10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the quarterly period ended September 30, 2012.

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the transition period from __________to __________

Commission File No. 1-13998

Insperity, Inc.

(Exact name of registrant as specified in its charter)

Delaware	76-0479645
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

19001 Crescent Springs Drive
Kingwood, Texas	77339
(Address of principal executive offices)	(Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No o

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

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

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

As of October 25, 2012, 25,654,217 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS

Part I

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31
Part II
Item 1.	Legal Proceedings	32
Item 1a.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35

PART I

ITEM 1. FINANCIAL STATEMENTS

INSPERITY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

ASSETS

	September 30, 2012			December 31, 2011
	(Unaudited)
Current assets:
Cash and cash equivalents	$	202,218		$	211,208
Restricted cash		46,069			44,737
Marketable securities		51,702			56,987
Accounts receivable, net:
Trade		2,255			7,893
Unbilled		198,197			158,508
Other		2,656			4,532
Prepaid insurance		23,739			21,300
Other current assets		8,133			11,488
Income taxes receivable		—			2,902
Deferred income taxes		940			3,233
Total current assets		535,909			522,788
Property and equipment:
Land		3,653			3,653
Buildings and improvements		69,868			67,496
Computer hardware and software		78,836			76,105
Software development costs		35,431			32,699
Furniture and fixtures		36,595			36,133
Aircraft		35,879			35,866
		260,262			251,952
Accumulated depreciation and amortization		(167,335	)		(159,008	)
Total property and equipment, net		92,927			92,944
Other assets:
Prepaid health insurance		9,000			9,000
Deposits – health insurance		3,000			2,640
Deposits – workers’ compensation		57,588			52,320
Goodwill and other intangible assets, net		27,131			28,433
Other assets		4,879			4,134
Total other assets		101,598			96,527
Total assets	$	730,434		$	712,259

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INSPERITY, INC.

CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY

	September 30, 2012			December 31, 2011
	(Unaudited)
Current liabilities:
Accounts payable	$	3,088		$	5,085
Payroll taxes and other payroll deductions payable		107,932			168,652
Accrued worksite employee payroll cost		174,264			130,317
Accrued health insurance costs		22,522			9,427
Accrued workers’ compensation costs		48,369			46,548
Accrued corporate payroll and commissions		21,819			22,383
Other accrued liabilities		13,975			13,814
Income taxes payable		3,987			—
Total current liabilities		395,956			396,226
Noncurrent liabilities:
Accrued workers’ compensation costs		63,463			60,054
Deferred income taxes		10,768			10,772
Total noncurrent liabilities		74,231			70,826
Commitments and contingencies
Stockholders’ equity:
Common stock		309			309
Additional paid-in capital		136,688			135,871
Treasury stock, at cost		(138,784	)		(134,647	)
Accumulated other comprehensive income, net of tax		70			24
Retained earnings		261,964			243,650
Total stockholders’ equity		260,247			245,207
Total liabilities and stockholders’ equity	$	730,434		$	712,259

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues (gross billings of $3.068 billion, $2.835 billion, $9.339 billion and $8.454 billion, less worksite employee payroll cost of $2.556 billion, $2.363 billion, $7.712 billion and $6.973 billion, respectively)	$	511,953		$	471,821		$	1,626,386		$	1,481,105
Direct costs:
Payroll taxes, benefits and workers’ compensation costs		413,533			384,792			1,337,668			1,219,276
Gross profit		98,420			87,029			288,718			261,829
Operating expenses:
Salaries, wages and payroll taxes		44,032			39,494			127,402			117,558
Stock-based compensation		2,429			2,109			7,385			6,455
Commissions		3,358			3,399			10,299			9,750
Advertising		3,680			5,235			17,001			18,280
General and administrative expenses		21,122			18,912			61,694			57,828
Depreciation and amortization		4,659			3,786			13,336			11,335
		79,280			72,935			237,117			221,206
Operating income		19,140			14,094			51,601			40,623
Other income (expense):
Interest, net		142			245			462			829
Other, net		(3	)		(7,501	)		141			(7,497	)
		139			(7,256	)		603			(6,668	)
Income before income tax expense		19,279			6,838			52,204			33,955
Income tax expense		7,827			2,739			21,247			14,329
Net income	$	11,452		$	4,099		$	30,957		$	19,626
Less net income allocated to participating securities		(334	)		(120	)		(898	)		(582	)
Net income allocated to common shares	$	11,118		$	3,979		$	30,059		$	19,044
Basic net income per share of common stock	$	0.45		$	0.16		$	1.20		$	0.75
Diluted net income per share of common stock	$	0.45		$	0.16		$	1.20		$	0.74

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

 (Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011
Net income	$	11,452	$	4,099		$	30,957	$	19,626
Other comprehensive income:
Unrealized gain (loss) on available-for-sale securities, net of tax		12		(7	)		46		31
Comprehensive income	$	11,464	$	4,092		$	31,003	$	19,657

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2012

(in thousands)

(Unaudited)

	Common Stock Issued				Additional Paid-In			Treasury			Accumulated Other Comprehensive		Retained
	Shares		Amount		Capital			Stock			Income (Loss)		Earnings			Total
Balance at December 31, 2011		30,839	$	309	$	135,871		$	(134,647	)	$	24	$	243,650		$	245,207
Purchase of treasury stock, at cost		―		―		―			(13,770	)		—		―			(13,770	)
Exercise of stock options		―		―		(558	)		1,620			—		―			1,062
Income tax benefit from stock-based compensation, net		―		―		1,097			—			—		―			1,097
Stock-based compensation expense		—		—		199			7,186			—		—			7,385
Other		―		―		79			827			—		―			906
Dividends paid		—		—		—			—			—		(12,643	)		(12,643	)
Unrealized gain on marketable securities, net of tax		—		—		—			—			46		—			46
Net income		—		—		—			—			—		30,957			30,957
Balance at September 30, 2012		30,839	$	309	$	136,688		$	(138,784	)	$	70	$	261,964		$	260,247

See accompanying notes.

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net income	$	30,957		$	19,626
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		13,336			11,335
Loss on exchange of assets		(21	)		4,396
Amortization of marketable securities		1,827			1,535
Stock-based compensation		7,385			6,455
Deferred income taxes		2,259			(96	)
Changes in operating assets and liabilities, net of effects from acquisitions:
Restricted cash		(1,332	)		(1,608	)
Accounts receivable		(32,175	)		(20,231	)
Prepaid insurance		(2,439	)		9,796
Other current assets		3,355			(2,339	)
Other assets		(6,373	)		4,876
Accounts payable		(1,997	)		(650	)
Payroll taxes and other payroll deductions payable		(60,704	)		(40,892	)
Accrued worksite employee payroll expense		43,947			21,091
Accrued health insurance costs		13,095			(10,210	)
Accrued workers’ compensation costs		5,231			6,013
Accrued corporate payroll, commissions and other accrued liabilities		2,155			3,656
Income taxes payable/receivable		6,529			479
Total adjustments		(5,922	)		(6,394	)
Net cash provided by operating activities		25,035			13,232
Cash flows from investing activities:
Marketable securities purchases		(23,585	)		(43,607	)
Marketable securities proceeds from dispositions		—			3,907
Marketable securities proceeds from maturities		27,119			26,194
Cash exchanged for acquisitions		(1,200	)		(13,125	)
Property and equipment		(11,996	)		(23,404	)
Net cash used in investing activities		(9,662	)		(50,035	)

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INSPERITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash flows from financing activities:
Purchase of treasury stock	$	(13,770	)	$	(22,459	)
Dividends paid		(12,643	)		(11,871	)
Proceeds from the exercise of stock options		1,062			3,881
Income tax benefit from stock-based compensation		1,457			2,049
Other		(469	)		284
Net cash used in financing activities		(24,363	)		(28,116	)
Net decrease in cash and cash equivalents		(8,990	)		(64,919	)
Cash and cash equivalents at beginning of period		211,208			234,829
Cash and cash equivalents at end of period	$	202,218		$	169,910

Supplemental Cash Flow Information:

In September 2011, the Company exchanged an existing aircraft with a fair value of $4.0 million and paid an additional $10.0 million to acquire a replacement aircraft, resulting in a non-cash loss of $4.4 million, which is included in other income (expense).

See accompanying notes.

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INSPERITY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(Unaudited)

1. Basis of Presentation

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

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

We provide our Workforce Optimization solution to small and medium-sized businesses in strategically selected markets throughout the United States.  For the nine months ended September 30, 2012 and 2011, Workforce Optimization revenues from Insperity’s Texas markets represented 26% and 27%, while Workforce Optimization revenues from Insperity’s California markets represented 17% and 16%, of Insperity’s total Workforce Optimization revenues, respectively.

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

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2011. Our Consolidated Balance Sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements.  Our Consolidated Balance Sheet at September 30, 2012 and the Consolidated Statements of Operations and Comprehensive Income for the three and nine month periods ended September 30, 2012 and 2011, the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2012 and 2011, and Consolidated Statement of Stockholders’ Equity for the nine month period ended September 30, 2012, have been prepared by us without audit.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.

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

2. Accounting Policies

Health Insurance Costs

We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare (“United”), Kaiser Permanente, Blue Shield of California, HMS 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, Insperity has accounted for this plan since its inception using a partially self-funded insurance accounting model.  Accordingly, Insperity records the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”) as benefits expense in the Consolidated Statements of Operations.  The estimated incurred claims are based upon: (i) the level of claims processed during the quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan, including both active and COBRA enrollees.  Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics and other factors are incorporated into the benefits costs.

Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter.  If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Consolidated Balance Sheets.  On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Consolidated Balance Sheets.  The terms of the arrangement require Insperity 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 $2.8 million as of September 30, 2012, and is reported as a long-term asset.  As of September 30, 2012, Plan Costs were less than the net premiums paid and owed to United by $30.2 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $21.2 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2012 were $19.2 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

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Workers’ Compensation Costs

Insperity’s 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 Insperity satisfies its responsibilities.  Through September 30, 2010, Insperity bore the economic burden for the first $1 million layer of claims per occurrence and the insurance carrier was and remains responsible for the economic burden for all claims in excess of such first $1 million layer.

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

Because we bear the economic burden for claims up to the levels noted above, such claims, which are the primary component of our workers’ compensation costs, are recorded in the period incurred.  Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.  Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.

Insperity employs a third party actuary to estimate its loss development rate, which is primarily based upon the nature of worksite employees’ job responsibilities, the location of worksite employees, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends.  Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers’ compensation claims cost estimates.  During the nine months ended September 30, 2012 and 2011, Insperity reduced accrued workers’ compensation costs by $10.4 million and $8.6 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 2012 and 2011 were 0.7% and 1.2%, respectively) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

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

	Nine Months Ended September 30,
	2012			2011
	(in thousands)
Beginning balance, January 1,	$	104,791		$	96,934
Accrued claims		28,586			26,668
Present value discount		(712	)		(1,159	)
Paid claims		(23,133	)		(21,123	)
Ending balance	$	109,532		$	101,320
Current portion of accrued claims	$	46,069		$	42,812
Long-term portion of accrued claims		63,463			58,508
	$	109,532		$	101,320

The current portion of accrued workers’ compensation costs on the Consolidated Balance Sheets at September 30, 2012 includes $2.3 million of workers’ compensation administrative fees.

As of September 30, 2012 and 2011, the undiscounted accrued workers’ compensation costs were $121.7 million and $115.1 million, respectively.

At the beginning of each policy period, the insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”).  The level of claim funds is primarily based upon anticipated worksite employee payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier.  Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits, a long-term asset in our Consolidated Balance Sheets.  In the first nine months of 2012 and 2011, we received $2.5 million and $10.0 million, respectively, for the return of excess claim funds related to the ACE Program, which reduced deposits.  As of September 30, 2012, we had restricted cash of $46.1 million and deposits of $57.6 million.

Insperity’s 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 its estimate of incurred claim costs expected to be paid beyond one year are included in long-term liabilities on our Consolidated Balance Sheets.

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3.  Cash, Cash Equivalents and Marketable Securities

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

	September 30,			December 31,
	2012			2011
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	46,079		$	71,350
Investment Holdings
Money market funds (cash equivalents)		67,395			59,587
Marketable securities		51,702			56,987
		165,176			187,924
Cash held in demand accounts		102,761			113,968
Outstanding checks		(14,017	)		(33,697	)
Total cash, cash equivalents and marketable securities	$	253,920		$	268,195
Cash and cash equivalents	$	202,218		$	211,208
Marketable securities		51,702			56,987
	$	253,920		$	268,195

Our cash and overnight holdings fluctuate based on the timing of the client’s payroll processing cycle.  Included in the cash balance as of September 30, 2012 and December 31, 2011, are $96.5 million and $150.8 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $12.4 million and $10.4 million in client prepayments, respectively.

Insperity accounts for its financial assets in accordance with Accounting Standard Codification (“ASC”) 820, Fair Value Measurement.  This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  The fair value measurement disclosures are grouped into three levels based on valuation factors:

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

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

· Level 3 - significant unobservable inputs

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

	Fair Value Measurements
	(in thousands)
	September 30,
	2012		Level 1		Level 2		Level 3
Money market funds	$	113,474	$	113,474	$	—	$	—
Municipal bonds		51,702		—		51,702		—
Total	$	165,176	$	113,474	$	51,702	$	—

	Fair Value Measurements
	(in thousands)
	December 31,
	2011		Level 1		Level 2		Level 3
Money market funds	$	130,937	$	130,937	$	—	$	—
Municipal bonds		56,987		—		56,987		—
Total	$	187,924	$	130,937	$	56,987	$	—

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. Valuation techniques used by Insperity 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:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
			(in thousands)
September 30, 2012:
Municipal bonds	$	51,584	$	133	$	(15	)	$	51,702
December 31, 2011:
Municipal bonds	$	56,945	$	90	$	(48	)	$	56,987

During the periods ended September 30, 2012 and 2011, we had no realized gains or losses recognized on sales of marketable securities.

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As of September 30, 2012, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	23,513	$	23,552
One to five years		28,071		28,150
Total	$	51,584	$	51,702

4.  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”). The Facility is available for working capital and general corporate purposes, including acquisitions, and issuances of letters of credit. Insperity’s 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.  In January 2012, we issued an irrevocable standby letter of credit for $285,000 under the Facility to a state workers’ compensation agency.  At September 30, 2012, we had not drawn on the Facility.

The Facility matures on September 15, 2015.  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. We were in compliance with all financial covenants under the Credit Agreement at September 30, 2012.

