10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-36373

TRINET GROUP INC

(Exact Name of Registrant as Specified in its Charter)

Delaware		95-3359658
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One Park Place, Suite 600
Dublin,	CA	94568
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (510) 352-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock par value $0.000025 per share	TNET	New York Stock Exchange

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  x    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o

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

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  Yes  o    No  o

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

The number of shares of Registrant’s Common Stock outstanding as of July 18, 2019 was 69,935,199.

TRINET GROUP, INC.

Form 10-Q - Quarterly Report

For the Quarterly Period Ended June 30, 2019

TABLE OF CONTENTS

	Form 10-Q Cross Reference	Page
Glossary		3
Unaudited Condensed Consolidated Financial Statements	Part I, Item 1.	26
Condensed Consolidated Balance Sheets		26
Condensed Consolidated Statements of Income and Comprehensive Income		27
Condensed Consolidated Statements of Stockholders' Equity		28
Condensed Consolidated Statements of Cash Flows		29
Notes to Condensed Consolidated Financial Statements		30
Management’s Discussion and Analysis of Financial Condition and Results of Operations	Part I, Item 2.	5
Quantitative and Qualitative Disclosures About Market Risk	Part I, Item 3.	25
Controls and Procedures	Part I, Item 4.	25
Legal Proceedings	Part II, Item 1.	44
Risk Factors	Part II, Item 1A.	44
Unregistered Sales of Equity Securities and Use of Proceeds	Part II, Item 2.	44
Defaults Upon Senior Securities	Part II, Item 3.	44
Mine Safety Disclosures	Part II, Item 4.	44
Other Information	Part II, Item 5.	44
Exhibits	Part II, Item 6.	45

GLOSSARY

Glossary of Acronyms and Abbreviations

Acronyms and abbreviations are used throughout this report, particularly in Part I, Item 1. Unaudited Condensed Consolidated Financial Statements and Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

AFS	Available-for-sale
ASC	Accounting standards codification
ASU	Accounting standards update
CEO	Chief Executive Officer
CFO	Chief Financial Officer
COPS	Cost of providing services
D&A	Depreciation and Amortization
EBITDA	Earnings before interest expense, taxes, depreciation and amortization of intangible assets
EPS	Earnings Per Share
ERISA	Employee Retirement Income Security Act of 1974
FASB	Financial Accounting Standards Board
G&A	General and administrative
GAAP	Generally Accepted Accounting Principles in the United States
HR	Human Resources
IRS	Internal Revenue Service
ISR	Insurance service revenues
MD&A	Management's Discussion and Analysis of Financial Condition and Results of Operations
NISR	Net Insurance Service Revenues
NSR	Net service revenues
OE	Operating expenses
PFC	Payroll funds collected
PSR	Professional service revenues
ROU	Right-of-use
RSA	Restricted Stock Award
RSU	Restricted Stock Unit
SBC	Stock Based Compensation
S&M	Sales and marketing
SD&P	Systems development and programming
SEC	Securities and Exchange Commission
SMB	Small to midsize business
U.S.	United States
WSE	Worksite employee

3

FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements and Other Financial Information

For purposes of this Quarterly Report on Form 10-Q (Form 10-Q), the terms “TriNet,” “the Company,” “we,” “us” and “our” refer to TriNet Group, Inc., and its consolidated subsidiaries. This Form 10-Q contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the use of words such as, but not limited to, "ability," “anticipate,” “believe,” “can,” “continue,” “could,” “design,” “estimate,” “expect,” “forecast,” “hope,” "impact," “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “strategy,” “target,” "value," “will,” “would” and similar expressions or variations intended to identify forward-looking statements.

Forward-looking statements are not guarantees of future performance, but are based on management’s expectations as of the date of this Form 10-Q and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from our current expectations and any past results, performance or achievements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements are discussed throughout our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 14, 2019 (2018 Form 10-K), including those appearing under the heading “Risk Factors” in Item 1A, and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our 2018 Form 10-K, as well as in our other periodic filings with the SEC. Examples of forward-looking statements include, among others: risks associated with changes in, uncertainty regarding, or adverse application of the complex laws and regulations that govern our business; our ability to be recognized as an employer of worksite employees under federal and state regulations; our ability to mitigate business risks associated with our co-employment relationship with our worksite employees; our ability to secure private and confidential client and worksite employee data and our information technology infrastructure against cyber-attacks and security breaches; our ability to manage unexpected changes in workers’ compensation and health insurance claims by worksite employees; fluctuation in our results of operation and stock price as a result of numerous factors, many of which are outside of our control, such as the volume and severity of our workers’ compensation and health insurance claims and the amount and timing of our insurance costs, operating expenses and capital expenditure requirements; failures or limitations in the business systems we rely upon; our ability to improve our technology to meet the expectations of our clients; our ability to properly manage our internal controls over financial reporting; our ability to effectively integrate businesses we have acquired and new businesses we may acquire in the future; the effects of volatility in the financial and economic environment on the businesses that make up our client base; our ability to effectively manage and improve our operational processes; market acceptance of our vertical strategy; our ability to manage our sales force effectively; the ability of our products and services to compete effectively in our industry; the concentration of our clients in certain geographies and industries; the outcome of existing and future legal proceedings; changes in our income tax positions or adverse outcomes from on-going and future audits; adverse changes in our insurance coverage or our relationships with key insurance carriers; our ability to manage our client attrition; our ability to comply with the restrictions of our credit facility and meet our debt obligations; the impact of concentrated ownership in our stock; and the effects of increased competition and our ability to compete effectively. These and other factors could cause our actual results to differ materially from our anticipated results. The information provided in this Form 10-Q is based upon the facts and circumstances known as of the date of this Form 10-Q, and any forward-looking statements made by us in this Form 10-Q speak only as of the date of this Form 10-Q. We undertake no obligation to revise or update any of the information provided in this Form 10-Q, except as required by law.

The MD&A of this Form 10-Q includes references to our performance measures presented in conformity with GAAP and other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plans. Refer to the Non-GAAP Financial Measures in our Key Financial and Operating Metrics section within our MD&A for definitions and reconciliations from GAAP measures.

4

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Overview

TriNet is a leading provider of HR expertise, payroll services, employee benefits and employment risk mitigation services for SMBs. We deliver a comprehensive suite of products and services, which allows our clients to administer and manage various HR-related functions, including compensation and benefits, payroll processing, employee data, health insurance and workers' compensation programs, and other transactional HR needs using our technology platform and HR, benefits and compliance expertise.

We also leverage our scale and industry-specific HR experience to design product and service offerings for SMBs in specific industries. We believe our industry-specific approach, which we call our vertical approach, is a key differentiator for us and creates additional value for our clients by allowing our product and service offerings to address the common HR needs in different client industries.

Operational Highlights

Our consolidated results for the second quarter and the first half of 2019 reflect our continued progress in attracting new customers to our industry-oriented (vertical) products, serving our existing customers and improving our brand awareness through marketing.

Our customers are our focus, and we are investing in our processes to ensure a stronger customer experience. We expect this investment will further enhance our value to our customers, support retention and provide further efficiency and scale for our operations. We started this work in 2018 and expect this to continue in the near-term.

During the first half of 2019 we:

• experienced an improvement in retention as a result of our customer service initiatives,

• benefited from our clients growing their WSEs,

• saw an increase in new sales which delivered additional revenue growth,

• continued to experience a change in our client mix with customers increasing their participation, or enrollment, in our insurance services offerings, and

• delivered profitable growth.

Our efforts to build a successful and enduring company include building and leveraging a strong national brand presence. Our branding strategy, Incredible Starts Here, is being augmented with our current campaign: People Matter. We place our customers at the center of what we do, including placing our customers at the center of our marketing.

5

MANAGEMENT'S DISCUSSION AND ANALYSIS

Performance Highlights

Our results for the second quarter and the first half of 2019 are as follows (percentages, increases or reductions represent changes when compared to the same periods of 2018):

Q2 2019

	$935M			$55M			$231M
	Total revenues			Operating income			Net Service Revenue *
	10	%	increase	(28	)%	decrease	5	%	increase
	$46M			$0.64			$50M
	Net income			Diluted EPS			Adjusted Net income *
	(22	)%	decrease	(20	)%	decrease	(21	)%	decrease
*	Non-GAAP measure as defined in the section below.

