectively, in withholdings associated with federal and state income taxes, employment taxes and other payroll deductions, as well as $87.9 million and $24.5 million, respectively, in client prepayments.

We account for our financial assets in accordance with ASC 820, Fair Value Measurement.  This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  The fair value measurement disclosures are grouped into three levels based on valuation factors:

• Level 1 - quoted prices in active markets using identical assets

• Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs

• Level 3 - significant unobservable inputs

The following tables summarize the levels of fair value measurements of our financial assets:

	Fair Value Measurements
			(in thousands)
	December 31, 2014		Level 1		Level 2		Level 3
Money market funds	$	285,965	$	285,965	$	—	$	—
Municipal bonds	28,631		—		28,631		—
Total	$	314,596	$	285,965	$	28,631	$	—

	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)
December 31, 2014
Municipal bonds	$	28,626	$	16	$	(11	)	$	28,631
December 31, 2013
Municipal bonds	$	46,290	$	51	$	(1	)	$	46,340

As of December 31, 2014, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	12,728	$	12,737
One to five years	15,898		15,894
Total	$	28,626	$	28,631

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Accounts Receivable (Tables)

12 Months Ended

Dec. 31, 2014

Accounts Receivable Additional Disclosures [Abstract]

Unbilled accounts receivable

We make an accrual at the end of each accounting period for our obligations associated with the earned but unpaid wages of our worksite employees and for the accrued gross billings associated with such wages. These accruals are included in accrued worksite employee payroll cost and unbilled accounts receivable; however, these amounts are presented net in the Consolidated Statements of Operations. We generally require clients to pay invoices for service fees no later than one day prior to the applicable payroll date. As such, we generally do not require collateral. Client prepayments directly attributable to unbilled accounts receivable have been netted against such receivables as the gross billings have been earned and the payroll cost has been incurred, thus we have the legal right of offset for these amounts. Unbilled accounts receivable consisted of the following:

	December 31,
	2014			2013
	(in thousands)
Accrued worksite employee payroll cost	$	192,396		$	173,801
Unbilled revenues	55,645			50,286
Customer prepayments	(87,887		)	(24,459		)
Unbilled accounts receivable	$	160,154		$	199,628

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Accounts Receivable (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Accounts Receivable Additional Disclosures [Abstract]
Trade receivables, allowance for doubtful accounts	$ 1,200,000	$ 900,000
Accounts receivable, due date prior to applicable payroll date	1 day
Unbilled accounts receivable [Abstract]
Accrued worksite employee payroll cost	192,396,000	173,801,000
Unbilled revenues	55,645,000	50,286,000
Customer prepayments	(87,887,000)	(24,459,000)
Unbilled accounts receivable	$ 160,154,000	$ 199,628,000

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Net Income Per Share

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Net Income Per Share

12. 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 includes 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.  We declared special dividends of $2.00 per share in 2014 and $1.00 per share in 2012. As a result, dividends exceeded earnings in both periods, which resulted in decreased earnings per share of $0.05 per share in 2014 and $0.01 per share in 2012. 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:

	Year ended December 31,
	2014			2013			2012
	(in thousands)
Net income	$	28,004		$	32,032		$	40,402
Less distributed and undistributed earnings allocated to participating securities	(2,002		)	(916		)	(1,224		)
Net income allocated to common shares	$	26,002		$	31,116		$	39,178
Weighted average common shares outstanding	24,708			24,850			25,007
Incremental shares from assumed conversions of common stock options	4			22			60
Adjusted weighted average common shares outstanding	24,712			24,872			25,067
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect	4			8			29