5. Stockholders’ Equity

Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase Program”).  The purchases are to be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors.  During the nine months ended September 30, 2012, 407,400 shares were repurchased under the Repurchase Program and 107,228 shares not subject to the Repurchase Program were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  As of September 30, 2012, we were authorized to repurchase an additional 829,472 shares under the program.

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The Board declared quarterly dividends of $0.17 per share of common stock in the second and third quarter of 2012 and $0.15 per share of common stock in the first quarter of 2012 and each quarter of 2011, resulting in a total of $12.6 million and $11.9 million, respectively, in dividend payments made by Insperity during the first nine months of each year.

6. Net Income per Share

We utilize the two-class method to compute net income per share.  The two-class method allocates a portion of net income to participating securities, which include unvested awards of share-based payments with non-forfeitable rights to receive dividends.  Net income allocated to unvested share-based payments is excluded from net income allocated to common shares.  Basic net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period.  Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Net income	$	11,452		$	4,099		$	30,957		$	19,626
Less income allocated to participating securities		(334	)		(120	)		(898	)		(582	)
Net income allocated to common shares	$	11,118		$	3,979		$	30,059		$	19,044
Weighted average common shares outstanding		24,923			25,425			25,034			25,546
Incremental shares from assumed conversions of common stock options		57			74			63			98
Adjusted weighted average common shares outstanding		24,980			25,499			25,097			25,644
Potentially dilutive securities not included in weightedaverage share calculation due to anti-dilutive effect		41			54			33			21

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7. Commitments and Contingencies

Insperity is a defendant in various lawsuits and claims arising in the normal course of business.  Management believes it has valid defenses in these cases and is defending them vigorously.  While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.

Pennsylvania Sales Taxes

Pennsylvania imposes a sales tax on “help supply services.”  The Pennsylvania Department of Revenue (“Department”) had maintained that PEO services constitute help supply services and are subject to the tax.  On February 21, 2012, the Pennsylvania Supreme Court affirmed the Appeals Court decision in the matter titled All Staffing vs. Commonwealth of Pennsylvania, which ruled that PEO services are not subject to the Pennsylvania sales tax.

In 2010, we filed refund claims totaling $2.9 million with the Department for the sales taxes paid in error for the period April 1, 2007 through December 31, 2009.  In the second quarter of 2012, the Pennsylvania Board of Finance and Revenue approved our refund claims, and we recognized a $2.9 million receivable and a corresponding reduction to payroll tax expense, a component of direct costs.  During the third quarter of 2012, we received the $2.9 million refund.

Kemper Insurance Companies

In 2003, facing continued capital constraints and a series of downgrades from various rating agencies, our former workers’ compensation insurance carrier for the two-year period ended September 2003, Lumbermens Mutual Casualty Company, formerly known as Kemper, (“Lumbermens Mutual”) made the decision to substantially cease underwriting operations and voluntarily entered into “run-off.”   In July 2012, Lumbermens Mutual announced that an agreed order of rehabilitation had been entered against it in Cook County, Illinois.  Under the order, the Director of the Illinois Department of Insurance was vested with control over Lumbermens Mutual property and decision-making.  The Director has publicly announced that while claims will continue to be paid during the rehabilitation process, he intends to use the rehabilitation period to work with state guaranty associations to prepare for the orderly transition of claim handling responsibilities to such funds once an Order of Liquidation is entered.  After this transition process has been completed, the Director has stated that he intends to file a verified complaint for liquidation.

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

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The guaranty associations in some states, including Texas, may assert that state law allows them to recover the amount of benefits paid by the guaranty association along with associated administration and defense costs from an insured with a net worth exceeding certain specified levels.  If an Order of Liquidation is entered and if one or more guaranty associations were to seek recovery from us for open claims with Lumbermens Mutual, we may be required to repay those amounts.  While we are not certain when or if Lumbermens Mutual will be placed into liquidation or whether any state guaranty association will ultimately assert a claim against us, we intend to vigorously assert any and all available defenses to any such claim.  We estimate the outstanding claims that may be subject to such contentions from state guaranty associations to range from $2.9 million to $5.0 million as of September 30, 2012.  In the event state guaranty associations attempt to seek recovery from the Company and are successful, the Company would be required to pay such claims, which would reduce net income and could have a material adverse effect on net income in the reported period.

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

You should read the following discussion in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011, as well as our Consolidated Financial Statements and notes thereto included in this quarterly report on Form 10-Q.

New Accounting Pronouncements

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

Results of Operations

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011.

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

	Three Months Ended September 30,
	2012		2011			% Change
	(in thousands, except per share and statistical data)
Revenues (gross billings of $3.068 billion and $2.835 billion, less worksite employee payroll cost of $2.556 billion and $2.363 billion, respectively)	$	511,953	$	471,821			8.5	%
Gross profit		98,420		87,029			13.1	%
Operating expenses		79,280		72,935			8.7	%
Operating income		19,140		14,094			35.8	%
Other income (expense)		139		(7,256	)		(101.9	)%
Net income		11,452		4,099			179.4	%
Diluted net income per share of common stock		0.45		0.16			181.3	%
Statistical Data:
Average number of worksite employees paid per month		127,096		118,226			7.5	%
Revenues per worksite employee per month(1)	$	1,343	$	1,330			1.0	%
Gross profit per worksite employee per month		258		245			5.3	%
Operating expenses per worksite employee per month		208		206			1.0	%
Operating income per worksite employee per month		50		40			25.0	%
Net income per worksite employee per month		30		12			150.0	%

(1) Gross billings of $8,047 and $7,992 per worksite employee per month, less payroll cost of $6,704 and $6,662 per worksite employee per month, respectively.

Revenues

Our revenues for the third quarter of 2012 increased 8.5% over the 2011 period, primarily due to a 7.5% increase in the average number of worksite employees paid per month and a 1.0%, or $13 increase in revenues per worksite employee per month.

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By region, our Workforce Optimization revenue change from the third quarter of 2011 and distribution for the quarters ended September 30, 2012 and 2011 were as follows:

	Three Months Ended September 30,							Three Months Ended September 30,
	2012		2011		% Change			2012			2011
	(in thousands)							(% of total revenues)
Northeast	$	131,759	$	120,994		8.9	%		26.1	%		26.1	%
Southeast		47,670		46,271		3.0	%		9.5	%		10.0	%
Central		73,875		66,314		11.4	%		14.7	%		14.3	%
Southwest		140,843		134,295		4.9	%		27.9	%		28.9	%
West		110,110		96,122		14.6	%		21.8	%		20.7	%
		504,257		463,996		8.7	%		100.0	%		100.0	%
Other revenue		7,696		7,825		(1.6	)%
Total revenue	$	511,953	$	471,821		8.5	%

Other revenue is comprised primarily of revenues generated by our Adjacent Businesses.

Our Workforce Optimization growth rate is affected by three primary sources – worksite employees paid from new client sales, client retention and the net change in existing clients through worksite employee new hires and layoffs.  During the third quarter of 2012, the net change in existing clients declined, while worksite employees paid from new client sales and client retention remained consistent with the third quarter of 2011.

Gross Profit

Gross profit for the third quarter of 2012 increased 13.1% over the third quarter of 2011 to $98.4 million.  The average gross profit per worksite employee increased 5.3% to $258 per month in the 2012 period from $245 per month in the 2011 period.

Our pricing objectives attempt to maintain or improve the gross profit per worksite employee by increasing revenue per worksite employee to match or exceed changes in primary direct costs and operating expenses.  While our revenues increased 1.0% per worksite employee per month, our direct costs, which primarily include payroll taxes, benefits and workers’ compensation expenses, remained flat on a per worksite employee per month basis compared to the third quarter of 2011.

· Benefits costs – The cost of group health insurance and related employee benefits decreased $13 per worksite employee per month, or 0.5% on a cost per covered employee basis compared to the third quarter of 2011.  The percentage of worksite employees covered under our health insurance plans was 71.9% in the 2012 period compared to 73.0% in the 2011 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Health Insurance Costs,” for a discussion of our accounting for health insurance costs.

· Workers’ compensation costs – Workers’ compensation costs increased 46.9%, or $10 per worksite employee per month compared to the third quarter of 2011.  As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.57% in the 2012 period compared to 0.43% in the 2011 period.  During the 2012 period, we recorded reductions in workers’ compensation costs of $3.9 million, or 0.16% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $4.9 million, or 0.22% of non-bonus payroll costs, in the 2011 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.

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· Payroll tax costs – Payroll taxes increased 8.5%, or $4 per worksite employee per month compared to the third quarter of 2011, primarily due to the 8.2% increase in payroll costs.  Payroll taxes as a percentage of payroll cost were 6.4% in both the 2012 period and the 2011 period.

Operating Expenses

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

	Three Months Ended September 30,							Three Months Ended September 30,
	2012		2011		% Change			2012		2011		% Change
	(in thousands)							(per worksite employee per month)
Salaries, wages and payroll taxes	$	44,032	$	39,494		11.5	%	$	115	$	111		3.6	%
Stock–based compensation		2,429		2,109		15.2	%		6		6		—
Commissions		3,358		3,399		(1.2	)%		9		10		(10.0	)%
Advertising		3,680		5,235		(29.7	)%		10		15		(33.3	)%
General and administrative expenses		21,122		18,912		11.7	%		56		53		5.7	%
Depreciation and amortization		4,659		3,786		23.1	%		12		11		9.1	%
Total operating expenses	$	79,280	$	72,935		8.7	%	$	208	$	206		1.0	%

Operating expenses increased 8.7% to $79.3 million compared to $72.9 million in the third quarter of 2011.  Operating expenses in the third quarter of 2011 included $1.8 million in costs associated with the launch of our new brand.  Operating expenses per worksite employee per month increased to $208 in the 2012 period from $206 in the 2011 period.  The components of operating expenses changed as follows:

· Salaries, wages and payroll taxes of corporate and sales staff increased 11.5%, or $4 per worksite employee per month compared to the 2011 period.  This increase was primarily due to a 4.6% rise in headcount and higher incentive compensation accruals resulting from improved operating results.

· Stock-based compensation increased 15.2%, but remained flat on a per worksite employee per month basis compared to the 2011 period, 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.

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· Commissions expense decreased 1.2%, or $1 per worksite employee per month compared to the 2011 period.

· Advertising costs decreased 29.7%, or $5 per worksite employee per month compared to the 2011 period, primarily due to the non-recurrence of expenses related to our 2011 rebranding initiative.  Advertising costs in the 2011 period included $1.7 million associated with the launch of our new brand.

· General and administrative expenses increased 11.7%, or $3 per worksite employee per month compared to the 2011 period, primarily due to higher travel and training expenses.

· Depreciation and amortization expense increased 23.1%, or $1 per worksite employee per month compared to the 2011 period, primarily due to investments in our technology infrastructure made in the second half of 2011.

Other Income (Expense)

Other income was $139,000 for the third quarter of 2012 compared to other expense of $7.3 million in the third quarter of 2011, primarily due to a $4.4 million loss in the 2011 period related to the exchange of an aircraft and a $3.1 million loss in the 2011 period related to a settlement with the State of California.

Income Tax Expense

Our effective income tax rate was 40.6% in the 2012 period compared to 40.1% in the 2011 period.  Our provision for income taxes differed from the U.S. statutory rate of 35% primarily due to state income taxes and non-deductible expenses.

Operating and Net Income

Operating and net income per worksite employee per month was $50 and $30 in the 2012 period, versus $40 and $12 in the 2011 period.

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Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011.

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

		Nine Months Ended September 30,
		2012		2011		% Change
		(in thousands, except per share and statistical data)
Revenues (gross billings of $9.339 billion and $8.454 billion, less worksite employee payroll cost of $7.712 billion and $6.973 billion, respectively)	$	1,626,386	$	1,481,105		9.8	%
Gross profit		288,718		261,829		10.3	%
Operating expenses		237,117		221,206		7.2	%
Operating income		51,601		40,623		27.0	%
Other income (expense)		603		(6,668	)	(109.0	)%
Net income		30,957		19,626		57.7	%
Diluted net income per share of common stock		1.20		0.74		62.2	%
Statistical Data:
Average number of worksite employees paid per month		124,418		115,097		8.1	%
Revenues per worksite employee per month(1)	$	1,452	$	1,430		1.5	%
Gross profit per worksite employee per month		258		253		2.0	%
Operating expenses per worksite employee per month		212		214		(0.9	)%
Operating income per worksite employee per month		46		39		17.9	%
Net income per worksite employee per month		28		19		47.4	%

(1) Gross billings of $8,340 and $8,161 per worksite employee per month, less payroll cost of $6,888 and $6,731 per worksite employee per month, respectively.

Revenues

Our revenues for the nine months ended September 30, 2012, increased 9.8% over the 2011 period, primarily due to an 8.1% increase in the average number of worksite employees paid per month and a 1.5%, or $22 increase in revenues per worksite employee per month.

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By region, our Workforce Optimization revenue change from the first nine months of 2011 and distribution for the nine months ended September 30, 2012 and 2011 were as follows:

	Nine Months Ended September 30,							Nine Months Ended September 30,
	2012		2011		% Change			2012			2011
	(in thousands)							(% of total revenues)
Northeast	$	425,295	$	383,938		10.8	%		26.5	%		26.3	%
Southeast		148,552		144,120		3.1	%		9.3	%		9.8	%
Central		235,464		212,910		10.6	%		14.7	%		14.6	%
Southwest		447,617		423,139		5.8	%		27.9	%		29.0	%
West		346,387		295,678		17.2	%		21.6	%		20.3	%
		1,603,315		1,459,785		9.8	%		100.0	%		100.0	%
Other revenue		23,071		21,320		8.2	%
Total revenue	$	1,626,386	$	1,481,105		9.8	%

Other revenue is comprised primarily of revenues generated by our Adjacent Businesses.

Our Workforce Optimization growth rate is affected by three primary sources – worksite employees paid from new client sales, client retention and the net change in existing clients through worksite employee new hires and layoffs.  During the first nine months of 2012, the net change in existing clients and client retention remained consistent with the first nine months of 2011, while worksite employees paid from new client sales declined.

Gross Profit

Gross profit for the first nine months of 2012 increased 10.3% over the 2011 period to $288.7 million.  The average gross profit per worksite employee increased 2.0% to $258 per month in the 2012 period from $253 per month in the 2011 period.

Our pricing objectives attempt to maintain or improve the gross profit per worksite employee by increasing revenue per worksite employee to match or exceed changes in primary direct costs and operating expenses. While our revenues increased 1.5% per worksite employee per month, our direct costs, which primarily include payroll taxes, benefits and workers’ compensation expenses, increased 1.4% to $1,194 per worksite employee per month in the first nine months of 2012 versus $1,177 in the 2011 period.