323,957			318,874			$9.1B
Total WSEs			Average WSEs			Payroll and payroll tax payments
2	%	increase	2	%	increase	9	%	increase

During the second quarter of 2019, we continued to achieve year-over-year improvement in our WSE and revenue growth. The growth year-over-year reflects improvement in our new sales performance and customer retention by customers that choose to benefit from all of our service offerings. Increased hiring and enrollments by our customers and a change in mix of WSEs also contributed to the growth. We continue to price to the value of our services and, for our insurance offerings, to our expected risk. Operating income, adjusted net income and net income decreased due primarily to increases in insurance costs as a result of an increase in medical cost trend and health plan participation or enrollment, and increased operating expenses as a result of our growth initiatives and initiatives to improve client service, partially offset by a 10% increase in total revenues.

Average WSEs (defined as average monthly WSEs paid during the period) for the second quarter of 2019 increased 2% compared to the same period in 2018 driven by lower client attrition in our Main Street vertical, improved new sales and increased WSE hiring by our clients.

Our pricing strategy and change in mix of WSEs over the last year contributed to our growth of both PSR and ISR.

We continue to enhance our investment strategy to invest available liquid funds to improve our net income and to fund our corporate initiatives.

YTD 2019

	$1.9B			$137M			$482M
	Total revenues			Operating income			Net Service Revenue *
	9	%	increase	(7	)%	decrease	9	%	increase
	$109M			$1.53			$120M
	Net income			Diluted EPS			Adjusted Net income *
	(3	)%	decrease	(1	)%	decrease	(2	)%	decrease
*	Non-GAAP measure as defined in the section below.

315,817			$20.7B
Average WSEs			Payroll and payroll tax payments
1	%	increase	11	%	increase

6

MANAGEMENT'S DISCUSSION AND ANALYSIS

Key Financial and Operating Metrics

The following key financial and operating metrics should be read in conjunction with our condensed consolidated financial statements and related notes included in this Form 10-Q.

	Three Months Ended June 30,							Six Months Ended June 30,
(in millions, except per share and WSE data)	2019		2018		% Change			2019		2018		% Change
Income Statement Data:
Total revenues	$	935	$	850	10		%	$	1,869	$	1,711	9		%
Operating income	55		76		(28	)		137		147		(7	)
Net income	46		58		(22	)		109		112		(3	)
Diluted net income per share of common stock	0.64		0.80		(20	)		1.53		1.55		(1	)
Non-GAAP measures (1):
Net Service Revenues	231		220		5			482		440		9
Net Insurance Service Revenues	104		105		(2	)		219		196		11
Adjusted EBITDA	85		99		(16	)		193		190		1
Adjusted Net Income	50		63		(21	)		120		121		(2	)
Operating Metrics:
Total WSEs payroll and payroll taxes processed	$	9,110	$	8,371	9		%	$	20,732	$	18,690	11		%
Average WSEs	318,874		313,845		2			315,817		314,203		1
Total WSEs at period end	323,957		318,921		2			323,957		318,921		2

(1)    Refer to Non-GAAP Financial Measures section below for definitions and reconciliations from GAAP measures.

(in millions)	June 30, 2019		December 31, 2018		% Change
Balance Sheet Data:
Cash and cash equivalents	$	219	$	228	(4	)	%
Working capital	236		221		7
Total assets	2,318		2,435		(5	)
Long-term debt	402		413		(3	)
Total liabilities	1,879		2,060		(9	)
Total stockholders’ equity	439		375		17

	Six Months Ended June 30,
(in millions)	2019			2018				% Change
Cash Flow Data:
Net cash used in operating activities	$	(162	)	$	(543	)		(70	)	%
Net cash used in investing activities	(25		)	(166		)		(86	)
Net cash used in financing activities	(77		)	(36		)		113
Non-GAAP measure(1):
Corporate operating cash flows	107			108			169	—

(1)    Refer to Non-GAAP Financial Measures section below for definitions and reconciliations from GAAP measures.

Non-GAAP Financial Measures

In addition to financial measures presented in accordance with GAAP, we monitor other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources, and to use as performance measures in our executive compensation plan. These key financial measures provide an additional view of our operational performance over the long-term and provide information that we use in order to maintain and grow our business.

The presentation of these non-GAAP financial measures is used to enhance the understanding of certain aspects of our financial performance. They are not meant to be considered in isolation from, superior to, or as a substitute, for the directly comparable financial measures prepared in accordance with GAAP.

7

MANAGEMENT'S DISCUSSION AND ANALYSIS

Non-GAAP Measure	Definition	How We Use The Measure
Net Service Revenues	• Sum of professional service revenues and Net Insurance Service Revenues, or total revenues less insurance costs.	• Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes. • Acts as the basis to allocate resources to different functions and evaluates the effectiveness of our business strategies by each business function. • Provides a measure, among others, used in the determination of incentive compensation for management.
Net Insurance Service Revenues	• Insurance revenues less insurance costs.	• Is a component of Net Service Revenues. • Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes. Promotes an understanding of our insurance services business by evaluating insurance service revenues net of our WSE related costs which are substantially pass-through for the benefit of our WSEs. Under GAAP, insurance service revenues and costs are recorded gross as we have latitude in establishing the price, service and supplier specifications. • We also sometimes refer to Net Insurance Service Margin, which is the ratio of Net Insurance Revenue to Insurance Service Revenue.
Adjusted EBITDA	• Net income, excluding the effects of: - income tax provision, - interest expense, - depreciation, - amortization of intangible assets, and - stock-based compensation expense.	• Provides period-to-period comparisons on a consistent basis and an understanding as to how our management evaluates the effectiveness of our business strategies by excluding certain non-cash charges such as depreciation and amortization, and stock-based compensation recognized based on the estimated fair values. We believe these charges are either not directly resulting from our core operations or not indicative of our ongoing operations. • Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects. • Provides a measure, among others, used in the determination of incentive compensation for management. • We also sometimes refer to Adjusted EBITDA margin, which is the ratio of Adjusted EBITDA to Net Service Revenue.
Adjusted Net Income	• Net income, excluding the effects of: - effective income tax rate (1), - stock-based compensation, - amortization of intangible assets, - non-cash interest expense (2), and - the income tax effect (at our effective tax rate (1)) of these pre-tax adjustments.	• Provides information to our stockholders and board of directors to understand how our management evaluates our business, to monitor and evaluate our operating results, and analyze profitability of our ongoing operations and trends on a consistent basis by excluding certain non-cash charges.

8

MANAGEMENT'S DISCUSSION AND ANALYSIS

Corporate Operating Cash Flows • Net cash (used in) provided by operating activities, excluding the effects of: - Assets associated with WSEs (accounts receivable, unbilled revenue, prepaid expenses and other current assets) and - Liabilities associated with WSEs (client deposits, accrued wages, payroll tax liabilities and other payroll withholdings, accrued health benefit costs, accrued workers' compensation costs, insurance premiums and other payables, and other current liabilities). • Provides information that our stockholders and management can use to evaluate our cash flows from operations independent of the current assets and liabilities associated with our WSEs.
• Enhances comparisons to prior periods and, accordingly, used as a liquidity measure to manage liquidity between corporate and WSE related activities, and to help determine and plan our cash flow and capital strategies.

(1) Non-GAAP effective tax rate is 26% for 2019 and 2018, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.

(2) Non-cash interest expense represents amortization and write-off of our debt issuance costs.

