Incentive Plans

12 Months Ended

Dec. 31, 2019



9.	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 (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, 2019, 2,615,253 shares of common stock were available for future grants under the 2012 Incentive Plan. The 2001 Incentive Plan only has outstanding nonqualified stock options. The 2012 Incentive Plan permits stock options, including nonqualified stock options and options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, stock awards, phantom stock awards, stock appreciation rights, performance units, and other stock-based awards and cash awards, all of which may or may not be subject to the achievement of one or more performance objectives. The purpose of the Incentive Plan generally is to retain and attract persons of training, experience and ability to serve as employees of Insperity and its subsidiaries and to serve as non-employee directors of Insperity, to encourage the sense of proprietorship of such persons and to stimulate the active interest of such persons in the development and financial success of Insperity and its subsidiaries.

We also maintain the Insperity, Inc. LTIP under the 2012 Incentive Plan. The LTIP provides for performance-based long-term compensation awards in the form of performance units to certain employees based on the achievement of pre-established performance goals. We granted performance units under the LTIP to our named executive officers and certain other officers in 2017, 2018 and 2019.

We recognized $24.0 million, $20.4 million and $24.3 million of compensation expense associated with the restricted stock and the LTIP awards in 2019, 2018 and 2017, respectively. Included in 2017, is $2.3 million of stock-based compensation associated with the acceleration of restricted stock awards from the first quarter of 2018 to December 2017 in order to maximize our tax deduction, which would have been limited under the 2017 Tax Reform Act. We recognized $4.9 million, $5.3 million and $8.5 million of tax benefits associated with stock-based compensation in 2019, 2018 and 2017, respectively.

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 years to five years for our shares currently outstanding. The total fair value of shares vested during the years ended December 31, 2019, 2018, and 2017 was $39.7 million, $1.2 million and $46.0 million, respectively. The weighted average grant date fair value of restricted stock awards granted during the years ended December 31, 2019, 2018 and 2017 was $124.04, $65.98 and $42.15, respectively. As of December 31, 2019, unrecognized compensation expense associated with the unvested shares outstanding was $23.9 million and is expected to be recognized over a weighted average period of 22 months.

The following is a summary of restricted stock award activity for 2019:



	Shares (in thousands)		Weighted Average Grant Date Fair Value

Non-vested - December 31, 2018	582		$	49.48
Granted	200		124.04
Vested	(320	)	43.75
Canceled	(19	)	77.83
Non-vested - December 31, 2019	443		$	86.10

Long-Term Incentive Program Awards

Each performance unit represents the right to receive common shares at a future date based on our performance against specified targets. The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance metrics to the specified targets, which can range from 0% to 200% of the targeted amounts. A performance unit may be comprised of either a performance based award or a market-based award. For performance based awards, performance units have a vesting schedule of three years and compensation expense is recognized based on the number of common shares expected to be issued and the market price per common share on the date of grant. Over the performance period, the number of shares expected to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets. For market-based awards, performance units vest at the end of a three-year period assuming continued employment and achievement of market-based performance goals. The fair value of market-based performance awards was determined through the use of the Monte Carlo simulation method. The compensation expense for the LTIP awards is recognized on a straight-line basis over the vesting terms.

The following is a summary of LTIP award activity, at 100% of targeted amount, for 2019:



	Number of Performance Units (in thousands)		Weighted Average Grant Date Fair Value

Unvested at December 31, 2018	426		$	46.35
Granted	59		139.71
Vested	(207	)	29.57
Canceled	(6	)	61.47
Unvested at December 31, 2019	272		$	79.95

The determination of achievement results and corresponding vesting of the 2016 LTIP awards occurred in February 2019 resulting in the recipients receiving approximately 352,000 shares of common stock with a fair value $45.1 million. As of December 31, 2019, we estimate that approximately 211,000, 130,000 and 21,000 shares will vest with $0.3 million, $3.2 million and $1.9 million in unamortized compensation expense related to the 2017, 2018 and 2019 LTIP grants, respectively.

Employee Stock Purchase Plan

Our employee stock purchase plan (the “ESPP”) enables employees to purchase shares of Insperity stock at a 5% discount. 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 29,000, 30,000 and 38,000 shares were issued from treasury under the ESPP during fiscal years 2019, 2018 and 2017, respectively.