· Benefits costs – The cost of group health insurance and related employee benefits increased $7 per worksite employee per month, or 3.1% on a cost per covered employee basis compared to the 2011 period.  The percentage of worksite employees covered under our health insurance plans was 72.3% in the 2012 period compared to 73.7% in the 2011 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Health Insurance Costs,” for a discussion of our accounting for health insurance costs.

· Workers’ compensation costs – Workers’ compensation costs increased 13.5%, or $2 per worksite employee per month compared to the first nine months of 2011.  As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.56% in the 2012 period compared to 0.54% in the 2011 period.  During the 2012 period, we recorded reductions in workers’ compensation costs of $10.4 million, or 0.15% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $8.6 million, or 0.14% of non-bonus payroll costs, in the 2011 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.

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· Payroll tax costs – Payroll taxes increased 9.9%, or $9 per worksite employee per month compared to the first nine months of 2011, primarily due to the 10.6% increase in payroll costs, partially offset by a $2.9 million (or $3 per worksite employee per month) credit related to the Pennsylvania sales tax matter.  Please read Note 7 to the Consolidated Financial Statements, “Commitments and Contingencies” for further information.  Payroll taxes as a percentage of payroll cost were 7.7% in both the 2012 and the 2011 periods.

Operating Expenses

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

	Nine Months Ended September 30,							Nine Months Ended September 30,
	2012		2011		% Change			2012		2011		% Change
	(in thousands)							(per worksite employee per month)
Salaries, wages and payroll taxes	$	127,402	$	117,558		8.4	%	$	114	$	113		0.9	%
Stock–based compensation		7,385		6,455		14.4	%		7		6		16.7	%
Commissions		10,299		9,750		5.6	%		9		10		(10.0	)%
Advertising		17,001		18,280		(7.0	)%		15		18		(16.7	)%
General and administrative expenses		61,694		57,828		6.7	%		55		56		(1.8	)%
Depreciation and amortization		13,336		11,335		17.7	%		12		11		9.1	%
Total operating expenses	$	237,117	$	221,206		7.2	%	$	212	$	214		(0.9	)%

Operating expenses increased 7.2% to $237.1 million compared to $221.2 million in the first nine months of 2011.  Operating expenses in the 2011 period included $9.7 million in costs associated with the launch of our new brand.  Operating expenses per worksite employee per month decreased to $212 in the 2012 period from $214 in the 2011 period.  The components of operating expenses changed as follows:

· Salaries, wages and payroll taxes of corporate and sales staff increased 8.4%, or $1 per worksite employee per month compared to the 2011 period.  This increase was primarily due to a 6.8% rise in headcount.

· Stock-based compensation increased 14.4%, or $1 per worksite employee per month compared to the 2011 period, 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.

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· Commissions expense increased 5.6% in the 2012 period, but decreased $1 per worksite employee per month compared to the 2011 period.

· Advertising costs decreased 7.0%, or $3 per worksite employee per month compared to the 2011 period, primarily due to the non-recurrence of $6.1 million in expenses related to our 2011 rebranding initiative, partially offset by the timing of business promotion expenses related to our Insperity ChampionshipTM professional golf tournament, which moved into the first nine months of the year during 2012.

· General and administrative expenses increased 6.7%, but decreased $1 per worksite employee per month compared to the first nine months of 2011, primarily due to increased travel, training, repairs and maintenance, partially offset by the non-recurrence of expenses related to our 2011 rebranding initiative.  General and administrative expenses in the 2011 period included $3.6 million associated with the launch of our new brand.

· Depreciation and amortization expense increased 17.7%, or $1 per worksite employee per month compared to the 2011 period, primarily due to investments in our technology infrastructure made in the second half of 2011.

Other Income (Expense)

Other income was $603,000 in the 2012 period compared to other expense of $6.7 million in the 2011 period, primarily due to a $4.4 million loss in the 2011 period related to the exchange of an aircraft and a $3.1 million loss in the 2011 period related to a settlement with the State of California.

Income Tax Expense

Our effective income tax rate was 40.7% in the 2012 period compared to 42.2% in the 2011 period.  Our provision for income taxes differed from the U.S. statutory rate of 35% primarily due to state income taxes and non-deductible expenses.

Operating and Net Income

Operating and net income per worksite employee per month was $46 and $28 in the 2012 period, versus $39 and $19 in the 2011 period.

Non-GAAP Financial Measures

Non-bonus payroll cost is a non-GAAP financial measure that excludes the impact of bonus payrolls paid to our worksite employees.  Bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program.  As a result, our management refers to non-bonus payroll cost in analyzing, reporting and forecasting our workers’ compensation costs.  Non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies.  Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.  We include these non-GAAP financial measures because we believe they are useful to investors in allowing for greater transparency related to the costs incurred under our current workers’ compensation program.  Investors are encouraged to review the reconciliation of the non-GAAP financial measures used to their most directly comparable GAAP financial measures as provided in the table below.

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	Three Months Ended							Nine Months Ended
	September 30,				%			September 30,				%
	2012		2011		Change			2012		2011		Change
	(in thousands, except per worksite employee data)
Payroll cost (GAAP)	$	2,556,114	$	2,362,941		8.2	%	$	7,712,302	$	6,972,806		10.6	%
Less: Bonus payroll cost		156,723		174,668		(10.3	)%		728,589		644,129		13.1	%
Non-bonus payroll cost	$	2,399,391	$	2,188,273		9.6	%	$	6,983,713	$	6,328,677		10.4	%
Payroll cost per worksite employee per month (GAAP)	$	6,704	$	6,662		0.6	%	$	6,888	$	6,731		2.3	%
Less: Bonus payroll cost per worksite employee per month		411		492		(16.5	)%		651		621		4.8	%
Non-bonus payroll cost per worksite employee per month	$	6,293	$	6,170		2.0	%	$	6,237	$	6,110		2.1	%

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, acquisition plans and other operating cash needs.  To meet short- and long-term liquidity requirements, including payment of direct and operating expenses and repaying debt, we rely primarily on cash from operations.  However, 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 $253.9 million in cash, cash equivalents and marketable securities at September 30, 2012, of which approximately $96.5 million was payable in early October 2012 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $12.4 million of client prepayments that were payable in October 2012.  At September 30, 2012, we had working capital of $140.0 million compared to $126.6 million at December 31, 2011.  We currently believe that our cash on hand and cash flows from operations will be adequate to meet our liquidity requirements for the remainder of 2012.  We will rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

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In September 2011, we completed the financing for a new four-year, $100 million revolving credit facility (“Facility”), with a syndicate of financial institutions.  The Facility is available for working capital and general corporate purposes, including acquisitions, and was undrawn at September 30, 2012.  Please read Note 4 to our Consolidated Financial Statements, “Revolving Credit Facility,” for additional information.

Cash Flows from Operating Activities

Net cash provided by operating activities in 2012 was $25.0 million.  Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients.  Our cash and cash equivalents, and thus our reported cash flows from operating activities are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet accounts.  These include the following:

· Timing of client payments / payrolls – We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of worksite employee payrolls and associated payroll taxes.  Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows.  For example, many worksite employees are paid on Fridays; therefore, operating cash flows decrease in the reporting periods that end on a Friday.  In the period ended September 30, 2012, the last business day of the reporting period was a Friday and client prepayments were $12.4 million and accrued worksite employee payroll was $174.3 million.  In the period ended September 30, 2011, the last business day of the reporting period was also a Friday and client prepayments were $3.9 million and accrued worksite employee payroll was $130.8 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 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 $32.1 million in the first nine months of 2012 and $27.3 million in the first nine months of 2011.  However, our estimate of workers’ compensation loss costs was $27.9 million in 2012 and $25.5 million in 2011, respectively.  During 2012 and 2011, we received $2.5 million and $10.0 million, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase to working capital.

· Medical plan funding – Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter.  Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows.  In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows.  At September 30, 2012, premiums owed and cash funded to United have exceeded Plan Costs, resulting in a $30.2 million surplus, $21.2 million of which is reflected as a current asset, and $9.0 million of which is reflected as a long-term asset on our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2012, were $19.2 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.

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· Operating results – Our net income has a significant impact on our operating cash flows.  Our net income increased 57.7% to $31.0 million in the nine months ended September 30, 2012, compared to $19.6 million in the nine months ended September 30, 2011.  Please read “Results of Operations – Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011.”

Cash Flows from Investing Activities

Net cash flows used in investing activities were $9.7 million for the nine months ended September 30, 2012, primarily due to $12.0 million in capital expenditures primarily related to our technology infrastructure.

Cash Flows from Financing Activities

Net cash flows used in financing activities were $24.4 million for the nine months ended September 30, 2012, including $13.8 million in stock repurchases and $12.6 million in dividends paid.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash equivalent short-term investments.   In addition, borrowings under our Facility bear interest at a variable market rate.  As of September 30, 2012, we had not drawn on the Facility.  Please read Note 4 to the Consolidated Financial Statements, “Revolving Credit Facility,” for additional information.  Our cash equivalent short-term investments consist primarily of overnight investments and money market funds, which are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned on these investments.  The available-for-sale marketable securities are subject to interest rate risk because these securities generally include a fixed interest rate.  As a result, the market values of these securities are affected by changes in prevailing interest rates.

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

ITEM 4. CONTROLS AND PROCEDURES.

In accordance with the Securities Exchange Act of 1934 Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2012.

There has been no change in our internal controls over financial reporting that occurred during the three months ended September 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II

ITEM 1.  LEGAL PROCEEDINGS.

Please read Note 7 to our Consolidated Financial Statements, “Commitments and Contingencies,” which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions.  Forward-looking statements involve a number of risks and uncertainties.  In the normal course of business, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time issue such forward-looking statements, either orally or in writing.  Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results.  We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made.  These statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict.  In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.  Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements.  Among the factors that could cause actual results to differ materially are: (i) continued effects of the economic recession and general economic conditions; (ii) regulatory and tax developments and possible adverse application of various federal, state and local regulations; (iii) the ability to secure competitive replacement contracts for health insurance and workers’ compensation contracts at expiration of current contracts; (iv) increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers and other insurers, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims; (v) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (vi) changes in the competitive environment in the PEO industry, including the entrance of new competitors and our ability to renew or replace client companies; (vii) our liability for worksite employee payroll, payroll taxes and benefits costs; (viii) our liability for disclosure of sensitive or private information; (ix) our ability to integrate or realize expected return on our adjacent business strategy, including acquisitions; and (x) an adverse final judgment or settlement of claims against Insperity.  These factors are discussed in further detail in our 2011 Annual Report on Form 10-K under “Factors That May Affect Future Results and the Market Price of Common Stock” on page 19, and elsewhere in this report.  Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.

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There have been no material changes in the risk factors disclosed pursuant to Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011, except for the item noted below.

In 2003, facing continued capital constraints and a series of downgrades from various rating agencies, our former workers’ compensation insurance carrier for the two-year period ended September 2003, Lumbermens Mutual Casualty Company, formerly known as Kemper, (“Lumbermens Mutual”) made the decision to substantially cease underwriting operations and voluntarily entered into “run-off.”   In July 2012, Lumbermens Mutual announced that an agreed order of rehabilitation had been entered against it in Cook County, Illinois.  Under the order, the Director of the Illinois Department of Insurance was vested with control over Lumbermens Mutual property and decision-making.  The Director has publicly announced that while claims will continue to be paid during the rehabilitation process, he intends to use the rehabilitation period to work with state guaranty associations to prepare for the orderly transition of claim handling responsibilities to such funds once an Order of Liquidation is entered.  After this transition process has been completed, the Director has stated that he intends to file a verified complaint for liquidation.

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

The guaranty associations in some states, including Texas, may assert that state law allows them to recover the amount of benefits paid by the guaranty association along with associated administration and defense costs from an insured with a net worth exceeding certain specified levels.  If an Order of Liquidation is entered and if one or more guaranty associations were to seek recovery from us for open claims with Lumbermens Mutual, we may be required to repay those amounts.  While we are not certain when or if Lumbermens Mutual will be placed into liquidation or whether any state guaranty association will ultimately assert a claim against us, we intend to vigorously assert any and all available defenses to any such claim.  We estimate the outstanding claims that may be subject to such contentions from state guaranty associations to range from $2.9 million to $5.0 million as of September 30, 2012.  In the event state guaranty associations attempt to seek recovery from the Company and are successful, the Company would be required to pay such claims, which would reduce net income and could have a material adverse effect on net income in the reported period.

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

The following table provides information about purchases by Insperity during the three months ended September 30, 2012, of equity securities that are registered by Insperity pursuant to Section 12 of the Exchange Act:

Period	Total Number of Shares Purchased(1)(2)			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program(1)		Maximum Number of Shares that may yet be Purchased under the Program(1)
07/01/2012 – 07/31/2012		187	(2)	$	27.44		-		910,902
08/01/2012 – 08/31/2012		80,000			24.88		80,000		830,902
09/01/2012 – 09/30/2012		1,430			24.02		1,430		829,472
Total		81,617		$	24.87		81,430		829,472

___________________

(1) The Board has approved a repurchase program of Insperity common stock. During the three months ended September 30, 2012, 81,430 shares were repurchased under the program and 187 shares were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  As of September 30, 2012, we were authorized to repurchase an additional 829,472 shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.

(2) These shares include shares of restricted stock that were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock.  The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable vesting date.  These shares are not subject to the repurchase program described above.

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ITEM 6. EXHIBITS

(a) List of exhibits.

10.1†	*	Form of Restricted Stock Agreement.
10.2†	*	Form of Director Stock Option Agreement.
10.3†	*	Form of Director Restricted Stock Award Agreement.
10.4†	*	Directors Compensation Plan.
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	*	XBRL Instance Document.(1)
101.SCH	*	XBRL Taxonomy Extension Schema Document.
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	*	XBRL Extension Definition Linkbase Document.
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document.

______________

*  Filed with this report.

** Furnished with this report.

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

(1) Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2012 and 2011; (ii) the Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2012 and 2011; (iii) the Consolidated Balance Sheets at September 30, 2012 and December 31, 2011; (iv) the Consolidated Statement of Stockholders’ Equity for the nine month period ended September 30, 2012; (v) the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2012 and 2011; and (vi) Notes to the Consolidated Financial Statements.