Reconciliation of GAAP to Non-GAAP Measures

The table below presents a reconciliation of Total revenues to Net Service Revenues:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Total revenues	$	935	$	850	$	1,869	$	1,711
Less: Insurance costs	704		630		1,387		1,271
Net Service Revenues	$	231	$	220	$	482	$	440

The table below presents a reconciliation of Insurance service revenues to Net Insurance Service Revenues:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019			2018
Insurance service revenues	$	808		$	735		$	1,606		$	1,467
Less: Insurance costs	704			630			1,387			1,271
Net Insurance Service Revenues	$	104		$	105		$	219		$	196
Net Insurance Service Revenue Margin	13		%	14		%	14		%	13		%

9

MANAGEMENT'S DISCUSSION AND ANALYSIS

The table below presents a reconciliation of Net income to Adjusted EBITDA:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019			2018
Net income	$	46		$	58		$	109		$	112
Provision for income taxes	10			14			30			27
Stock-based compensation	11			10			20			19
Interest expense and bank fees	6			7			11			13
Depreciation and amortization of intangible assets	12			10			23			19
Adjusted EBITDA	$	85		$	99		$	193		$	190
Adjusted EBITDA Margin	36		%	45		%	40		%	43		%

The table below presents a reconciliation of Net income to Adjusted Net Income:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019			2018
Net income	$	46		$	58		$	109		$	112
Effective income tax rate adjustment	(5		)	(6		)	(6		)	(10		)
Stock-based compensation	11			10			20			19
Amortization of intangible assets	2			2			3			3
Non-cash interest expense	—			3			—			4
Income tax impact of pre-tax adjustments	(4		)	(4		)	(6		)	(7		)
Adjusted Net Income	$	50		$	63		$	120		$	121

The table below presents a reconciliation of net cash used in operating activities to corporate operating cash flows:

	Six Months Ended June 30,
(in millions)	2019			2018
Net cash used in operating activities	$	(162	)	$	(543	)
Change in WSE related other current assets	52			(1		)
Change in WSE related liabilities	217			652
Corporate Operating Cash Flows	$	107		$	108

10

MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

Operating Metrics

Worksite Employees (WSE)

Average WSEs increased 2% in the second quarter of 2019 and increased 1% in the first half of 2019, compared to the same periods in 2018. In the second quarter and first half of 2019, we experienced reduced attrition due to our customer service initiatives, combined with stronger new sales performance in our Nonprofit vertical and continued hiring within our installed base, especially in our Technology vertical.

Total WSEs can be used to estimate our beginning WSEs for the next period and, as a result, can be used as an indicator of our potential future success in growing our business and retaining clients.

Anticipated revenues for future periods can diverge from the revenue expectation derived from Average WSEs or Total WSEs due to pricing differences across our HR solutions and services and the degree to which clients and WSEs elect to participate in our solutions during future periods. In addition to focusing on growing our Average WSE and Total WSE counts, we also focus on pricing strategies, product participation and product differentiation to expand our revenue opportunities. We report the impact of client and WSE participation differences as a change in mix.

We are focused on growing our WSE base, including pursuing strategic acquisitions where appropriate, while improving our customer experience and continuing to manage attrition. We continued to invest in our efforts to enhance our customers' and WSEs' experiences, through operational and process improvements, and we have started to realize improved retention in some of our verticals.

11

MANAGEMENT'S DISCUSSION AND ANALYSIS

Total Revenues

Our revenues consist of professional service revenues (PSR) and insurance service revenues (ISR). PSR represents fees charged to clients for processing payroll-related transactions on behalf of our clients, access to our HR expertise, employment and benefit law compliance services, and other HR-related services. ISR consists of insurance-related billings and administrative fees collected from clients and withheld from WSEs for workers' compensation insurance and health benefit insurance plans provided by third-party insurance carriers.

Monthly total revenues per Average WSE is a measure we use to monitor the success of our product and service pricing strategies. This measure increased 8% during the second quarter of 2019 compared to the same period in 2018, and increased 9% in the first half of 2019, compared to the same period in 2018.

We also analyze changes in total revenue with the following measures:

• Volume - the percentage change in period over period Average WSEs,

• Rate - the combined percentage change in service fees for each vertical product and change in service fees associated with each insurance service offerings, and

• Mix - the change in composition of Average WSEs within our verticals combined with the composition of our enrolled WSEs within our insurance service offerings.

The changes in total revenues attributed above to rate and mix during the second quarter and of first half of 2019, when compared to the same periods in 2018, were primarily driven by increases in insurance services fees and health plan enrollment in our insurance service offerings.

12

MANAGEMENT'S DISCUSSION AND ANALYSIS

Operating Income

Our operating income consists of total revenues less insurance costs and OE. Our insurance costs include insurance premiums for coverage provided by insurance carriers, reimbursement of claims payments made by insurance carriers or third-party administrators, and changes in accrued costs related to contractual obligations with our workers' compensation and health benefit carriers. Our OE consists primarily of our corporate employees' compensation related expenses which includes payroll, payroll taxes, SBC, bonuses, commissions and other payroll-and benefits-related costs.

The tables below provide a view of the changes in components of operating income for the second quarter and first half of 2019, as compared to the same periods in 2018, respectively.

(in millions)
$76		Second Quarter 2018 Operating Income
	+85	Higher total revenues primarily as a result of an increase in ISR fees and health plan enrollment.
	-74	Higher insurance costs primarily as a result of an increase in medical cost trend and health plan participation, or enrollment.
	-32	Higher OE primarily as a result of growth in the number of our corporate employees and costs associated with initiatives to improve customer experience and our growth initiatives.
$55		Second Quarter 2019 Operating Income

(in millions)
$147		YTD 2018 Operating Income
	+158	Higher total revenues primarily as a result of an increase in ISR fees and health plan enrollment.
	-116	Higher insurance costs primarily as a result of an increase in medical cost trend and health plan participation, or enrollment.
	-52	Higher OE primarily as a result of growth in the number of our corporate employees and costs associated with initiatives to improve customer experience and our growth initiatives.
$137		YTD 2019 Operating Income

13

MANAGEMENT'S DISCUSSION AND ANALYSIS

Professional Service Revenues

Our clients are billed either based on a fee per WSE per month per transaction or on a percentage of the WSEs’ payroll. For those clients that are billed on a percentage of WSEs' payroll, as our clients' payrolls increase, our fees also increase. As such, payroll and payroll taxes processed, which includes recurring payrolls and non-recurring bonus payrolls, benefits, and associated payroll taxes may also be an indicator of our PSR growth.

Our vertical approach provides us the flexibility to offer our clients in different industries with varied services at different prices, which we believe potentially reduces the value of using Average WSE and Total WSE counts as indicators of future potential revenue performance.

We also analyze changes in PSR with the following measures:

• Mix - the change in composition of Average WSEs across our verticals,

• Rate - the percentage change in fees for each vertical, and

• Volume - the percentage change in period over period Average WSEs.

The increase in PSR, for the second quarter and first half of 2019 compared to the same periods in 2018, reflects the result of our vertical pricing strategy and ongoing change in the mix of our WSEs. During the second quarter of 2019 and first half of 2019, we continued to experience WSE growth especially in our Professional Services and Technology verticals, while our Main Street vertical continued to shrink, but at a reduced rate when compared to the same periods in 2018.

14

MANAGEMENT'S DISCUSSION AND ANALYSIS

Insurance Service Revenues

ISR consists of insurance services-related billings and administrative fees collected from clients and withheld from WSE payroll for health benefits and workers' compensation insurance provided by third-party insurance carriers.

We use the following measures to analyze changes in ISR:

• Volume - the percentage change in period over period Average WSEs,

• Rate - the percentage change in fees associated with each of our insurance service offerings, and

• Mix - all other changes including the composition of our enrolled WSEs within our insurance service offerings (health plan enrollment).

The growth in ISR for the second quarter and first half of 2019, as compared to the same periods in 2018, primarily resulted from changes in rate due to higher insurance service fees per plan participant and changes in mix due to higher health plan enrollment.

15

MANAGEMENT'S DISCUSSION AND ANALYSIS

Insurance Costs

Insurance costs include insurance premiums for coverage provided by insurance carriers, reimbursement of claims payments made by insurance carriers or third-party administrators, and changes in accrued costs related to contractual obligations with our workers' compensation and health benefit carriers.

We use the following measures to analyze changes in insurance costs:

• Volume - the percentage change in period over period Average WSEs,

• Rate - the percentage change in cost trend associated with each of our insurance service offerings, and

• Mix - all other changes including the composition of our enrolled WSEs within our insurance service offerings (health plan enrollment).

The increase in insurance cost rates during the second quarter and first half of 2019, was primarily driven by an increase in medical cost trend, partially offset by lower administrative costs. We continued to experience favorable prior year development on our accrued workers' compensation costs of $11 million for the second quarter and $16 million for the first half of 2019, primarily due to lower than expected claim severity. The 4% increase in insurance costs attributed to the change in mix during the second quarter and first half of 2019 is consistent with the change in ISR mix which was a result of higher health plan enrollment.

16

MANAGEMENT'S DISCUSSION AND ANALYSIS

Net Service Revenues

NSR provides us with a comparable basis of revenues on a net basis, acts as the basis to allocate resources to different functions and helps us evaluate the effectiveness of our business strategies by each business function.

