

3.	Cash, Cash Equivalents and Marketable Securities

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



	September 30, 2016			December 31, 2015
	(in thousands)
Overnight holdings
Money market funds (cash equivalents)	$	187,485		$	247,720
Investment holdings
Money market funds (cash equivalents)	24,070			26,048
Marketable securities	1,820			9,875
	213,375			283,643
Cash held in demand accounts	25,260			19,377
Outstanding checks	(13,265		)	(23,607		)
Total cash, cash equivalents and marketable securities	$	225,370		$	279,413

Cash and cash equivalents	$	223,550		$	269,538
Marketable securities	1,820			9,875
Total cash, cash equivalents and marketable securities	$	225,370		$	279,413

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Included in the cash, cash equivalents and marketable securities at September 30, 2016 and December 31, 2015, are $148.8 million and $185.7 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $8.7 million and $17.0 million in client prepayments, respectively.

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


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


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


•	Level 3 - significant unobservable inputs

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



	Fair Value Measurements
	(in thousands)
	September 30, 2016		Level 1		Level 2		Level 3

Money market funds	$	211,555	$	211,555	$	—	$	—
Municipal bonds	1,820		—		1,820		—
Total	$	213,375	$	211,555	$	1,820	$	—



	Fair Value Measurements
	(in thousands)
	December 31, 2015		Level 1		Level 2		Level 3

Money market funds	$	273,768	$	273,768	$	—	$	—
Municipal bonds	9,875		—		9,875		—
Total	$	283,643	$	273,768	$	9,875	$	—

The municipal bond securities valued as Level 2 investments are primarily pre-refunded municipal bonds that are secured by escrow funds containing U.S. government securities. Our valuation techniques used to measure fair value for these securities during the period consisted primarily of third party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs.

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



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(in thousands)
September 30, 2016
Municipal bonds	$	1,821	$	1	$	(2	)	$	1,820

December 31, 2015
Municipal bonds	$	9,875	$	3	$	(3	)	$	9,875

As of September 30, 2016, the contractual maturities of our marketable securities were as follows:



	Amortized Cost		Estimated Fair Value
	(in thousands)

Less than one year	$	1,155	$	1,155
One to five years	666		665
Total	$	1,821	$	1,820