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SIGNATURES

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

	Insperity, Inc.
Date:  November 1, 2012	By:	/s/ Douglas S. Sharp
		Douglas S. Sharp
		Senior Vice President of Finance,
		Chief Financial Officer and Treasurer
		(Principal Financial and Duly Authorized Officer)

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EX-10.1

EXHIBIT 10.1

INSPERITY, INC. 2012 INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (“Agreement”) is between Insperity, Inc. (the “Company”) and _______________(the “Grantee”), an employee of the Company or one of its Subsidiaries, regarding an award (“Award”) of _____________ shares of Common Stock (as defined in the Insperity, Inc. 2012 Incentive Plan (the “Plan”), such Common Stock comprising this Award referred to herein as “Restricted Stock”) awarded to the Grantee on ______________ (the “Award Date”), such number of shares subject to adjustment as provided in the Plan, and further subject to the following terms and conditions:

1.            Relationship to Plan.  This Award is subject to all of the terms, conditions and provisions of, and administrative interpretations under, the Plan, if any, which have been adopted by the Committee thereunder.  Any question of interpretation arising under this Agreement shall be determined by the Committee and its determinations shall be final and conclusive upon all parties in interest. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan.

2.            Vesting Schedule.

(a)           Subject to Section 3 below, the Award hereby granted shall become vested in three (3) cumulative annual installments, with one-third (1/3) of the Restricted Stock becoming vested on the first (1st) anniversary of the Award Date, another one-third (1/3) becoming vested on the second (2nd) anniversary of the Award Date, and the remaining one-third (1/3) becoming vested on the third (3rd) anniversary of the Award Date.

(b)          All unvested shares of Restricted Stock subject to this Award shall vest, irrespective of the limitations set forth in subparagraph (a) above, provided that the Grantee has been in continuous Employment since the Award Date, upon the occurrence of:

(i)           a Change in Control, unless otherwise provided for in the Plan, or

(ii)          the Grantee’s termination of Employment by reason of death or Disability.

(c)           For purposes of this Agreement:

(i)           “Disability” means that the Grantee has a disability  such that he has been determined to be eligible for benefits under a long-term disability plan sponsored by the Company or a Subsidiary or, if the Grantee is not covered by such a plan, a physical or mental impairment (a) which causes a Grantee to be unable to perform the normal duties for an employer as determined by the Committee in its sole discretion; and (b) which is expected either to result in death (or blindness) or to last for a continuous period of at least twelve (12) months. The Committee may require that the Grantee be examined by a physician or physicians selected by the Committee.

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(ii)          “Employment” means employment with the Company or a Subsidiary other than a Subsidiary that is a licensed professional employer organization.

3.            Forfeiture of Award.  Except as provided in another written agreement between the Grantee and the Company, if the Grantee’s Employment terminates other than by reason of death or Disability, all unvested Restricted Stock as of the Employment termination date shall be forfeited. No additional shares shall vest after the Grantee’s Employment has terminated for any reason other than death or Disability. The Company has sole discretionary authority to determine when a Grantee’s Employment terminates for all purposes under this Agreement and the Plan.

4.            Escrow of Shares.  During the period of time between the Award Date and the earlier of the date the Restricted Stock vests or is forfeited (the “Restriction Period”), the Restricted Stock shall be registered in the name of the Grantee and held in escrow by the Company, and the Grantee agrees, upon the Company’s written request, to provide a stock power endorsed by the Grantee in blank.  If any certificate is issued during the Restriction Period, it shall bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions described in this Agreement.  Upon termination of theRestriction Period, a certificate representing suchshares shall be delivered upon written request to the Grantee as promptly as is reasonably practicable following such termination.

5.           Code Section 83(b) Election.  The Grantee shall be permitted to make an election under Code Section 83(b), to include an amount in income in respect of the Award of Restricted Stock in accordance with the requirements of Code Section 83(b).

6.           Dividends and Voting Rights.  The Grantee is entitled to receive all dividends and other distributions made with respect to Restricted Stock registered in his name and is entitled to vote or execute proxies with respect to such registered Restricted Stock, unless and until the Restricted Stock is forfeited.

7.           Delivery of Shares.  The Company shall not be obligated to deliver any shares of Common Stock if counsel to the Company determines that such sale or delivery would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any national securities exchange or inter-dealer quotation system upon which the Common Stock is listed or quoted.  In no event shall the Company be obligated to take any affirmative action in order to cause the delivery of shares of Common Stock to comply with any such law, rule, regulation or agreement.

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8.            Notices and Disclosure.  Unless the Company notifies the Grantee in writing of a different procedure, any notice or other communication to the Company with respect to this Award shall be in writing and shall be delivered:

(a)           by registered or certified United States mail, postage prepaid, to Insperity, Inc., Attn:  General Counsel, 19001 Crescent Springs Drive, Kingwood, Texas 77339;

(b)           by hand delivery or otherwise to Insperity, Inc., Attn:  General Counsel, 19001 Crescent Springs Drive, Kingwood, Texas 77339; or

(c)           by email to the Company’s General Counsel or his delegate.

Notwithstanding the foregoing, in the event that the address of the Company is changed, notices shall instead be made pursuant to the foregoing provisions at the Company’s then current address.

Any notices provided for in this Agreement or in the Plan shall be given in writing and shall be deemed effectively delivered or given upon receipt or, in the case of notices delivered by the Company to the Grantee, five days (5) after deposit in the United States mail, postage prepaid, addressed to the Grantee at the address specified at the end of this Agreement or at such other address as the Grantee hereafter designates by written notice to the Company.

The foregoing notwithstanding, the Grantee agrees that the Company may deliver by email all documents relating to the Plan or this Award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). The Grantee also agrees that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, such posting is deemed to notify the Grantee.

9.             Assignment of Award.  Except as otherwise permitted by the Committee, the Grantee’s rights under the Plan and this Agreement are personal; no assignment or transfer of the Grantee’s rights under and interest in this Award may be made by the Grantee other than by will or by the laws of descent and distribution or by a qualified domestic relations order, and this Award is payable during his lifetime only to the Grantee, or in the case of a Grantee who is mentally incapacitated, this Award shall be payable to his guardian or legal representative.

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10.           Payment of Par Value.  The Company’s obligation to deliver the shares of Restricted Stock to Grantee upon the vesting of such shares shall be subject to the payment in full of the requisite par value per share of the shares of Restricted Stock prior to such issuance (collectively, the “Par Value”).  The Grantee approves and authorizes the Company to deduct the Par Value of the shares of Restricted Stock from the Grantee’s payroll from the Company or its affiliates. If the Company is unable to or otherwise does not make such payroll deduction; and has not received from Grantee cash, a check or other available funds for the full amount of the Par Value by 5:00 P.M. Central Standard Time within thirty (30) days after the Award Date; or Grantee has not made by that date such other provision for the payment of the Par Value in form satisfactory to the Committee or Board in its sole discretion, the Company shall pay the Par Value of the shares of Restricted Stock on behalf of Grantee and will report the amount of such payment as income to Grantee for the taxable period of Grantee during which the shares of Restricted Stock are granted.  Grantee acknowledges and agrees that he shall be responsible for the payment of any and all federal, state and local taxes on such income if the Company pays the Par Value on behalf of Grantee.

11.           Withholding.  The Company’s obligation to deliver shares of Restricted Stock to the Grantee upon the vesting of such shares shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements (the “Required Withholding”).  The Company shall withhold from the Restricted Stock that would otherwise have been delivered to the Grantee the number of shares necessary to satisfy the Grantee’s Required Withholding, and deliver the remaining whole shares of Restricted Stock to the Grantee, unless the Grantee has made arrangements with the Company for the Grantee to deliver to the Company cash, a check or other available funds for the full amount of the Required Withholding by 5:00 p.m. Central Standard Time on the date the shares of Restricted Stock become vested.  The amount of the Required Withholding and the number of shares of Restricted Stock to be withheld by the Company, if applicable, to satisfy the Grantee’s Required Withholding, shall be based on the Fair Market Value of the shares of vested Restricted Stock on the date prior to the applicable date of vesting and shall be limited to the withholding amount calculated using the minimum statutory withholding rates.

12.           Stock Certificates.  Certificates representing the Common Stock issued pursuant to the Award will bear all legends required by law and necessary or advisable to effectuate the provisions of the Plan and this Award.  The Company may place a “stop transfer” order against shares of the Common Stock issued pursuant to this Award until all restrictions and conditions set forth in the Plan or this Agreement and in the legends referred to in this Section 12 have been complied with.

13.           Successors and Assigns.  This Agreement shall bind and inure to the benefit of and be enforceable by the Grantee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Grantee may not assign any rights or obligations under this Agreement except to the extent and in the manner expressly permitted herein.

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14.           Right to Employment or Service.  The granting of this Award shall not impose upon the Company any obligation to maintain any Participant as an Employee and shall not diminish the power of the Company to terminate any Participant's Employment at any time.  The Company and its Subsidiaries reserve the right to terminate a Grantee’s Employment at any time, with or without cause.

15.           Severability.  If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall not affect any of the other terms, provisions, covenants, or conditions of this Agreement, each of which shall be binding and enforceable.

16.           Governing Law.  This Agreement, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by, construed, and enforced in accordance with the laws of the State of Texas.

17.           Entire Agreement; Binding Effect.  This Agreement shall cover all shares of Common Stock acquired by the Grantee pursuant to this Agreement, including any community and/or separate property interest owned by the Grantee’s spouse in said shares. All terms, conditions and limitations on transferability imposed under this Agreement upon shares acquired by the Grantee shall apply to any interest of the Grantee’s spouse in such shares. This Agreement and the 2012 Incentive Plan constitute the entire understanding between the parties regarding this Award, and supersedes any and all prior written or oral agreements between the parties with respect to the subject matter hereof. There are no representations, agreements, arrangements, or understanding, either written or oral, between or among the parties with respect to the subject matter hereof which are not set forth in this Agreement. This Agreement is binding upon the Grantee’s heirs, executors and personal representatives with respect to all provisions hereof. Except as set forth herein, this Agreement cannot be modified, altered or amended, to the detriment of the Grantee, except by an agreement, in writing, signed by both a duly authorized executive officer of the Company and the Grantee.

	INSPERITY, INC.
Award Date:	By:
	Name:	Paul J. Sarvadi
	Title:	Chairman of the Board and
		Chief Executive Officer

5

Acknowledgement and Acceptance by the Grantee

I, _________________________, the undersigned Grantee, hereby acknowledge that I have received a copy of the Insperity, Inc. 2012 Incentive Plan(the “Plan”) and that I will consult with and rely upon only my own tax, legal and financial advisors regarding the consequences and risks of the Award. I hereby agree to and accept the foregoing Restricted Stock Agreement, subject to the terms and provisions of the Plan and administrative interpretations thereof referred to above.

	GRANTEE:
Date:
	Grantee’s Address:

6

EX-10.2

Exhibit 10.2

INSPERITY, INC. 2012 INCENTIVE PLAN

ANNUAL DIRECTOR STOCK OPTION AWARD AGREEMENT

This Award Agreement is between Insperity, Inc. (the “Company”), and _______________________ (the “Optionee”), a nonemployee member of the Board of Directors of the Company (a “Director”), regarding a right (the “Option”) awarded to the Optionee on ___________________ (the “Grant Date”) to purchase from the Company up to, but not exceeding in the aggregate, _____________ shares of Common Stock (as defined in the Insperity, Inc. 2012 Incentive Plan (the “2012 Incentive Plan”)) at $________ per share (the “Exercise Price”), which is equal to the Fair Market Value of an Option Share as of the Grant Date, such number of shares and such price per share being subject to adjustment as provided in Section 14 of the 2012 Incentive Plan, and further subject to the following terms and conditions:

1.      Relationship to 2012 Incentive Plan.  This Option is intended to be a nonqualified stock option within the meaning of the Internal Revenue Service Code (the “Code”) Section 83.  This Option is granted pursuant to the 2012 Incentive Plan, as provided under the Insperity, Inc. Directors Compensation Plan (the “Directors Compensation Plan”), subject to all of the terms, conditions and provisions of, and administrative interpretations under, the 2012 Incentive Plan, if any, which have been adopted by the Committee thereunder.  Any question of interpretation arising under this Award Agreement shall be determined by the Committee and its determinations shall be final and conclusive upon all parties in interest.  Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the 2012 Incentive Plan.  For purposes of this Award Agreement,“Service” shall mean service as a Director.

2.      Exercise Schedule.The Option hereby granted is 100% vested and exercisable as of the Grant Date.

3.      Termination of Option.  The Option hereby granted shall terminate and be of no force and effect with respect to any shares of Common Stock not previously purchased by the Optionee upon the first to occur of:

(a)        the tenth (10th) anniversary of the Grant Date; or

(b)       the expiration of (i) three (3) months following the Director’s termination of Service for Cause, or (ii) three (3) years following the Director’s termination of Service for any other reason.

4.      Exercise of Option.  Subject to the limitations set forth herein and in the 2012 Incentive Plan, the Option may be exercised by following the prescribed procedures available from the Company’s Investor’s Relations Administrator. Such procedures shall include obtaining preauthorization from the Company’s General Counsel, telephoning the plan administrator designated by the Company and following the applicable Option exercise procedures. Notwithstanding anything to the contrary contained herein, the Optionee agrees that he will not exercise the Option granted pursuant hereto, if the exercise of the Option or the issuance of such Option Shares would constitute a violation by the Optionee or by the Company of any Company policy or provision of any law or any rule or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system upon which the Common Stock is listed or quoted.

1

In no event shall the Company be required to issue fractional shares upon the exercise of any portion of the option.

5.      Delivery of Shares.  The Company shall not be obligated to deliver any shares of Common Stock if counsel to the Company determines that such sale or delivery would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any national securities exchange or inter-dealer quotation system upon which the Common Stock is listed or quoted.  In no event shall the Company be obligated to take any affirmative action in order to cause the delivery of shares of Common Stock to comply with any such law, rule, regulation or agreement.

6.      Notice and Disclosure.  Unless the Company notifies the Optionee in writing of a different procedure, any notice or other communication to the Company with respect to this Option shall be in writing and shall be delivered:

(a)        by registered or certified United States mail, postage prepaid, to Insperity, Inc., Attn: General Counsel, 19001 Crescent Springs Drive, Kingwood, Texas 77339;

(b)        by hand delivery or otherwise to Insperity, Inc., Attn:  General Counsel, 19001 Crescent Springs Drive, Kingwood, Texas 77339; or

(c)        by email to the Company’s General Counsel or his delegate.

Notwithstanding the foregoing, in the event that the address of the Company is changed, notices shall instead be made pursuant to the foregoing provisions at the Company’s then current address.

Any notices provided for in this Agreement or in the 2012 Incentive Plan shall be given in writing and shall be deemed effectively delivered or given upon receipt or, in the case of notices delivered by the Company to the Optionee, five (5) days after deposit in the United States mail, postage prepaid, addressed to the Optionee at the address specified at the end of this Agreement or at such other address as the Optionee hereafter designates by written notice to the Company.