NISR margin for the second quarter decreased by 1% due to increased insurance costs and the first half of 2019 remained consistent with the same periods in 2018.

17

MANAGEMENT'S DISCUSSION AND ANALYSIS

Operating Expenses

OE includes cost of providing services (COPS), sales and marketing (S&M), general and administrative (G&A), systems development and programming (SD&P), and depreciation and amortization expenses (D&A).

We manage our operating expenses and allocate resources across different business functions based on percentage of NSR which has increased to 76% in the second quarter of 2019 from 65% in the same period in 2018 and increased to 72% in the first half of 2019 from 67% in the same period of 2018.

We had approximately 3,100 corporate employees as of June 30, 2019 in 56 offices across the U.S. Our corporate employees' compensation-related expenses represent a majority of our OE. Compensation costs for our corporate employees include payroll, payroll taxes, SBC, bonuses, commissions and other payroll- and benefits-related costs. Compensation expense for internal employees was and is primarily driven by our continued efforts to improve our customer experience. Compensation-related expense represented 59% and 59% of our OE in the second quarters of 2019 and 2018, and 59% and 60% in the first halves of 2019 and 2018, respectively.

We expect our OE to increase for the foreseeable future from our continued efforts to improve our customer experience, and our systems and processes. These expenses may fluctuate as a percentage of our total revenues from period-to-period depending on the timing of when expenses are incurred.

18

MANAGEMENT'S DISCUSSION AND ANALYSIS

We analyze and present our OE based upon the business functions COPS, S&M, G&A and SD&P and depreciation and amortization. The charts below provide a view of the expenses of the business functions. Dollars are presented in millions and percentages represent year-over-year change.

COPS increased in the second quarter and the first half of 2019, when compared to the same periods in 2018, primarily due to increased headcount to support initiatives to improve the customer experience, enhancing our product offerings and process improvement initiatives.

S&M increased in the second quarter and the first half of 2019, when compared to the same periods in 2018, driven by increase in headcount, advertising expenses for our People Matter campaign, and commissions expense related to our growth in new sales.

G&A increased in the second quarter and the first half of 2019, when compared to the same periods in 2018, primarily driven by increased headcount to support operations, partially offset by a decrease in recruiting expenses.

The increase in SD&P and D&A in the second quarter and the first half of 2019, when compared to the same periods in 2018, remained consistent with our investments in technology to support our customer service initiatives.

19

MANAGEMENT'S DISCUSSION AND ANALYSIS

We break out the change in expenses that make up our OE in the chart below:

Other Income (Expense)

Other income (expense) consists primarily of interest and dividend income from investments and interest expense under our credit facility.

Interest income increased to $7 million in the second quarter of 2019 and $13 million for the first half of 2019 from $3 million and $5 million in the same periods in 2018, respectively, as a result of a change in our investment strategy initiated in the second quarter of 2018 to improve our interest income.

We intend to continue to execute our investment strategy, which we expect will improve our interest income, net income, and our Adjusted EBITDA.

Interest expense, bank fees and other, remained consistent for the second quarter and first half of 2019 and 2018.

Provision for Income Taxes

Our effective income tax rate was 17% and 19% for the second quarter of 2019 and 2018, respectively, and 21% and 19% for the six months ended June 30, 2019 and 2018, respectively. The decrease when comparing the second quarter of 2019 with the same period in 2018 is primarily due to a one-time benefit associated with prior year tax expense. The increase in the year to date rates for 2019 when compared to the same period in 2018, consisted primarily from a decrease in tax benefits recognized from excess tax benefits related to stock-based compensation.

20

MANAGEMENT'S DISCUSSION AND ANALYSIS

Liquidity and Capital Resources

Liquidity

We believe that we have sufficient liquidity and capital resources to satisfy future requirements and meet our obligations to our clients, creditors and debt holders.

Included in our balance sheets are assets and liabilities resulting from transactions directly or indirectly associated with WSEs, including payroll and related taxes and withholdings, our sponsored workers' compensation and health insurance programs, and other benefit programs. Although we are not subject to regulatory restrictions that require us to do so, we distinguish and manage our corporate assets and liabilities separately from those current assets and liabilities held by us to satisfy our employer obligations associated with our WSEs as follows:

	June 30, 2019						December 31, 2018
(in millions)	Corporate		WSE		Total		Corporate		WSE		Total
Current assets:
Cash and cash equivalents	$	219	$	—	$	219	$	228	$	—	$	228
Investments	76		—		76		54		—		54
Restricted cash, cash equivalents and investments	14		658		672		15		927		942
Other current assets	50		438		488		36		386		422
Total current assets	$	359	$	1,096	$	1,455	$	333	$	1,313	$	1,646
Total current liabilities	$	123	$	1,096	$	1,219	$	112	$	1,313	$	1,425
Working Capital	$	236	$	—	$	236	$	221	$	—	$	221

Working capital for WSE-related assets and liabilities

We designate funds to ensure that we have adequate current assets to satisfy our current obligations associated with WSEs. We manage our WSE payroll and benefits obligations through collections of payments from our clients which generally occurs two to three days in advance of client payroll dates. We regularly review our short-term obligations associated with our WSEs (such as payroll and related taxes, insurance premium and claim payments) and designate funds required to fulfill these short-term obligations, which we refer to as PFC. PFC is included in current assets as restricted cash, cash equivalents and investments.

We manage our sponsored benefit and workers' compensation insurance obligations by maintaining collateral funds in restricted cash, cash equivalents and investments. These collateral amounts are generally determined at the beginning of each plan year and we may be required by our insurance carriers to adjust our collateral balances when facts and circumstances change. We regularly review our collateral balances with our insurance carriers and anticipate funding further collateral in the future based upon our capital requirements. We classify our restricted cash, cash equivalents and investments as current and noncurrent assets to match against the anticipated timing of claims payments.

Working capital for corporate purposes

We use our available cash and cash equivalents to satisfy our operational and regulatory requirements and to fund capital expenditures. We believe that our existing corporate cash and cash equivalents and positive working capital will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Corporate working capital as of June 30, 2019 increased compared to December 31, 2018.

Capital Resources

Sources of Funds

We believe that we can meet our present and reasonably foreseeable operating cash needs and future commitments through existing liquid assets, continuing cash flows from corporate operating activities, our borrowing capacity under our revolving credit facility and the potential issuance of debt or equity securities.

21

MANAGEMENT'S DISCUSSION AND ANALYSIS

We also have available a $250 million revolving credit facility. The total unused portion of the revolving credit facility was $234 million as of June 30, 2019.

Cash Flows

The following table presents our cash flow activities for the stated periods:

	Six Months Ended June 30,
(in millions)	2019									2018
	Corporate			WSE			Total			Corporate			WSE			Total
Net cash provided by (used in):
Operating activities	$	107		$	(269	)	$	(162	)	$	108		$	(651	)	$	(543	)
Investing activities	(27		)	2			(25		)	(166		)	—			(166		)
Financing activities	(77		)	—			(77		)	(36		)	—			(36		)
Net increase (decrease) in cash and cash equivalents, unrestricted and restricted	$	3		$	(267	)	$	(264	)	$	(94	)	$	(651	)	$	(745	)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period	425			924			1,349			476			1,262			1,738
End of period	$	428		$	657		$	1,085		$	382		$	611		$	993
Net increase (decrease) in cash and cash equivalents:
Unrestricted	$	(9	)	$	—		$	(9	)	$	(134	)	$	—		$	(134	)
Restricted	12			(267		)	(255		)	40			(651		)	(611		)

Operating Activities

Components of net cash used in operating activities are as follows:

	Six Months Ended June 30,
(in millions)	2019									2018
	Corporate			WSE			Total			Corporate			WSE			Total
Net income	$	109		$	—		$	109		$	112		$	—		$	112
Depreciation and amortization	27			—			27			24			—			24
Noncash lease expense	10			—			10			—			—			—
Stock-based compensation expense	20			—			20			19			—			19
Interest paid	(9		)	—			(9		)	(8		)	—			(8		)
Income tax payments, net	(33		)	—			(33		)	(24		)	—			(24		)
Changes in other operating assets	(29		)	(52		)	(81		)	(13		)	1			(12		)
Changes in other operating liabilities	12			(217		)	(205		)	(2		)	(652		)	(654		)
Net cash provided by (used in) operating activities	$	107		$	(269	)	$	(162	)	$	108		$	(651	)	$	(543	)

Year-over-year fluctuation in net cash used in operating activities for WSE purposes was primarily driven by timing of client payments, payments of payroll and payroll taxes, and collateral funding and insurance claim activities. We expect the changes in restricted cash and cash equivalents to correspond to WSE cash provided by (or used in) operations as we manage our obligations associated with WSEs through restricted cash.

