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:

	March 31,			December 31,
	2013			2012
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	178,040		$	255,000
Investment Holdings
Money market funds (cash equivalents)		38,722			26,087
Marketable securities		51,397			16,904
		268,159			297,991
Cash held in demand accounts		22,345			21,732
Outstanding checks		(11,675	)		(38,275	)
Total cash, cash equivalents and marketable securities	$	278,829		$	281,448

Cash and cash equivalents	$	227,432		$	264,544
Marketable securities		51,397			16,904
	$	278,829		$	281,448

Our cash and overnight holdings fluctuate based on the timing of the client's payroll processing cycle. Included in the cash balance as of March 31, 2013 and December 31, 2012, are $169.6 million and $158.2 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $11.9 million and $13.5 million in client prepayments, respectively.

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

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

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

·	Level 3 - significant unobservable inputs

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

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

Money market funds	$	216,762	$	216,762	$	—	$	—
Municipal bonds		51,397		—		51,397		—
Total	$	268,159	$	216,762	$	51,397	$	—

	Fair Value Measurements
	(in thousands)
	December 31,
	2012		Level 1		Level 2		Level 3

Money market funds	$	281,087	$	281,087	$	—	$	—
Municipal bonds		16,904		—		16,904		—
Total	$	297,991	$	281,087	$	16,904	$	—

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

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
			(in thousands)
March 31, 2013:
Municipal bonds	$	51,342	$	56	$	(1	)	$	51,397

December 31, 2012:
Municipal bonds	$	16,878	$	29	$	(3	)	$	16,904

During the periods ended March 31, 2013 and 2012, we had no realized gains or losses recognized on sales of marketable securities.

As of March 31, 2013, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)

Less than one year	$	23,231	$	23,255
One to five years		28,111		28,142
Total	$	51,342	$	51,397