The foregoing notwithstanding, the Optionee agrees that the Company may deliver by email all documents relating to the 2012 Incentive Plan or this Option (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). The Optionee also agrees that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, such posting is deemed to notify the Optionee.

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7.      Assignment of Option.  The Optionee’s rights under the 2012 Incentive Plan and this Award Agreement are personal; no assignment or transfer of the Optionee’s rights under and interest in this Option may be made by the Optionee other than by will or by the laws of descent and distribution or by a qualified domestic relations order; and this Option is exercisable during his lifetime only by the Optionee, or in the case of an Optionee who is mentally incapacitated, this Option shall be exercisable by his guardian or legal representative.

Notwithstanding the foregoing, subject to approval by the Committee in its sole discretion, the Option is transferable by the Optionee to (a) the spouse, children or grandchildren (including adopted and stepchildren and grandchildren) of the Optionee (“Immediate Family Members”), (b) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (c) a partnership or partnerships in which such Immediate Family Members and, if applicable, the Optionee are the only partners.  Subsequent transfers of a transferred Option shall be prohibited except by will or the laws of descent and distribution, unless such transfers are made to the original Optionee or a person to whom the original Optionee could have made a transfer in the manner described herein.  No transfer shall be effective unless and until written notice of such transfer is provided to the Committee, in the form and manner prescribed by the Committee.  Following transfer, the Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and except as otherwise provided herein, the term “Optionee” shall be deemed to refer to the transferee.  The consequences of termination of Service shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee only to the extent and for the periods specified in this Award Agreement.

After the death of the Optionee, unless the Option has been transferred as permitted above, exercise of the Option shall be permitted only by the Optionee’s executor or the personal representative of the Optionee’s estate (or by his assignee, in the event of a permitted assignment) and only to the extent that the Option was exercisable on the date of the Optionee’s death.

8.      Withholding.  No certificates representing shares of Common Stock purchased hereunder shall be delivered to or in respect of an Optionee unless the amount of all federal, state and other governmental withholding tax requirements imposed upon the Company with respect to the issuance of such shares of Common Stock has been remitted to the Company or unless provisions to pay such withholding requirements have been made to the satisfaction of the Committee pursuant to Section 15 of the 2012 Incentive Plan.  The Committee may make such provisions as it may deem appropriate for the withholding of any taxes that it determines is required in connection with this Option.

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9.      Stock Certificates.  Certificates representing the Common Stock issued pursuant to the exercise of the Option will bear all legends required by law and necessary or advisable to effectuate the provisions of the 2012 Incentive Plan and this Option.  The Company may place a “stop transfer” order against shares of the Common Stock issued pursuant to the exercise of this Option until all restrictions and conditions set forth in the 2012 Incentive Plan or this Award Agreement and in the legends referred to in this Section 9 have been complied with.

10.    Successors and Assigns.  This Award Agreement shall bind and inure to the benefit of and be enforceable by the Optionee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Optionee may not assign any rights or obligations under this Award Agreement except to the extent and in the manner expressly permitted herein.

11.    No Service Guaranteed.  No provision of this Award Agreement shall confer any right upon the Optionee to continued Service as a Director.

12.    Severability.  If any term, provision, covenant, or condition of this Award Agreement is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall not affect any of the other terms, provisions, covenants, or conditions of this Award Agreement, each of which shall be binding and enforceable.

13.    Code Section 409A.  Notwithstanding anything in this Award Agreement to the contrary, the Option is intended to provide for a payment that is exempt from Code Section 409A and the regulations thereunder as a nonstatutory stock option not providing for the deferral of compensation, as described in Treasury Regulation section 1.409A-1(b)(5)(i)(A).

14.    Governing Law.  This Award Agreement, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by, construed and enforced in accordance with the laws of the State of Texas.

15.    Entire Agreement; Binding Effect.  This Award Agreement shall cover all shares of Common Stock acquired by the Optionee pursuant to this Award Agreement, including any community and/or separate property interest owned by the Optionee’s spouse in said shares.  All terms, conditions and limitations on transferability imposed under this Award Agreement upon shares acquired by the Optionee shall apply to any interest of the Optionee’s spouse in such shares.This Award Agreement and the 2012 Incentive Plan constitute the entire understanding between the parties regarding this Award, and supersedes any and all prior written or oral agreements between the parties with respect to the subject matter hereof.  There are no representations, agreements, arrangements, or understanding, either written or oral, between or among the parties with respect to the subject matter hereof which are not set forth in this Award Agreement.  This Award Agreement is binding upon the Optionee’s heirs, executors and

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personal representatives with respect to all provisions hereof. Except as set forth herein, this Agreement cannot be modified, altered or amended, to the detriment of the Optionee, except by an agreement, in writing, signed by both a duly authorized executive officer of the Company and the Optionee.

		INSPERITY, INC.
Dated:	By:
	Name:	Paul J. Sarvadi
	Title:	Chairman of the Board
		and Chief Executive Officer

Acknowledgement and Acceptance by the Optionee

I, _________________________, the undersigned Optionee, hereby acknowledge that I have received copies of the Insperity, Inc. Directors Compensation Plan and the Insperity, Inc. 2012 Incentive Plan(the “2012 Incentive Plan”) and that I will consult with and rely upon only my own tax, legal and financial advisors regarding the consequences and risks of the Option.  I hereby agree to and accept the foregoing Award Agreement, subject to the terms and provisions of the 2012 Incentive Plan and administrative interpretations thereof referred to above.

	OPTIONEE:
Date:
	Optionee’s Address

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EX-10.3

EXHIBIT 10.3

INSPERITY, INC. 2012 INCENTIVE PLAN

INITIAL DIRECTOR STOCK AWARD AGREEMENT

This Restricted Stock Agreement (“Agreement”) is between Insperity, Inc. (the “Company”) and _______________(the “Grantee”), a nonemployee member of the Board of Directors of the Company (a “Director”), regarding an award (“Award”) of _____________ shares of Common Stock (as defined in the Insperity Inc. 2012 Incentive Plan (the “2012 Incentive Plan”), such Common Stock comprising this Award referred to herein as “Restricted Stock”), awarded to the Grantee on ____________ (the “Award Date”), such number of shares subject to adjustment as provided in the 2012 Incentive Plan, and further subject to the following terms and conditions:

1.            Relationship to 2012 Incentive Plan. This Award is granted pursuant to the 2012 Incentive Plan, as provided under the Insperity, Inc. Directors Compensation Plan (the “Directors Compensation Plan”), subject to all of the terms, conditions and provisions of, and administrative interpretations under, the 2012 Incentive Plan, if any, which have been adopted by the Committee thereunder. Any question of interpretation arising under this Agreement shall be determined by the Committee and its determinations shall be final and conclusive upon all parties in interest. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the 2012 Incentive Plan. For purposes of this Agreement, the term “Service” shall mean service as a Director.

2.            Vesting Schedule.

(a)           Subject to Section 3 below, the Award hereby granted shall become vested in three (3) cumulative annual installments, with one-third (1/3) of the Restricted Stock becoming vested on the first (1st) anniversary of the Award Date, another one-third (1/3) becoming vested on the second (2nd) anniversary of the Award Date, and the remaining one-third (1/3) becoming vested on the third (3rd) anniversary of the Award Date.

(b)           All unvested shares of Restricted Stock subject to this Award shall vest, irrespective of the limitations set forth in subparagraph (a) above, provided that the Grantee has been in continuous Service since the Award Date, upon the occurrence of:

(i)           a Change in Control, unless otherwise provided for in the 2012 Incentive Plan, or

(ii)          the Grantee’s termination of Service by reason of death or Disability.

(c)           For purposes of this Agreement:

(i)           “Disability” means Disability as such term is defined under the Directors Compensation Plan.

3.            Forfeiture of Award.  Except as provided in another written agreement between the Grantee and the Company, if the Grantee’s Service terminates other than by reason of death or Disability, all unvested Restricted Stock as of the Service termination date shall be forfeited. No additional shares shall vest after the Grantee’s Service has terminated for any reason other than death or Disability. The Company has sole discretionary authority to determine when a Grantee’s Service terminates for all purposes under this Agreement and the 2012 Incentive Plan.

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4.            Escrow of Shares.  During the period of time between the Award Date and the earlier of the date the Restricted Stock vests or is forfeited (the “Restriction Period”), the Restricted Stock shall be registered in the name of the Grantee and held in escrow by the Company, and the Grantee agrees, upon the Company’s written request, to provide a stock power endorsed by the Grantee in blank.  If any certificate is issued during the Restriction Period, it shall bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions described in this Agreement.  Upon termination of theRestriction Period, a certificate representing suchshares shall be delivered upon written request to the Grantee as promptly as is reasonably practicable following such termination.

5.            Code Section 83(b) Election.  The Grantee shall be permitted to make an election under Code Section 83(b), to include an amount in income in respect of the Award of Restricted Stock in accordance with the requirements of Code Section 83(b).

6.             Dividends and Voting Rights.  The Grantee is entitled to receive all dividends and other distributions made with respect to Restricted Stock registered in his name and is entitled to vote or execute proxies with respect to such registered Restricted Stock, unless and until the Restricted Stock is forfeited.

7.             Delivery of Shares.  The Company shall not be obligated to deliver any shares of Common Stock if counsel to the Company determines that such sale or delivery would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any national securities exchange or inter-dealer quotation system upon which the Common Stock is listed or quoted.  In no event shall the Company be obligated to take any affirmative action in order to cause the delivery of shares of Common Stock to comply with any such law, rule, regulation or agreement.

8.             Notices and Disclosure.  Unless the Company notifies the Grantee in writing of a different procedure, any notice or other communication to the Company with respect to this Award shall be in writing and shall be delivered:

(a)           by registered or certified United States mail, postage prepaid, to Insperity, Inc., Attn:  General Counsel, 19001 Crescent Springs Drive, Kingwood, Texas 77339;

(b)           by hand delivery or otherwise to Insperity, Inc., Attn:  General Counsel, 19001 Crescent Springs Drive, Kingwood, Texas 77339; or

(c)           by email to the Company’s General Counsel or his delegate.

Notwithstanding the foregoing, in the event that the address of the Company is changed, notices shall instead be made pursuant to the foregoing provisions at the Company’s then current address.

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Any notices provided for in this Agreement or in the 2012 Incentive Plan shall be given in writing and shall be deemed effectively delivered or given upon receipt or, in the case of notices delivered by the Company to the Grantee, five (5) days after deposit in the United States mail, postage prepaid, addressed to the Grantee at the address specified at the end of this Agreement or at such other address as the Grantee hereafter designates by written notice to the Company.

The foregoing notwithstanding, the Grantee agrees that the Company may deliver by email all documents relating to the 2012 Incentive Plan or this Award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). The Grantee also agrees that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, such posting is deemed to notify the Grantee.

9.             Assignment of Award.  Except as otherwise permitted by the Committee, the Grantee’s rights under the 2012 Incentive Plan and this Agreement are personal; no assignment or transfer of the Grantee’s rights under and interest in this Award may be made by the Grantee other than by will or by the laws of descent and distribution or by a qualified domestic relations order, and this Award is payable during his lifetime only to the Grantee, or in the case of a Grantee who is mentally incapacitated, this Award shall be payable to his guardian or legal representative.

10.           Payment of Par Value.  The Company’s obligation to deliver the shares of Restricted Stock to Grantee upon the vesting of such shares shall be subject to the payment in full of the requisite par value per share of the shares of Restricted Stock prior to such issuance (collectively, the “Par Value”).  The Grantee approves and authorizes the Company to deduct the Par Value of the shares of Restricted Stock from the Grantee’s cash compensation from the Company or its affiliates. If the Company is unable to or otherwise does not make such compensation deduction and has not received from Grantee cash, a check or other available funds for the full amount of the Par Value by 5:00 P.M. Central Standard Time within thirty (30) days after the Award Date; or Grantee has not made by that date such other provision for the payment of the Par Value in form satisfactory to the Committee or Board in its sole discretion, the Company shall pay the Par Value of the shares of Restricted Stock on behalf of Grantee and will report the amount of such payment as income to Grantee for the taxable period of Grantee during which the shares of Restricted Stock are granted. Grantee acknowledges and agrees that he shall be responsible for the payment of any and all federal, state and local taxes on such income if the Company pays the Par Value on behalf of Grantee.

11.           Withholding.  The Company’s obligation to deliver shares of Restricted Stock to the Grantee upon the vesting of such shares shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements (the “Required Withholding”).  If applicable, the Company shall withhold from the Restricted Stock that would otherwise have been delivered to the Grantee the number of shares necessary to satisfy the Grantee’s Required Withholding, and deliver the remaining whole shares of Restricted Stock to the Grantee, unless the Grantee has made arrangements with the Company for the Grantee to deliver to the Company cash, a check or other available funds for the full amount of the Required Withholding by 5:00 p.m. Central Standard Time on the date the shares of Restricted Stock become vested.  The amount of the Required Withholding and the number of shares of Restricted Stock to be withheld by the Company, if applicable, to satisfy the Grantee’s Required Withholding, shall be based on the Fair Market Value of the shares of vested Restricted Stock on the date prior to the applicable date of vesting.

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12.           Stock Certificates.  Certificates representing the Common Stock issued pursuant to the Award will bear all legends required by law and necessary or advisable to effectuate the provisions of the 2012 Incentive Plan and this Award.  The Company may place a “stop transfer” order against shares of the Common Stock issued pursuant to this Award until all restrictions and conditions set forth in the 2012 Incentive Plan or this Agreement and in the legends referred to in this Section 12 have been complied with.

13.           Successors and Assigns.  This Agreement shall bind and inure to the benefit of and be enforceable by the Grantee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Grantee may not assign any rights or obligations under this Agreement except to the extent and in the manner expressly permitted herein.

14.           No Service Guaranteed.  No provision of this Agreement shall confer any right upon the Grantee to continued Service as a Director.

15.           Severability.  If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall not affect any of the other terms, provisions, covenants, or conditions of this Agreement, each of which shall be binding and enforceable.

16.           Governing Law.  This Agreement, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by, construed, and enforced in accordance with the laws of the State of Texas.

17.           Entire Agreement; Binding Effect.This Agreement shall cover all shares of Common Stock acquired by the Grantee pursuant to this Agreement, including any community and/or separate property interest owned by the Grantee’s spouse in said shares.  All terms, conditions and limitations on transferability imposed under this Agreement upon shares acquired by the Grantee shall apply to any interest of the Grantee’s spouse in such shares. This Agreement and the 2012 Incentive Plan constitute the entire understanding between the parties regarding this Award, and supersedes any and all prior written or oral agreements between the parties with respect to the subject matter hereof. There are no representations, agreements, arrangements, or understanding, either written or oral, between or among the parties with respect to the subject matter hereof which are not set forth in this Agreement.  This Agreement is binding upon the Grantee’s heirs, executors and personal representatives with respect to all provisions hereof. Except as set forth herein, this Agreement cannot be modified, altered or amended, to the detriment of the Grantee, except by an agreement, in writing, signed by both a duly authorized executive officer of the Company and the Grantee.