Our corporate operating cash flows remained flat when comparing the first half of 2019 to the same period in 2018.

22

MANAGEMENT'S DISCUSSION AND ANALYSIS

Investing Activities

Net cash used in investing activities in the first half of 2019 decreased, when compared to the same period of 2018, due to the decrease in purchases of investments.

	Six Months Ended June 30,
(in millions)	2019			2018
Investments:
Purchases of investments	65			203
Proceeds from sale and maturity of investments	(65		)	(63		)
Cash used in investments	$	—		$	140
Capital expenditures:
Software and hardware	$	18		$	13
Office furniture, equipment and leasehold improvements	7			13
Cash used in capital expenditures	$	25		$	26

Investments

We invest a portion of available cash in investment-grade securities with effective maturities less than five years that are classified on our condensed balance sheets as investments. As of June 30, 2019, we had approximately $193 million in corporate investments.

We also invest funds held as collateral to satisfy our long-term obligation towards workers' compensation liabilities in U.S. long-term treasuries. These investments are classified on our condensed balance sheets as restricted cash, cash equivalents and investments. We review the amount and the anticipated holding period of these investments regularly in conjunction with our estimated long-term workers' compensation liabilities and anticipated claims payment trend.

As of June 30, 2019, we held approximately $1.3 billion in cash, cash equivalents and investments of which $0.9 billion was restricted. Refer to Note 2 in this Form 10-Q for a summary of these funds.

Capital Expenditures

During the first half of 2019 and 2018, we continued to make investments in software and hardware, enhanced our existing products and technology platform. We also incurred expenses related to the build out of our corporate headquarters and our technology and client service centers. We expect capital investments in our software and hardware to continue in the future.

Financing Activities

Net cash used in financing activities in the first half of 2019 and 2018 consisted of our debt and equity-related activities.

	Six Months Ended June 30,
(in millions)	2019		2018
Financing activities
Repurchase of common stock, net of issuance	$	66	$	32
Repayment of borrowings	11		4
Cash used in financing activities	$	77	$	36

23

MANAGEMENT'S DISCUSSION AND ANALYSIS

In February 2019, our board of directors authorized a $300 million incremental increase to our ongoing stock repurchase program initiated in May 2014, primarily to return value to our stockholders and to offset dilution from the issuance of stock under our equity-based incentive plan and employee stock purchase plan. During the first half of 2019, we repurchased 1,175,609 shares of our common stock for approximately $62 million through our stock repurchase program. As of June 30, 2019, approximately $313 million remained available for repurchase under all authorizations by our board of directors. We plan to use current cash and cash generated from ongoing operating activities to fund this share repurchase program.

Covenants

We were in compliance with the financial covenants under our credit facilities at June 30, 2019. For information on the covenants under our 2018 credit facility, refer to Note 7 in Part II, Item 8. Financial Statements and Supplementary Data, of our Form 10-K.

Off-Balance Sheet Arrangements

There have been no additional material changes in our off-balance sheet arrangements discussed in Part II, Item 7. Management's Discussion and Analysis of our 2018 Form 10-K.

Critical Accounting Policies, Estimates and Judgments

During the first quarter of 2019, we adopted ASC Topic 842. Refer to Note 1 in Item 1 of this Form 10-Q for disclosure of the changes related to this adoption. There have been no additional material changes to our critical accounting policies as discussed in our 2018 Form 10-K.

Recent Accounting Pronouncements

Refer to Note 1 in Item 1 of this Form 10-Q.

24

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

AND CONTROLS AND PROCEDURES

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to changes in interest rates relates primarily to our investment portfolio and outstanding floating rate debt. Changes in U.S. interest rates affect the interest earned on the Company’s cash, cash equivalents and investments and the fair value of the investments, as well as interest costs associated with our debt.

On June 2019, we entered into an interest rate collar derivative transaction with no upfront premium. We use this derivative to hedge against interest rate risk on a portion of our outstanding floating rate debt. We have designated this derivative as a cash flow hedge. Our primary objective in purchasing and holding this derivative is to reduce our volatility of net earnings and cash flows associated with changes in the benchmark interest rate in our interest rate payments. We do not enter into any derivatives for trading or other speculative purposes.

We performed a sensitivity analysis to determine the impact a change in interest rates would have on the cash flows of the collar assuming a 100 basis point parallel shift in the current LIBOR rate. Based on the terms and remaining settlements as of June 30, 2019, a hypothetical 100 basis point decrease in one-month LIBOR across all maturities would not result in any cash payments by the Company while a hypothetical 100 basis point increase in one-month LIBOR across all maturities would result in cash receipts of $6 million.

Our cash equivalents consist primarily of money market mutual funds, which are not significantly exposed to interest rate risk. Our AFS 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 and credit risk, as our investment policy defines minimum credit quality, liquidity, diversification and other requirements for eligible investments. Our AFS marketable securities consist of highly liquid, investment-grade securities. The risk of rate changes on investment balances was not significant at June 30, 2019.

At June 30, 2019, we had total outstanding long-term debt of $402 million. A 100 basis point increase or decrease in market interest rates would cause interest expense on our debt as of June 30, 2019 to increase by $8 million or decrease by $15 million on an annualized basis, respectively.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have, with the participation of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2019, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Based on the evaluation of our disclosure controls and procedures as of June 30, 2019, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of such date in ensuring that (i) information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the CEO and CFO, to allow timely decisions regarding required disclosure and (ii) such information is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

We have concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

25

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	June 30,			December 31,
(in millions, except share and per share data)	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	219		$	228
Investments	76			54
Restricted cash, cash equivalents and investments	672			942
Accounts receivable, net	10			11
Unbilled revenue, net	341			304
Prepaid expenses, net	64			48
Other current assets	73			59
Total current assets	1,455			1,646
Restricted cash, cash equivalents and investments, noncurrent	200			187
Investments, noncurrent	117			135
Property & equipment, net	89			79
Operating lease right-of-use asset	60			—
Goodwill	289			289
Other intangible assets, net	18			21
Other assets	90			78
Total assets	$	2,318		$	2,435
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other current liabilities	$	40		$	45
Long-term debt	22			22
Client deposits	67			56
Accrued wages	377			352
Accrued health insurance costs, net	143			135
Accrued workers' compensation costs, net	64			67
Payroll tax liabilities and other payroll withholdings	473			729
Operating lease liabilities	17			—
Insurance premiums and other payables	16			19
Total current liabilities	1,219			1,425
Long-term debt, noncurrent	380			391
Accrued workers' compensation costs, noncurrent, net	148			158
Deferred taxes	67			68
Operating lease liabilities, noncurrent	55			—
Other non-current liabilities	10			18
Total liabilities	1,879			2,060
Commitments and contingencies (see Note 6)
Stockholders' equity:
Preferred stock	—			—
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued or outstanding at June 30, 2019 and December 31, 2018)
Common stock and additional paid-in capital	667			641
($0.000025 par value per share; 750,000,000 shares authorized; 69,991,145 and 70,596,559 shares issued and outstanding at June 30, 2019 and December 31, 2018)
Accumulated deficit	(229		)	(266		)
Accumulated other comprehensive income	1			—
Total stockholders' equity	439			375
Total liabilities & stockholders' equity	$	2,318		$	2,435

See accompanying notes.

26

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except share and per share data)	2019			2018			2019			2018
Professional service revenues	$	127		$	115		$	263		$	244
Insurance service revenues	808			735			1,606			1,467
Total revenues	935			850			1,869			1,711
Insurance costs	704			630			1,387			1,271
Cost of providing services	63			51			127			108
Sales and marketing	52			41			98			80
General and administrative	36			31			72			62
Systems development and programming	13			11			25			24
Depreciation and amortization of intangible assets	12			10			23			19
Total costs and operating expenses	880			774			1,732			1,564
Operating income	55			76			137			147
Other income (expense):
Interest expense, bank fees and other	(6		)	(7		)	(11		)	(13		)
Interest income	7			3			13			5
Income before provision for income taxes	56			72			139			139
Income tax expense	10			14			30			27
Net income	$	46		$	58		$	109		$	112
Other comprehensive income, net of tax	1			1			1			—
Comprehensive income	$	47		$	59		$	110		$	112
Net income per share:
Basic	$	0.65		$	0.82		$	1.56		$	1.59
Diluted	$	0.64		$	0.80		$	1.53		$	1.55
Weighted average shares:
Basic	69,703,792			70,448,809			69,806,319			70,250,273
Diluted	71,074,751			72,561,891			71,151,219			72,404,539

 See accompanying notes.