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	INSPERITY, INC.
Award Date:	By:
	Name:	Paul J. Sarvadi
	Title:	Chairman of the Board and
		Chief Executive Officer

Acknowledgement and Acceptance by the Grantee

I, _________________________, the undersigned Grantee, hereby acknowledge that I have received copies of the Insperity, Inc. Directors Compensation Plan and the Insperity, Inc. 2012 Incentive Plan(the “2012 Incentive Plan”) and that I will consult with and rely upon only my own tax, legal and financial advisors regarding the consequences and risks of the Award.  I hereby agree to and accept the foregoing Restricted Stock Agreement, subject to the terms and provisions of the 2012 Incentive Plan and administrative interpretations thereof referred to above.

	GRANTEE:
Date:
	Grantee’s Address

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EX-10.4

Exhibit 10.4

INSPERITY, INC.

DIRECTORS COMPENSATION PLAN

(Amended and Restated as of August 15, 2012)

INSPERITY, INC.

DIRECTORS COMPENSATION PLAN

Table of Contents

		Page
SECTION 1.	DEFINITIONS	1
SECTION 2.	ADMINISTRATION	4
SECTION 3.	PARTICIPANTS	4
SECTION 4.	BENEFITS	4
SECTION 5.	GENERAL PROVISIONS	7

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Exhibit 10.4

INSPERITY, INC.

DIRECTORS COMPENSATION PLAN

PREAMBLE

WHEREAS, Insperity, Inc. (the “Company”) previously adopted the Insperity, Inc. Directors Compensation Plan (the “Plan”) in order to promote the interests of the Company by encouraging Directors (as defined below) to acquire or increase their equity interests in the Company and to provide a means whereby such persons may develop a sense of proprietorship and personal involvement in the development and financial success of the Company;

WHEREAS, the Company desires to amend and restate the Plan in its entirety;

NOW, THEREFORE, the Company hereby amends and restates the Plan as set forth herein, effective as of August 15, 2012.

SECTION 1.

DEFINITIONS

For purposes of the Plan, the following terms shall have the meanings indicated:

1.1           Annual Director Award Date means for each calendar year in which this Plan is in effect, the date on which the annual meeting of the stockholders of the Company is held in that year.

1.2           Applicable Date means:

(a) for the annual Board retainer, committee membership retainers and annual committee chair fees, the last day of the quarter; or

(b) for meeting fees, the day preceding the day of the meeting.

1.3           Award Agreement means Award Agreement as such term is defined under the Insperity, Inc. 2012 Incentive Plan.

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1.4           Board means the Board of Directors of the Company.

1.5           Cause means:

(a) the Director whose removal is proposed has been convicted, or when a Director is granted immunity to testify when another has been convicted, of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal;

(b) such Director has been found by the affirmative vote of a majority of the entire Board at any regular or special meeting of the Board called for that purpose or by a court of competent jurisdiction to have been guilty of willful misconduct in the performance of his or her duties to the Company in a matter of substantial importance to the Company; or

(c) such Director has been adjudicated by a court of competent jurisdiction to be mentally incompetent, which mental incompetency directly affects his or her ability as a Director of the Company.

1.6           Committee means the Compensation Committee of the Board or any other committee as may be designated by the Board.

1.7           Common Stock means Common Stock as such term is defined under the Insperity, Inc. 2012 Incentive Plan.

1.8           Compensation means the Participant’s annual Board retainer and committee membership retainers and any meeting fees for each regular and special meeting, (including telephonic meetings), and any retainers and fees earned by the Participant for chairing committees during the applicable Plan Year, as set forth in Appendix A, which may be amended from time to time by the Board.

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1.9           Director means a member of the Board, excluding any individual who is also an employee of the Company or a subsidiary thereof.

1.10           Disability means the inability to perform the duties of the Director’s position for a period of six (6) consecutive months or for an aggregate of six (6) months during any twelve (12) month period after the Grant Date by reason of any medically determinable physical or mental impairment, as determined by the Board in the Board’s sole discretion.

1.11           Exercise Price means the Exercise Price as such term is defined under the Insperity, Inc. 2012 Incentive Plan.

1.12           Fair Market Value means, as applied to a specific date, Fair Market Value as such term is defined under the Insperity, Inc. 2012 Incentive Plan.

1.13           Grant Date means the automatic date of grant of an award under the Plan as provided for in Section 4.

1.14           Insperity, Inc. 2012 Incentive Plan or 2012 Incentive Plan means the Insperity, Inc. 2012 Incentive Plan, effective May 16, 2012, and as amended from time to time.

1.15           Option means an Option as such term is defined under the Insperity, Inc. 2012 Incentive Plan.

1.16           Participant means each Director, excluding any Director who elects in writing not to participate in the Plan.

1.17           Stock Award means a Stock Award as such term is defined under the Insperity, Inc. 2012 Incentive Plan.

1.18           Treasury Stock means issued shares of Company Stock that are held by the Company.

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SECTION 2.

ADMINISTRATION

2.1           Administration.  The Plan shall be administered by the Board.  The Board shall have the complete authority and power to interpret the Plan, prescribe, amend and rescind rules relating to its administration, determine a Participant’s right to a payment and the amount of such payment, and to take all other actions necessary or desirable for the administration of the Plan.  All actions and decisions of the Board shall be final and binding upon all persons.

2.2           Capitalized Terms.  To the extent not defined in this Plan, capitalized terms shall have the meanings assigned thereto in the 2012 Incentive Plan.

SECTION 3.

PARTICIPANTS

3.1           Participants.  Each Director shall be eligible to be a Participant.

SECTION 4.

BENEFITS

4.1           Retainer, Meeting and Committee Chair Fees.  The Compensation of Directors is set forth in Appendix A.   The Compensation for annual retainers and annual committee chair fees, if any, shall be paid to each Director on a quarterly basis, with each installment being equal to one-fourth of the annualized amount set forth in Appendix A and being paid as soon as administratively feasible following the end of the quarter.  The Compensation for meeting fees, if any, shall be paid to each Director as soon as administratively feasible after the meeting to which such fees relate.  Annually, each Director may elect, prior to the date that the Compensation would otherwise be paid to such Director in cash, to receive all such Compensation in shares of Company Stock.  The number of shares of Company Stock to be paid to an electing Director shall be determined by dividing the Director’s Compensation to be paid on such date by the Fair Market Value of the Company Stock on the Applicable Date, with any fractional share paid in cash.  Notwithstanding the foregoing, however, payment in shares of Company Stock may only be made by the Company with shares of Treasury Stock.  In the event the number of shares of Treasury Stock is insufficient on any date to make all such payments provided for in this Section 4.1 in full, then all Directors who are entitled to receive shares of Company Stock on such date shall share ratably in the number of shares available and the balance of each such Director’s Compensation shall be paid in cash.  An individual Director’s ratable share shall be calculated by dividing such Director’s eligible Compensation applicable to such payment by the total of all electing Directors’ eligible Compensation applicable to such payment.  An election to receive payment of Compensation in Company Stock rather than in cash shall be made in such manner as the Committee may from time to time prescribe.

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4.2           Equity Award Grants.  Directors shall be granted equity awards in accordance with the terms provided below and subject to applicable terms and limitations set forth in the Company’s 2012 Incentive Plan and the applicable Award Agreements.  Notwithstanding anything herein to the contrary, if the number of shares of Common Stock available for equity awards under the 2012 Incentive Plan is insufficient to make all grants of the awards provided for below on the applicable grant date, then all Directors who are entitled to an award on such date shall share ratably in the number of shares then available for awards under the 2012 Incentive Plan, and Directors shall have no right to receive an award with respect to the deficiencies in the number of available shares.

4.3           Initial Director Award.  Each Director who is elected or appointed to the Board for the first time after August 15, 2012, shall be automatically granted, on the date of his or her election or appointment to the Board, a Stock Award of a number of shares of Restricted Stock with an aggregate Fair Market Value as set forth in Appendix A, determined as of the date prior to the Grant Date.  The Award shall be rounded up to the next higher whole share amount in the case of a fractional share amount, which shall become vested as to one-third (1/3) of the shares on each anniversary of the Grant Date, unless such Director gives advance written notice to the Board that he or she does not wish to receive such Stock Award.  Notwithstanding the foregoing, if the Director terminates his or her service as a member of the Board, or his service is otherwise terminated, his or her unvested portion of such Stock Award, if any, shall terminate immediately on such termination date, unless such termination of service is due to death or Disability, in which event the unvested portion of such Stock Award shall become immediately 100% vested on such termination date.

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4.4           Annual Director Award.  On the Annual Director Award Date, each Director who is in office immediately after the annual meeting on such date and who was not elected or appointed to the Board for the first time on such date shall be granted a Stock Award of a number of shares of Common Stock with an aggregate Fair Market Value as set forth in Appendix A, determined as of the date prior to the Grant Date.  In lieu of such Stock Award, each Director may elect prior to the issuance of such Stock Award, in a time and manner determined acceptable by the Board, to receive on the Annual Director Award Date, an Option to purchase a number of shares of Common Stock which has the same aggregate value set forth in Appendix A, determined as of the date prior to the Grant Date, calculated using the valuation methodology most recently utilized by the Company for purposes of financial statement reporting.  The Exercise Price of Options issued under the Plan shall not be less than the Fair Market Value of the Common Stock at the Grant Date.  The Annual Director Awards shall be 100% vested and exercisable and shall be rounded up to the next higher whole share amount in the case of a fractional share amount.  No Annual Director Award will be made to an individual Director if such Director gives advance written notice to the Board that he or she does not wish to receive such award.

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4.5           Termination of Director Options.  Any Option granted to each Director shall terminate and be of no force and effect with respect to any shares of Common Stock not previously purchased by the Director upon the first to occur of:

(i)  the tenth (10th) anniversary of the Grant Date for such award; or

(ii) the expiration of (A) three months following the Director’s termination of service for Cause; or (B) three years following the Director’s termination of service for any other reason.

Notwithstanding anything herein to the contrary, the normal expiration date for Options shall not be extended.

4.6           Forfeiture of Director Stock Awards.  Any portion of a Stock Award to a Director which has not become vested on or before the date of the Director’s termination of service shall be forfeited.

4.7           Award Agreement.  Each Option and Stock Award granted to a Director shall be evidenced by an Award Agreement between the Company and such Director that sets forth the terms, conditions and limitations described in this Plan, if any, the 2012 Incentive Plan and any additional terms, conditions and limitations applicable to the Option or the Stock Award.

SECTION 5.

GENERAL PROVISIONS

5.1           Amendment and Termination.  The Board may from time to time amend, suspend or terminate the Plan, in whole or in part; provided, however, no amendment, suspension or termination of the Plan may impair the right of a Participant to receive any benefit accrued hereunder prior to the effective date of such amendment, suspension or termination. Notwithstanding the preceding sentence, equity awards under the Plan will cease without any action of the Committee or Board if the 2012 Incentive Plan expires and the Board does not designate a successor plan under which the equity awards are to be made.

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5.2           Compliance with Securities Laws.  It is the intention of the Company that, so long as any of the Company’s equity securities are registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, this Plan shall be operated in compliance with Section 16(b) thereof.

5.3           Applicable Law.  Except to the extent preempted by applicable federal law, the Plan shall be construed and governed in accordance with the laws of the State of Delaware.

APPENDIX A

Insperity, Inc. Directors Compensation Plan

(Amended and Restated as of August 15, 2012)

Directors' Compensation and Equity Awards

Effective August 15, 2012

	Board		Compensation Committee		FRMA Committee		N&CG Committee
Annual Retainer	$	40,000	$	3,000	$	5,000	None
Annual Committee Chair Fees		N/A	$	8,000	$	10,000	$	3,000
Meeting Fees	$2,000 in person, $1,000 telephonically*		$1,500 in person, $750 telephonically* These fees are also paid to the Chairman for meetings attended with Management between regular meetings. Only one meeting fee per day will be paid.		$1,500 in person, $750 telephonically* These fees are also paid to the Chairman for meetings attended with Management or Auditors between regular meetings. Only one meeting fee per day will be paid.			N/A
Initial  Director Award	$	75,000		N/A		N/A		N/A
Annual Director Award	$	75,000		N/A		N/A		N/A

  * If a Director attends in person a meeting noticed as a telephonic meeting, the Director receives the in person fee.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Paul J. Sarvadi, certify that:

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

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1, 2012
	/s/ Paul J. Sarvadi
	Paul J. Sarvadi
	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Douglas S. Sharp, certify that:

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

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1, 2012
	/s/ Douglas S. Sharp
	Douglas S. Sharp
	Senior Vice President of Finance,
	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2012, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Paul J. Sarvadi, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Paul J. Sarvadi

Paul J. Sarvadi

Chairman of the Board and Chief Executive Officer

November 1, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Insperity, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2012, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Douglas S. Sharp, Senior Vice President of Finance, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.            The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Douglas S. Sharp

Douglas S. Sharp

Senior Vice President of Finance,

Chief Financial Officer and Treasurer

November 1, 2012

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Net Income Per Share (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net Income Per Share [Abstract]
Net income	$ 11,452	$ 4,099	$ 30,957	$ 19,626
Less income allocated to participating securities	(334)	(120)	(898)	(582)
Net income allocated to common shares	$ 11,118	$ 3,979	$ 30,059	$ 19,044
Weighted average common shares outstanding (in shares)	24,923	25,425	25,034	25,546
Incremental shares from assumed conversions of common stock options (in shares)	57	74	63	98
Adjusted weighted average common shares outstanding (in shares)	24,980	25,499	25,097	25,644
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect (in shares)	41	54	33	21

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

1.            Basis of Presentation

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

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

We provide our Workforce Optimization solution to small and medium-sized businesses in strategically selected markets throughout the United States.  For the nine months ended September 30, 2012 and 2011, Workforce Optimization revenues from Insperity's Texas markets represented 26% and 27%, while Workforce Optimization revenues from Insperity's California markets represented 17% and 16%, of Insperity's total Workforce Optimization revenues, respectively.

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

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements as of and for the year ended December 31, 2011. Our Consolidated Balance Sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements.  Our Consolidated Balance Sheet at September 30, 2012 and the Consolidated Statements of Operations and Comprehensive Income for the three and nine month periods ended September 30, 2012 and 2011, the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2012 and 2011, and Consolidated Statement of Stockholders' Equity for the nine month period ended September 30, 2012, have been prepared by us without audit.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.

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

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2011
Supplemental Cash Flow Information:
Exchange of existing aircraft, fair value	$ 4
Additional payments to acquire replacement aircraft	10
Non-cash loss included in other income (expense)	$ 4.4

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 202,218	$ 211,208
Restricted cash	46,069	44,737
Marketable securities	51,702	56,987
Accounts receivable, net:
Trade	2,255	7,893
Unbilled	198,197	158,508
Other	2,656	4,532
Prepaid insurance	23,739	21,300
Other current assets	8,133	11,488
Income taxes receivable	0	2,902
Deferred income taxes	940	3,233
Total current assets	535,909	522,788
Property and equipment:
Land	3,653	3,653
Buildings and improvements	69,868	67,496
Computer hardware and software	78,836	76,105
Software development costs	35,431	32,699
Furniture and fixtures	36,595	36,133
Aircraft	35,879	35,866
Property and equipment, gross	260,262	251,952
Accumulated depreciation and amortization	(167,335)	(159,008)
Total property and equipment, net	92,927	92,944
Other assets:
Prepaid health insurance	9,000	9,000
Deposits - health insurance	3,000	2,640
Deposits - workers' compensation	57,588	52,320
Goodwill and other intangible assets, net	27,131	28,433
Other assets	4,879	4,134
Total other assets	101,598	96,527
Total assets	730,434	712,259
Current liabilities:
Accounts payable	3,088	5,085
Payroll taxes and other payroll deductions payable	107,932	168,652
Accrued worksite employee payroll cost	174,264	130,317
Accrued health insurance costs	22,522	9,427
Accrued workers' compensation costs	48,369	46,548
Accrued corporate payroll and commissions	21,819	22,383
Other accrued liabilities	13,975	13,814
Income taxes payable	3,987	0
Total current liabilities	395,956	396,226
Noncurrent liabilities:
Accrued workers' compensation costs	63,463	60,054
Deferred income taxes	10,768	10,772
Total noncurrent liabilities	74,231	70,826
Commitments and Contingencies
Stockholders' equity:
Common stock	309	309
Additional paid-in capital	136,688	135,871
Treasury stock, at cost	(138,784)	(134,647)
Accumulated other comprehensive income,net of tax	70	24
Retained earnings	261,964	243,650
Total stockholders' equity	260,247	245,207
Total liabilities and stockholders' equity	$ 730,434	$ 712,259

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (USD $) In Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2011	$ 309	$ 135,871	$ (134,647)	$ 24	$ 243,650	$ 245,207
Balance (in shares) at Dec. 31, 2011	30,839
Purchase of treasury stock, at cost			(13,770)			(13,770)
Exercise of stock options		(558)	1,620			1,062
Income tax benefit from stock-based compensation, net		1,097				1,097
Stock-based compensation expense		199	7,186			7,385
Other		79	827			906
Dividends paid					(12,643)	(12,643)
Unrealized gain on marketable securities, net of tax				46		46
Net income					30,957	30,957
Balance at Sep. 30, 2012	$ 309	$ 136,688	$ (138,784)	$ 70	$ 261,964	$ 260,247
Balance (in shares) at Sep. 30, 2012	30,839

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Cash, Cash Equivalents and Marketable Securities (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Overnight Holdings [Abstract]
Money market funds (cash equivalents)	$ 46,079,000	$ 71,350,000
Investment Holdings [Abstract]
Money market funds (cash equivalents)	67,395,000	59,587,000
Marketable securities	51,702,000	56,987,000
Total cash equivalents and marketable securities	165,176,000	187,924,000
Cash held in demand accounts	102,761,000	113,968,000
Outstanding checks	(14,017,000)	(33,697,000)
Total cash, cash equivalents and marketable securities	253,920,000	268,195,000
Cash and cash equivalents	202,218,000	211,208,000	169,910,000	234,829,000
Marketable securities	51,702,000	56,987,000
Total cash, cash equivalents and marketable securities	253,920,000	268,195,000
Withholding associated with federal and state income taxes, employment taxes and other payroll deductions included in cash balance	96,500,000	150,800,000
Client prepayments included in cash balance	12,400,000	10,400,000
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Municipal bonds	51,702,000
Schedule of Available-for-sale Securities [Line Items]
Municipal bonds	51,702,000
Contractual maturities amortized cost [Abstract]
Less than one year	23,513,000
One to five years	28,071,000
Total	51,584,000
Contractual maturities estimated fair value [Abstract]
Less than one year	23,552,000
One to five years	28,150,000
Total	51,702,000
US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Municipal bonds	51,702,000	56,987,000
Schedule of Available-for-sale Securities [Line Items]
Municipal bonds	51,702,000	56,987,000
Amortized cost	51,584,000	56,945,000
Gross unrealized gains	133,000	90,000
Gross unrealized losses	(15,000)	(48,000)
Contractual maturities estimated fair value [Abstract]
Total	51,702,000	56,987,000
Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	113,474,000	130,937,000
Municipal bonds	51,702,000	56,987,000
Total	165,176,000	187,924,000
Schedule of Available-for-sale Securities [Line Items]
Municipal bonds	51,702,000	56,987,000
Contractual maturities estimated fair value [Abstract]
Total	51,702,000	56,987,000
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	113,474,000	130,937,000
Municipal bonds	0	0
Total	113,474,000	130,937,000
Schedule of Available-for-sale Securities [Line Items]
Municipal bonds	0	0
Contractual maturities estimated fair value [Abstract]
Total	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Municipal bonds	51,702,000	56,987,000
Total	51,702,000	56,987,000
Schedule of Available-for-sale Securities [Line Items]
Municipal bonds	51,702,000	56,987,000
Contractual maturities estimated fair value [Abstract]
Total	51,702,000	56,987,000
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Municipal bonds	0	0
Total	0	0
Schedule of Available-for-sale Securities [Line Items]
Municipal bonds	0	0
Contractual maturities estimated fair value [Abstract]
Total	$ 0	$ 0

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Stockholders Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended							9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Sep. 30, 2012	Sep. 30, 2011
Stockholders Equity [Abstract]
Shares repurchased under the program (in shares)								407,400
Shares withheld for tax withholding obligations for the vesting of restricted stock awards (in shares)								107,228
Authorized to repurchased additional shares under repurchase program (in shares)	829,472							829,472
Dividends declared per share of common stock (in dollars per share)	$ 0.17	$ 0.17	$ 0.15	$ 0.15	$ 0.15	$ 0.15	$ 0.15
Dividend paid								$ 12,643	$ 11,900

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net income	$ 30,957	$ 19,626
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	13,336	11,335
Loss on exchange of assets	(21)	4,396
Amortization of marketable securities	1,827	1,535
Stock-based compensation	7,385	6,455
Deferred income taxes	2,259	(96)
Changes in operating assets and liabilities,net of effects from acquisitions:
Restricted cash	(1,332)	(1,608)
Accounts receivable	(32,175)	(20,231)
Prepaid insurance	(2,439)	9,796
Other current assets	3,355	(2,339)
Other assets	(6,373)	4,876
Accounts payable	(1,997)	(650)
Payroll taxes and other payroll deductions payable	(60,704)	(40,892)
Accrued worksite employee payroll expense	43,947	21,091
Accrued health insurance costs	13,095	(10,210)
Accrued workers' compensation costs	5,231	6,013
Accrued corporate payroll, commissions and otheraccrued liabilities	2,155	3,656
Income taxes payable/receivable	6,529	479
Total adjustments	(5,922)	(6,394)
Net cash provided by operating activities	25,035	13,232
Cash flows from investing activities:
Marketable securities purchases	(23,585)	(43,607)
Marketable securities proceeds from dispositions	0	3,907
Marketable securities proceeds from maturities	27,119	26,194
Cash exchanged for acquisitions	(1,200)	(13,125)
Property and equipment	(11,996)	(23,404)
Net cash used in investing activities	(9,662)	(50,035)
Cash flows from financing activities:
Purchase of treasury stock	(13,770)	(22,459)
Dividends paid	(12,643)	(11,871)
Proceeds from the exercise of stock options	1,062	3,881
Income tax benefit from stock-based compensation	1,457	2,049
Other	(469)	284
Net cash used in financing activities	(24,363)	(28,116)
Net increase (decrease) in cash and cash equivalents	(8,990)	(64,919)
Cash and cash equivalents at beginning of period	211,208	234,829
Cash and cash equivalents at end of period	$ 202,218	$ 169,910

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Revenues (gross billings of $3.068 billion, $2.835 billion, $9.339 billion and $8.454 billion, less worksite employee payroll cost of $2.556 billion, $2.363 billion, $7.712 billion and $6.973 billion, respectively)	$ 511,953	$ 471,821	$ 1,626,386	$ 1,481,105
Direct costs:
Payroll taxes benefits and workers compensation costs	413,533	384,792	1,337,668	1,219,276
Gross profit	98,420	87,029	288,718	261,829
Operating expenses:
Salaries wages and payroll taxes	44,032	39,494	127,402	117,558
Stock-based compensation	2,429	2,109	7,385	6,455
Commissions	3,358	3,399	10,299	9,750
Advertising	3,680	5,235	17,001	18,280
General and administrative expenses	21,122	18,912	61,694	57,828
Depreciation and amortization	4,659	3,786	13,336	11,335
Total operating expenses	79,280	72,935	237,117	221,206
Operating income	19,140	14,094	51,601	40,623
Other income (expense):
Interest, net	142	245	462	829
Other, net	(3)	(7,501)	141	(7,497)
Other income (expense)	139	(7,256)	603	(6,668)
Income before income tax expense	19,279	6,838	52,204	33,955
Income tax expense	7,827	2,739	21,247	14,329
Net income	11,452	4,099	30,957	19,626
Less net income allocated to participating securities	(334)	(120)	(898)	(582)
Net income allocated to common shares	$ 11,118	$ 3,979	$ 30,059	$ 19,044
Basic net income per share of common stock (in dollars per share)	$ 0.45	$ 0.16	$ 1.20	$ 0.75
Diluted net income per share of common stock (in dollars per share)	$ 0.45	$ 0.16	$ 1.20	$ 0.74

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Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

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

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

	Nine Months Ended September 30,
	2012			2011
	(in thousands)
Beginning balance, January 1,	$	104,791		$	96,934
Accrued claims		28,586			26,668
Present value discount		(712	)		(1,159	)
Paid claims		(23,133	)		(21,123	)
Ending balance	$	109,532		$	101,320
Current portion of accrued claims	$	46,069		$	42,812
Long-term portion of accrued claims		63,463			58,508
	$	109,532		$	101,320

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 25, 2012
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 Common Stock, Shares Outstanding		25,654,217
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012

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Cash, Cash Equivalents and Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2012

Cash Cash Equivalents and Marketable Securities [Abstract]

Schedule of cash and cash equivalents

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

	September 30,			December 31,
	2012			2011
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	46,079		$	71,350
Investment Holdings
Money market funds (cash equivalents)		67,395			59,587
Marketable securities		51,702			56,987
		165,176			187,924
Cash held in demand accounts		102,761			113,968
Outstanding checks		(14,017	)		(33,697	)
Total cash, cash equivalents and marketable securities	$	253,920		$	268,195
Cash and cash equivalents	$	202,218		$	211,208
Marketable securities		51,702			56,987
	$	253,920		$	268,195

Schedule of fair value assets and liabilities measured on recurring basis

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

	Fair Value Measurements
	(in thousands)
	September 30,
	2012		Level 1		Level 2		Level 3
Money market funds	$	113,474	$	113,474	$	—	$	—
Municipal bonds		51,702		—		51,702		—
Total	$	165,176	$	113,474	$	51,702	$	—

	Fair Value Measurements
	(in thousands)
	December 31,
	2011		Level 1		Level 2		Level 3
Money market funds	$	130,937	$	130,937	$	—	$	—
Municipal bonds		56,987		—		56,987		—
Total	$	187,924	$	130,937	$	56,987	$	—

Schedule of available for sale securities reconciliation

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
			(in thousands)
September 30, 2012:
Municipal bonds	$	51,584	$	133	$	(15	)	$	51,702
December 31, 2011:
Municipal bonds	$	56,945	$	90	$	(48	)	$	56,987

Contractual maturities of marketable securities

As of September 30, 2012, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	23,513	$	23,552
One to five years		28,071		28,150
Total	$	51,584	$	51,702

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Gross billings	$ 3,068	$ 2,835	$ 9,339	$ 8,454
Worksite employee payroll cost	$ 2,556	$ 2,363	$ 7,712	$ 6,973

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Revolving Credit Facility

9 Months Ended

Sep. 30, 2012

Revolving Credit Facility [Abstract]

Revolving Credit Facility

4.            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"). The Facility is available for working capital and general corporate purposes, including acquisitions, and issuances of letters of credit. Insperity's 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.  In January 2012, we issued an irrevocable standby letter of credit for $285,000 under the Facility to a state workers' compensation agency.  At September 30, 2012, we had not drawn on the Facility.

The Facility matures on September 15, 2015.  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. We were in compliance with all financial covenants under the Credit Agreement at September 30, 2012.

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Cash, Cash Equivalents and Marketable Securities

9 Months Ended

Sep. 30, 2012

Cash Cash Equivalents and Marketable Securities [Abstract]

Cash, Cash Equivalents and Marketable Securities

3.            Cash, Cash Equivalents and Marketable Securities

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

	September 30,			December 31,
	2012			2011
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	46,079		$	71,350
Investment Holdings
Money market funds (cash equivalents)		67,395			59,587
Marketable securities		51,702			56,987
		165,176			187,924
Cash held in demand accounts		102,761			113,968
Outstanding checks		(14,017	)		(33,697	)
Total cash, cash equivalents and marketable securities	$	253,920		$	268,195
Cash and cash equivalents	$	202,218		$	211,208
Marketable securities		51,702			56,987

$ 253,920 $ 268,195

Our cash and overnight holdings fluctuate based on the timing of the client's payroll processing cycle.  Included in the cash balance as of September 30, 2012 and December 31, 2011, are $96.5 million and $150.8 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $12.4 million and $10.4 million in client prepayments, respectively.