27

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Total Stockholders' Equity, beginning balance	$	406		$	262		$	375		$	206
Common Stock and Additional Paid-In Capital
Beginning balance	651			595			641			583
Issuance of common stock from exercise of stock options	1			3			2			6
Issuance of common stock for employee stock purchase plan	4			3			4			3
Stock-based compensation expense	11			10			20			19
Ending balance	667			611			667			611
Accumulated Deficit
Beginning balance	(245		)	(332		)	(266		)	(377		)
Net income	46			58			109			112
Cumulative effect of accounting change	—			—			—			3
Repurchase of common stock	(24		)	(22		)	(62		)	(30		)
Awards effectively repurchased for required employee withholding taxes	(6		)	(6		)	(10		)	(10		)
Ending balance	(229		)	(302		)	(229		)	(302		)
Accumulated Other Comprehensive Loss
Beginning balance	—			(1		)	—			—
Other comprehensive income	1			1			1			—
Ending balance	1			—			1			—
Total Stockholders' Equity, ending balance	$	439		$	309		$	439		$	309

See accompanying notes.

28

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
(in millions)	2019		2018
Operating activities
Net income	109		112
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27		24
Noncash lease expense	10		—
Stock-based compensation	20		19
Changes in operating assets and liabilities:
Accounts receivable	3		11
Unbilled revenue	(36	)	35
Prepaid expenses	(18	)	(9	)
Other assets	(30	)	(45	)
Accounts payable and other current liabilities	(11	)	(28	)
Client deposits	10		(24	)
Accrued wages	25		(28	)
Accrued health insurance costs	9		(13	)
Accrued workers' compensation costs	(13	)	(8	)
Payroll taxes payable and other payroll withholdings	(256	)	(588	)
Operating lease liabilities	(9	)	—
Other liabilities	(2	)	(1	)
Net cash used in operating activities	(162	)	(543	)
Investing activities
Purchases of marketable securities	(65	)	(203	)
Proceeds from sale and maturity of marketable securities	65		63
Acquisitions of property and equipment	(25	)	(26	)
Net cash used in investing activities	(25	)	(166	)
Financing activities
Repurchase of common stock	(62	)	(30	)
Proceeds from issuance of common stock from employee stock purchase plan	4		3
Proceeds from issuance of common stock from exercised options	2		5
Awards effectively repurchased for required employee withholding taxes	(10	)	(10	)
Proceeds from issuance of notes payable, net	—		210
Payments for extinguishment of debt	—		(204	)
Repayment of debt	(11	)	(10	)
Net cash used in financing activities	(77	)	(36	)
Net decrease in unrestricted and restricted cash and cash equivalents	(264	)	(745	)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period	1,349		1,738
End of period	1,085		993
Supplemental disclosures of cash flow information
Interest paid	9		8
Income taxes paid, net	33		24
Supplemental schedule of noncash investing and financing activities
Payable for purchase of property and equipment	8		2

See accompanying notes.

29

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

TriNet Group, Inc. (TriNet, or the Company, we, our and us), a professional employer organization, provides comprehensive human resources solutions for small to midsize businesses under a co-employment model. These HR solutions include multi-state payroll processing and tax administration, employee benefits programs, including health insurance and retirement plans, workers' compensation insurance and claims management, employment and benefit law compliance, and other HR-related services. Through the co-employment relationship, we are the employer of record for certain employment-related administrative and regulatory purposes for the worksite employees, including:

• compensation through wages and salaries,

• employer payroll-related tax payments,

• employee payroll-related tax withholdings and payments,

• employee benefit programs, including health and life insurance, and others, and

• workers' compensation coverage.

Our clients are responsible for the day-to-day job responsibilities of the WSEs.

We operate in one reportable segment. All of our service revenues are generated from external clients. Less than 1% of our revenue is generated outside of the U.S.

Basis of Presentation

These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Rules and Regulations of the Securities and Exchange Commission. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, that are normal and recurring in nature, necessary for fair financial statement presentation. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results anticipated for the full year. These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in Part II, Item 8 Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K).

30

FINANCIAL STATEMENTS

Reclassifications

Certain prior year amounts have been reclassified to conform to current period presentation. Effects on the cash flow statement due to reclassifications are summarized below:

	Six Months Ended June 30, 2018
(in millions)	As previously reported			Reclassified amounts			As revised
Operating activities
Accounts receivable	$	—		$	11		$	11
Unbilled revenue	—			35			35
Prepaid income taxes	2			(2		)	—
Prepaid expenses and other current assets	(23		)	23			—
Prepaid expenses	—			(9		)	(9		)
Workers' compensation collateral receivable	(6		)	6			—
Accounts payable and other current liabilities	(14		)	(14		)	(28		)
Client deposits	—			(24		)	(24		)
Accrued wages	—			(28		)	(28		)
Accrued corporate wages	(5		)	5			—
Accrued health insurance costs	—			(13		)	(13		)
Accrued workers' compensation costs	—			(8		)	(8		)
Workers' compensation loss reserves and other non-current liabilities	(4		)	4			—
Payroll taxes payable and other payroll withholdings	—			(588		)	(588		)
Worksite employee related assets	4			(4		)	—
Worksite employee related liabilities	(652		)	652			—
Other assets	—			(45		)	(45		)
Other liabilities	—			(1		)	(1		)

Effects on the consolidated statements of income and comprehensive income due to reclassifications are summarized below:

	Three Months Ended									Six months ended
	June 30, 2018									June 30, 2018
(in millions)	As previously reported			Reclassified amounts			As revised			As previously reported			Reclassified amounts			As revised
Depreciation	$	8		$	(8	)	$	—		$	16		$	(16	)	$	—
Amortization of intangible assets	2			(2		)	—			3			(3		)	—
Depreciation and amortization of intangible assets	—			10			10			—			19			19
Interest expense, bank fees and other, net	(4		)	4			—			(8		)	8			—
Interest expense, bank fees and other	—			(7		)	(7		)	—			(13		)	(13		)
Interest income	—			3			3			—			5			5
Other comprehensive income, net of tax	—			1			1			—			—			—
Comprehensive income	58			1			59			112			—			112

31

FINANCIAL STATEMENTS

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts and related disclosures. Significant estimates include:

• liability for unpaid losses and loss adjustment expenses (accrued workers' compensation costs) related to workers' compensation and workers' compensation collateral receivable,

• accrued health insurance costs,

• liability for insurance premiums payable,

• valuation of the investment portfolio,

• impairments of goodwill and other intangible assets,

• income tax assets and liabilities, and

• liability for legal contingencies.

These estimates are based on historical experience and on various other assumptions that we believe to be reasonable from the facts available to us. Some of the assumptions are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial statements could be materially affected.

Accrued Health Insurance Costs

We sponsor and administer a number of fully insured, risk-based employee benefit plans, including group health, dental, and vision as an employer plan sponsor under section 3(5) of the ERISA. In the six months ended June 30, 2019, the majority of our group health insurance costs related to risk-based plans. Our remaining group health insurance costs were for guaranteed-cost policies.

Accrued health insurance costs are established to provide for the estimated unpaid costs of reimbursing the carriers for paying claims within the deductible layer in accordance with risk-based health insurance policies. These accrued costs include estimates for reported losses, plus estimates for claims incurred but not paid. We assess accrued health insurance costs regularly based upon independent actuarial studies that include other relevant factors such as current and historical claims payment patterns, plan enrollment and medical trend rates.

In certain carrier contracts we are required to prepay the expected claims activity for subsequent periods. These prepaid balances by agreement permit net settlement of obligations and offset the accrued health insurance costs. As of June 30, 2019 and December 31, 2018, prepayments included in accrued health insurance costs were $39 million and $33 million, respectively. When the prepaid is in excess of our recorded liability, the net asset position is included in prepaid expenses. As of June 30, 2019 and December 31, 2018, accrued health insurance costs included in prepaid expenses were $51 million and $50 million, respectively.

Derivative Instruments

In June 2019, we entered into a interest rate collar derivative transaction with no upfront premium to mitigate the risk of changes in interest rates on our floating rate debt. This derivative, for which we have elected and qualify for cash flow hedge accounting, is recorded on the balance sheet at its fair value. Changes in the derivative’s fair value are recorded each period in other comprehensive income until the underlying monthly interest payment and the corresponding portion of the derivative are settled, at which point changes in fair value are recorded in net income. We evaluate this derivative each quarter to determine that it remains effective by comparing the remaining cash flows of the derivative against the related interest payments of our floating rate debt. We do not enter into any derivatives for trading or other speculative purposes.

Leases

We adopted ASU 2016-02 - Leases (ASC 842) effective January 1, 2019 using the optional transition method, under which we recognized the cumulative effects of initially applying the standard as an adjustment to the opening balance of retained earnings on January 1, 2019 with unchanged comparative periods. As part of this adoption, we elected the following practical expedients:

• not to reassess 1) whether any contracts that existed prior to adoption have or contain leases, 2) the classification of our existing leases or 3) initial direct costs for existing leases,

32

FINANCIAL STATEMENTS

• to use the practical expedient of using hindsight to determine the lease terms and evaluate any impairments in right-of-use assets upon transition, and

• not separately record non-lease and lease components for all leases in which we act as a lessee.

We determine if a new contractual arrangement is a lease at contract inception. If a contract contains a lease, we evaluate whether it should be classified as an operating or a finance lease. If applicable as a lease, we record our lease liabilities and ROU assets based on the future minimum lease payments over the lease term and only include options to renew a lease in the minimum lease payments if it is reasonably certain that we will exercise that option. For certain leases with original terms of twelve months or less we recognize the lease expense as incurred and we do not recognize lease liabilities and ROU assets.

We measure our lease liabilities based on the future minimum lease payments discounted over the lease term. We determine our discount rate at lease inception using our incremental borrowing rate, which is based on our outstanding term debts that are collateralized by certain corporate assets. As of June 30, 2019, the weighted-average rate used in discounting the lease liability was 4.6%.

We measure our ROU assets based on the associated lease liabilities adjusted for any lease incentives such as tenant improvement allowances and classify operating ROU assets in other assets in our condensed consolidated balance sheet. For operating leases, we recognize expense for lease payments on a straight-line basis over the lease term.

Recent Accounting Pronouncements

Recently adopted accounting guidance

Leases - In February of 2016, the FASB issued ASC 842, which replaced existing lease guidance under GAAP. Under this guidance, we recognize on our condensed balance sheet lease liabilities representing the present value of future lease payments and an associated right-of-use asset representing our right to use or control the use of specified assets for the lease term for any operating lease with a term greater than one year.

The impact of our adoption of ASC 842 did not have a material impact on our income statement or cash flow statement. The impact on our condensed balance sheets is as follows:

	June 30, 2019
(in millions)	As reported			Balance Using Previous Standard		Increase (Decrease)
Balance sheet
Assets
Operating lease right-of-use assets	$	60		$	—	$	60
Liabilities
Operating lease liabilities	17			—		17
Operating lease liabilities, noncurrent	55			11		44
Equity
Accumulated deficit	(229		)	—		(229		)

Recently issued accounting pronouncements

Credit Losses - In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326), which requires financial assets to be presented at the net amount expected to be collected. We will be required to use forward-looking information when evaluating an allowance for our accounts receivable, unbilled revenue and other financial assets measured at amortized cost. Topic 326 also modifies the impairment guidance for available-for-sale debt securities to require an allowance for credit losses. We will adopt Topic 326 effective January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings. We are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes and systems.

33

FINANCIAL STATEMENTS

NOTE 2. CASH, CASH EQUIVALENTS AND INVESTMENTS

Under the terms of the agreements with certain of our workers' compensation and health benefit insurance carriers, we are required to maintain collateral in trust accounts for the benefit of specified insurance carriers and to reimburse the carriers’ claim payments within our deductible layer. We invest a portion of the collateral amounts in marketable securities. We report the current and noncurrent portions of these trust accounts as restricted cash, cash equivalents and investments on the consolidated balance sheets.

We require our clients to prefund their payroll and related taxes and other withholding liabilities before payroll is processed or due for payment. This prefund is included in restricted cash, cash equivalents and investments as payroll funds collected, which is designated to pay pending payrolls, payroll tax liabilities and other payroll withholdings.

We also invest available corporate funds, primarily in fixed income securities which meet the requirements of our corporate investment policy and are classified as available for sale (AFS).

Our total cash, cash equivalents and investments are summarized below:

	June 30, 2019						December 31, 2018
(in millions)	Cash and cash equivalents		Available-for-sale marketable securities		Total		Cash and cash equivalents		Available-for-sale marketable securities		Certificate of deposits		Total
Cash and cash equivalents	$	219	$	—	$	219	$	228	$	—	$	—	$	228
Investments	—		76		76		—		54		—		54
Restricted cash, cash equivalents and investments
Insurance carriers' security deposits	14		—		14		15		—		—		15
Payroll funds collected	519		—		519		783		—		—		783
Collateral for health benefits claims	75		—		75		75		—		—		75
Collateral for workers' compensation claims	63		1		64		66		1		—		67
Collateral to secure standby letter of credit	—		—		—		—		—		2		2
Total restricted cash, cash equivalents and investments	671		1		672		939		1		2		942
Investments, noncurrent	—		117		117		—		135		—		135
Restricted cash, cash equivalents and investments, noncurrent
Collateral for workers' compensation claims	195		5		200		182		5		—		187
Total	$	1,085	$	199	$	1,284	$	1,349	$	195	$	2	$	1,546

NOTE 3. INVESTMENTS

All of our investment securities that have a contractual maturity date greater than three months are classified as AFS. The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of our investments as of June 30, 2019 and December 31, 2018 are presented below.

	June 30, 2019								December 31, 2018
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset-backed securities	$	35	$	—	$	—	$	35	$	33	$	—	$	—	$	33
Corporate bonds	94		1		—		95		99		—		—		99
U.S. government agencies and government- sponsored agencies	5		—		—		5		7		—		—		7
U.S. treasuries	58		1		—		59		46		—		—		46
Exchange traded fund	1		—		—		1		1		—		—		1
Other debt securities	4		—		—		4		9		—		—		9
Total	$	197	$	2	$	—	$	199	$	195	$	—	$	—	$	195

34

FINANCIAL STATEMENTS

Gross unrealized losses as of June 30, 2019 and December 31, 2018 were not material.

Unrealized losses on fixed income securities are principally caused by changes in interest rates and the financial condition of the issuer. In analyzing an issuer's financial condition, we consider whether the securities are issued by the federal government or its agencies, whether downgrades by credit rating agencies have occurred, and industry analysts' reports. As we have the ability to hold these investments until maturity, or for the foreseeable future, no decline was deemed to be other-than-temporary. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

The fair value of debt investments by contractual maturity are shown below:

(in millions)	June 30, 2019
One year or less	$	81
Over one year through five years	103
Over five years through ten years	7
Over ten years	7
Total fair value	$	198

The gross proceeds from sales and maturities of AFS securities for the three and six months ended June 30, 2019 and June 30, 2018 are presented below. We had immaterial realized gains and losses from sales of investments for the three and six months ended June 30, 2019 and June 30, 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Gross proceeds from sales	$	14	$	—	$	28	$	39
Gross proceeds from maturities	19		10		36		24

35

FINANCIAL STATEMENTS

NOTE 4. LEASES

Our leasing activities predominantly consist of leasing office space that we occupy, which we have classified as operating leases. Our leases are comprised of fixed payments with remaining lease terms of 1 to 9.3 years, some of which include options to extend for up to 15 years. As of June 30, 2019, we have not included any options to extend or cancel in the calculation of our lease liability or ROU asset. We do not have any significant residual value guarantees or restrictive covenants in our leases.

During the second quarter of 2019, we recognized operating lease expense of $5 million and we recognized $10 million during the first half of 2019.