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

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

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

· Level 3 - significant unobservable inputs

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

	Fair Value Measurements
	(in thousands)
	September 30,
	2012		Level 1		Level 2		Level 3
Money market funds	$	113,474	$	113,474	$	—	$	—
Municipal bonds		51,702		—		51,702		—
Total	$	165,176	$	113,474	$	51,702	$	—

	Fair Value Measurements
	(in thousands)
	December 31,
	2011		Level 1		Level 2		Level 3
Money market funds	$	130,937	$	130,937	$	—	$	—
Municipal bonds		56,987		—		56,987		—
Total	$	187,924	$	130,937	$	56,987	$	—

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. Valuation techniques used by Insperity 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:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
			(in thousands)
September 30, 2012:
Municipal bonds	$	51,584	$	133	$	(15	)	$	51,702
December 31, 2011:
Municipal bonds	$	56,945	$	90	$	(48	)	$	56,987

During the periods ended September 30, 2012 and 2011, we had no realized gains or losses recognized on sales of marketable securities.

As of September 30, 2012, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)
Less than one year	$	23,513	$	23,552
One to five years		28,071		28,150
Total	$	51,584	$	51,702

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Revolving Credit Facility (Details) (USD $)	9 Months Ended
	Sep. 30, 2012
Revolving Credit Facility [Abstract]
Term of revolving credit facility	4 years
Current borrowing capacity	$ 100,000,000
Maximum borrowing capacity	150,000,000
Percentage of subsidiary stock securing debt (in hundredths)	65.00%
Irrevocable standby letter of credit issued	$ 285,000
Basis of interest rate calculation on credit facility	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%.
Unused commitment fee on the average daily unused portion (in hundredths)	0.25%

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Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2012

Net Income Per Share [Abstract]

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

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Net income	$	11,452		$	4,099		$	30,957		$	19,626
Less income allocated to participating securities		(334	)		(120	)		(898	)		(582	)
Net income allocated to common shares	$	11,118		$	3,979		$	30,059		$	19,044
Weighted average common shares outstanding		24,923			25,425			25,034			25,546
Incremental shares from assumed conversions of common stock options		57			74			63			98
Adjusted weighted average common shares outstanding		24,980			25,499			25,097			25,644
Potentially dilutive securities not included in weightedaverage share calculation due to anti-dilutive effect		41			54			33			21

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

7.            Commitments and Contingencies

Insperity is a defendant in various lawsuits and claims arising in the normal course of business.  Management believes it has valid defenses in these cases and is defending them vigorously.  While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.

Pennsylvania Sales Taxes

Pennsylvania imposes a sales tax on "help supply services."  The Pennsylvania Department of Revenue ("Department") had maintained that PEO services constitute help supply services and are subject to the tax.  On February 21, 2012, the Pennsylvania Supreme Court affirmed the Appeals Court decision in the matter titled All Staffing vs. Commonwealth of Pennsylvania, which ruled that PEO services are not subject to the Pennsylvania sales tax.

In 2010, we filed refund claims totaling $2.9 million with the Department for the sales taxes paid in error for the period April 1, 2007 through December 31, 2009.  In the second quarter of 2012, the Pennsylvania Board of Finance and Revenue approved our refund claims, and we recognized a $2.9 million receivable and a corresponding reduction to payroll tax expense, a component of direct costs.  During the third quarter of 2012, we received the $2.9 million refund.

Kemper Insurance Companies

In 2003, facing continued capital constraints and a series of downgrades from various rating agencies, our former workers' compensation insurance carrier for the two-year period ended September 2003, Lumbermens Mutual Casualty Company, formerly known as Kemper, ("Lumbermens Mutual") made the decision to substantially cease underwriting operations and voluntarily entered into "run-off."   In July 2012, Lumbermens Mutual announced that an agreed order of rehabilitation had been entered against it in Cook County, Illinois.  Under the order, the Director of the Illinois Department of Insurance was vested with control over Lumbermens Mutual property and decision-making.  The Director has publicly announced that while claims will continue to be paid during the rehabilitation process, he intends to use the rehabilitation period to work with state guaranty associations to prepare for the orderly transition of claim handling responsibilities to such funds once an Order of Liquidation is entered.  After this transition process has been completed, the Director has stated that he intends to file a verified complaint for liquidation.

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

The guaranty associations in some states, including Texas, may assert that state law allows them to recover the amount of benefits paid by the guaranty association along with associated administration and defense costs from an insured with a net worth exceeding certain specified levels. If an Order of Liquidation is entered and if one or more guaranty associations were to seek recovery from us for open claims with Lumbermens Mutual, we may be required to repay those amounts.  While we are not certain when or if Lumbermens Mutual will be placed into liquidation or whether any state guaranty association will ultimately assert a claim against us, we intend to vigorously assert any and all available defenses to any such claim.  We estimate the outstanding claims that may be subject to such contentions from state guaranty associations to range from $2.9 million to $5.0 million as of September 30, 2012. In the event state guaranty associations attempt to seek recovery from the Company and are successful, the Company would be required to pay such claims, which would reduce net income and could have a material adverse effect on net income in the reported period.

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Stockholders Equity

9 Months Ended

Sep. 30, 2012

Stockholders Equity [Abstract]

Stockholders Equity

5.            Stockholders' Equity

Our Board of Directors (the "Board") has authorized a program to repurchase shares of our outstanding common stock ("Repurchase Program").  The purchases are to be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors.  During the nine months ended September 30, 2012, 407,400 shares were repurchased under the Repurchase Program and 107,228 shares not subject to the Repurchase Program were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  As of September 30, 2012, we were authorized to repurchase an additional 829,472 shares under the program.

The Board declared quarterly dividends of $0.17 per share of common stock in the second and third quarter of 2012 and $0.15 per share of common stock in the first quarter of 2012 and each quarter of 2011, resulting in a total of $12.6 million and $11.9 million, respectively, in dividend payments made by Insperity during the first nine months of each year.

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Net Income Per Share

9 Months Ended

Sep. 30, 2012

Net Income Per Share [Abstract]

Net Income Per Share

6.            Net Income per Share

We utilize the two-class method to compute net income per share.  The two-class method allocates a portion of net income to participating securities, which include unvested awards of share-based payments with non-forfeitable rights to receive dividends.  Net income allocated to unvested share-based payments is excluded from net income allocated to common shares.  Basic net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period.  Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Net income	$	11,452		$	4,099		$	30,957		$	19,626
Less income allocated to participating securities		(334	)		(120	)		(898	)		(582	)
Net income allocated to common shares	$	11,118		$	3,979		$	30,059		$	19,044
Weighted average common shares outstanding		24,923			25,425			25,034			25,546
Incremental shares from assumed conversions of common stock options		57			74			63			98
Adjusted weighted average common shares outstanding		24,980			25,499			25,097			25,644
Potentially dilutive securities not included in weightedaverage share calculation due to anti-dilutive effect		41			54			33			21

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Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Health Insurance Costs

Health Insurance Costs

We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare ("United"), Kaiser Permanente, Blue Shield of California, HMS 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, Insperity has accounted for this plan since its inception using a partially self-funded insurance accounting model.  Accordingly, Insperity records the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the "Plan Costs") as benefits expense in the Consolidated Statements of Operations.  The estimated incurred claims are based upon: (i) the level of claims processed during the quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan, including both active and COBRA enrollees.  Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics and other factors are incorporated into the benefits costs.

Additionally, since the plan's inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter.  If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Consolidated Balance Sheets.  On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Consolidated Balance Sheets.  The terms of the arrangement require Insperity 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 $2.8 million as of September 30, 2012, and is reported as a long-term asset.  As of September 30, 2012, Plan Costs were less than the net premiums paid and owed to United by $30.2 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $21.2 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2012 were $19.2 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Workers' Compensation Costs

Workers' Compensation Costs

Insperity's 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 Insperity satisfies its responsibilities.  Through September 30, 2010, Insperity bore the economic burden for the first $1 million layer of claims per occurrence and the insurance carrier was and remains responsible for the economic burden for all claims in excess of such first $1 million layer.

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

Because we bear the economic burden for claims up to the levels noted above, such claims, which are the primary component of our workers' compensation costs, are recorded in the period incurred.  Workers' compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.  Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.

Insperity employs a third party actuary to estimate its loss development rate, which is primarily based upon the nature of worksite employees' job responsibilities, the location of worksite employees, the historical frequency and severity of workers' compensation claims, and an estimate of future cost trends.  Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers' compensation claims cost estimates.  During the nine months ended September 30, 2012 and 2011, Insperity reduced accrued workers' compensation costs by $10.4 million and $8.6 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 2012 and 2011 were 0.7% and 1.2%, respectively) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

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 the first nine months of 2012 and 2011, we received $2.5 million and $10.0 million, respectively, for the return of excess claim funds related to the ACE Program, which reduced deposits.  As of September 30, 2012, we had restricted cash of $46.1 million and deposits of $57.6 million.

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Accounting Policies (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Oct. 01, 2010	Sep. 30, 2010
Health Insurance Costs [Abstract]
Number of days in advance of the beginning of a reporting quarter United establishes cash funding rates	90 days
Required accumulated cash surplus	$ 9,000,000
Required deposit equal to approximately one day of claims funding activity	2,800,000
Amount which plan costs were less than the net premiums paid and owed	30,200,000
Prepaid health insurance, current	21,200,000
Premiums owed to United	19,200,000
Workers Compensation Costs [Abstract]
Company's maximum economic burden for the first layer of claims per occurrence				1,000,000	1,000,000
Company's maximum aggregate economic burden for claims in excess of 1 million per policy year				5,000,000
Reduction in accrued workers' compensation costs for changes in estimated losses	10,400,000	8,600,000
U.S. Treasury rates that correspond with the weighted average estimated claim payout period (in hundredths)	0.70%	1.20%
Incurred but not paid workers compensation liabilities [Abstract]
Beginning balance, January 1,	104,791,000	96,934,000
Accrued claims	28,586,000	26,668,000
Present value discount	(712,000)	(1,159,000)
Paid claims	(23,133,000)	(21,123,000)
Ending balance	109,532,000	101,320,000
Current portion of accrued claims	46,069,000	42,812,000
Long-term portion of accrued claims	63,463,000	58,508,000	60,054,000
Ending balance	109,532,000	101,320,000
Return of excess claims funds related to ACE program	2,500,000	10,000,000
Workers compensation administrative fees accrued	2,300,000
Undiscounted accrued workers' compensation costs	121,700,000	115,100,000
Restricted cash - workers' compensation	46,069,000		44,737,000
Deposits - workers' compensation	$ 57,588,000		$ 52,320,000
Time period incurred claims expected to be paid recorded as restricted cash	1 year	1 year
Time period incurred claims expected to be paid, included in deposits, a long-term assets	Greater than 1Y	Greater than 1Y
Time period estimate of incurred claim costs to be paid included in short-term liabilities	1 year
Time period estimate of incurred claim costs to be paid included in long term liabilities	Greater than 1Y

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Pennsylvania Sales Taxes [Abstract]
Refund claim for Pennsylvania sales taxes paid in error			$ 2.9
Recorded amount of Pennsylvania refund		2.9
Collection of Pennsylvania refund claim	2.9
Kemper Insurance Companies [Abstract]
Outstanding claims minimum	2.9
Outstanding claims maximum	$ 5

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Net income	$ 11,452	$ 4,099	$ 30,957	$ 19,626
Other comprehensive income:
Unrealized gains (loss) on available-for-sale securities, net of tax	12	(7)	46	31
Comprehensive income	$ 11,464	$ 4,092	$ 31,003	$ 19,657

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Accounting Policies

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Accounting Policies

2.            Accounting Policies

Health Insurance Costs

We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare ("United"), Kaiser Permanente, Blue Shield of California, HMS 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, Insperity has accounted for this plan since its inception using a partially self-funded insurance accounting model.  Accordingly, Insperity records the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the "Plan Costs") as benefits expense in the Consolidated Statements of Operations.  The estimated incurred claims are based upon: (i) the level of claims processed during the quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan, including both active and COBRA enrollees.  Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics and other factors are incorporated into the benefits costs.

Additionally, since the plan's inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter.  If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Consolidated Balance Sheets.  On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Consolidated Balance Sheets.  The terms of the arrangement require Insperity 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 $2.8 million as of September 30, 2012, and is reported as a long-term asset.  As of September 30, 2012, Plan Costs were less than the net premiums paid and owed to United by $30.2 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $21.2 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at September 30, 2012 were $19.2 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Workers' Compensation Costs

Insperity's 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 Insperity satisfies its responsibilities.  Through September 30, 2010, Insperity bore the economic burden for the first $1 million layer of claims per occurrence and the insurance carrier was and remains responsible for the economic burden for all claims in excess of such first $1 million layer.

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

Because we bear the economic burden for claims up to the levels noted above, such claims, which are the primary component of our workers' compensation costs, are recorded in the period incurred.  Workers' compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.  Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.

Insperity employs a third party actuary to estimate its loss development rate, which is primarily based upon the nature of worksite employees' job responsibilities, the location of worksite employees, the historical frequency and severity of workers' compensation claims, and an estimate of future cost trends.  Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers' compensation claims cost estimates.  During the nine months ended September 30, 2012 and 2011, Insperity reduced accrued workers' compensation costs by $10.4 million and $8.6 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 2012 and 2011 were 0.7% and 1.2%, 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 paid workers' compensation claims:

	Nine Months Ended September 30,
	2012			2011
	(in thousands)
Beginning balance, January 1,	$	104,791		$	96,934
Accrued claims		28,586			26,668
Present value discount		(712	)		(1,159	)
Paid claims		(23,133	)		(21,123	)
Ending balance	$	109,532		$	101,320
Current portion of accrued claims	$	46,069		$	42,812
Long-term portion of accrued claims		63,463			58,508
	$	109,532		$	101,320

The current portion of accrued workers' compensation costs on the Consolidated Balance Sheets at September 30, 2012 includes $2.3 million of workers' compensation administrative fees.

As of September 30, 2012 and 2011, the undiscounted accrued workers' compensation costs were $121.7 million and $115.1 million, respectively.

At the beginning of each policy period, the insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims ("claim funds").  The level of claim funds is primarily based upon anticipated worksite employee payroll levels and expected workers' compensation loss rates, as determined by the insurance carrier.  Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits, a long-term asset in our Consolidated Balance Sheets.  In the first nine months of 2012 and 2011, we received $2.5 million and $10.0 million, respectively, for the return of excess claim funds related to the ACE Program, which reduced deposits.  As of September 30, 2012, we had restricted cash of $46.1 million and deposits of $57.6 million.

Insperity's 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 its estimate of incurred claim costs expected to be paid beyond one year are included in long-term liabilities on our Consolidated Balance Sheets.

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Basis of Presentation (Details)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Basis of Presentation [Abstract]
Percentage of PEO revenues from the Company's Texas markets (in hundredths)	26.00%	27.00%
Percentage of PEO revenues from the Company's California markets (in hundredths)	17.00%	16.00%