During the second quarter of 2019, we paid $4 million to reduce operating lease liabilities and $8 million during the first half of 2019. During the second quarter of 2019, we recognized $5 million in new operating lease liabilities in exchange for ROU assets and we recognized $17 million during the first half of 2019.

As of June 30, 2019, the weighted average remaining lease term on our operating leases was 6.2 years. Future minimum lease payments as of June 30, 2019 and December 31, 2018 were as follows:

(in millions)	June 30, 2019 (2)			December 31, 2018 (3)
2019(1)	$	10		$	18
2020	18			17
2021	11			11
2022	10			9
2023	9			8
2024	6			5
2025 and thereafter	19			20
Total future minimum lease payments	$	83		$	88
Less: imputed interest	(11		)	N/A(4)
Total operating lease liabilities	72			N/A(4)
Current portion	17			N/A(4)
Non-current portion	55			N/A(4)

(1)    The remaining payments as of June 30, 2019 exclude those made during the six months ended June 30, 2019.

(2) Presented in accordance with ASC 842, which excludes base payments of $4 million for leases that do not yet have a commencement date.

(3)    Presented in accordance with ASC 840.

(4)    N/A - Not Applicable under ASC 840.

As of June 30, 2019, we have entered into two leases that have not commenced for terms up to 5 years. Those leases will require minimum lease payments over their terms of $4 million.

36

FINANCIAL STATEMENTS

NOTE 5. ACCRUED WORKERS' COMPENSATION COSTS

The following table summarizes the accrued workers’ compensation cost activity for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019			2018
Total accrued costs, beginning of period	$	236		$	250		$	238		$	255
Incurred
Current year	16			19			35			39
Prior years	(11		)	(6		)	(16		)	(13		)
Total incurred	5			13			19			26
Paid
Current year	(2		)	(2		)	(3		)	(2		)
Prior years	(15		)	(17		)	(30		)	(35		)
Total paid	(17		)	(19		)	(33		)	(37		)
Total accrued costs, end of period	$	224		$	244		$	224		$	244

The following summarizes workers' compensation liabilities on the condensed consolidated balance sheets:

(in millions)	June 30, 2019			December 31, 2018
Total accrued costs, end of period	$	224		$	238
Collateral paid to carriers and offset against accrued costs	(12		)	(13		)
Total accrued costs, net of carrier collateral offset	$	212		$	225
Payable in less than 1 year (net of collateral paid to carriers of $3 at June 30, 2019 and December 31, 2018)	$	64		$	67
Payable in more than 1 year (net of collateral paid to carriers of $9 and $10 at June 30, 2019 and December 31, 2018, respectively)	148			158
Total accrued costs, net of carrier collateral offset	$	212		$	225

Incurred claims related to prior years represent changes in estimates for ultimate losses on workers' compensation claims. For the three and six months ended June 30, 2019, the change was primarily due to a decrease in estimate of ultimate losses related to older plan years and the recognition of current year development of ultimate losses.

As of June 30, 2019 and December 31, 2018, we had $55 million and $57 million, respectively, of collateral held by insurance carriers of which $12 million and $13 million, respectively, was offset against accrued workers' compensation costs as the agreements permit and are net settled against collateral held.

37

FINANCIAL STATEMENTS

NOTE 6. COMMITMENTS AND CONTINGENCIES

Contingencies

In August 2015, Howard Welgus, a purported stockholder, filed a putative securities class action lawsuit, Welgus v. TriNet Group, Inc., et. al., under the Securities Exchange Act of 1934 in the U.S. District Court for the Northern District of California. On December 18, 2017, the district court granted TriNet’s motion to dismiss the complaint, which had been amended in April 2016 and again in March 2017, in its entirety, without leave to amend. Plaintiff filed a notice of appeal of the district court’s order on January 17, 2018 and oral arguments were held before the Ninth Circuit Court of Appeals on March 14, 2019. On March 26, 2019, the Ninth Circuit Court of Appeals affirmed the district court’s dismissal of the amended complaint in its entirety. The deadline for Plaintiff-Appellant to petition the U.S. Supreme Court to review the decision by the Court of Appeals expired on June 24, 2019 and the litigation is therefore terminated.

We are and, from time to time, have been and may in the future become involved in various litigation matters, legal proceedings, and claims arising in the ordinary course of our business, including disputes with our clients or various class action, collective action, representative action, and other proceedings arising from the nature of our co-employment relationship with our clients and WSEs in which we are named as a defendant. In addition, due to the nature of our co-employment relationship with our clients and WSEs, we could be subject to liability for federal and state law violations, even if we do not participate in such violations. While our agreements with our clients contain indemnification provisions related to the conduct of our clients, we may not be able to avail ourselves of such provisions in every instance. We have accrued our current best estimates of probable losses with respect to these matters, which are individually and in aggregate immaterial to our consolidated financial statements.

While the outcome of the matters described above cannot be predicted with certainty, management currently does not believe that any such claims or proceedings will have a materially adverse effect on our consolidated financial position, results of operations, or cash flows. However, the unfavorable resolution of any particular matter or our reassessment of our exposure for any of the above matters based on additional information obtained in the future could have a material impact on our consolidated financial position, results of operations, or cash flows.

NOTE 7. STOCKHOLDERS’ EQUITY

Common Stock

The following table presents a rollforward of our common stock for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Shares issued and outstanding, beginning balance	70,079,747		70,363,251		70,596,559		69,818,392
Issuance of common stock from vested restricted stock units	213,991		389,875		500,710		1,000,141
Issuance of common stock from exercise of stock options	58,491		263,464		139,773		469,894
Issuance of common stock for employee stock purchase plan	112,623		84,525		112,623		84,525
Repurchase of common stock	(392,700	)	(434,766	)	(1,175,609	)	(594,799	)
Awards effectively repurchased for required employee withholding taxes	(81,007	)	(92,462	)	(182,911	)	(204,266	)
Shares issued and outstanding, ending balance	69,991,145		70,573,887		69,991,145		70,573,887

Equity-Based Incentive Plans

Our 2019 Equity Incentive Plan (the 2019 Plan), approved in May 2019, replaced our 2009 Equity Incentive Plan and provides for the grants of options (both non-qualified and incentive stock options), stock appreciation rights, restricted stock, RSUs, performance awards (each as defined in the 2019 Plan) and other cash- and stock-based awards. Shares available for grant as of June 30, 2019 were approximately 2,839,430.

38

FINANCIAL STATEMENTS

Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs)

Time-based RSUs and RSAs generally vest over a four-year term. Performance-based RSUs and RSAs are subject to vesting requirements based on certain financial performance metrics as defined in the grant notice. Actual number of shares earned may range from 0% to 200% of the target award. Awards granted in 2019 and 2018 are based on a single-year performance period subject to subsequent multi-year vesting with 50% of the shares earned vesting in one year after the performance period and the remaining shares in the year after.

The following table summarizes RSU and RSA activity under our equity-based plans for the six months ended June 30, 2019:

	RSUs				RSAs
	Number of Units		Weighted-Average Grant Date Fair Value		Number of Units		Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2018	1,737,554		$	32.83	346,792		$	49.13
Granted	724,172		60.58		—		—
Vested	(511,813	)	30.34		(31,248	)	50.61
Forfeited	(106,737	)	36.52		(11,103	)	49.35
Nonvested at June 30, 2019	1,843,176		$	44.18	304,441		$	49.11

Equity-Based Compensation

Stock-based compensation expense is measured based on the fair value of the stock award on the grant date and recognized over the requisite service period for each separately vesting portion of the stock award. Stock-based compensation expense and other disclosures for stock-based awards made to our employees pursuant to the equity plans was as follows: 

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Cost of providing services	$	2	$	2	$	4	$	4
Sales and marketing	1		2		1		4
General and administrative	7		5		13		9
Systems development and programming costs	1		1		2		2
Total stock-based compensation expense	$	11	$	10	$	20	$	19

Stock Repurchases

In February 2019, our board of directors authorized a $300 million incremental increase to our ongoing stock repurchase program initiated in May 2014. During the six months ended June 30, 2019, we repurchased 1,175,609 shares of common stock for approximately $62 million. As of June 30, 2019, approximately $313 million remained available for further repurchases of our common stock under all authorizations from our board of directors under this program.

NOTE 8. INCOME TAXES

Our effective income tax rate was 17% and 19% for the second quarter of 2019 and 2018, respectively, and 21% and 19% for the six months ended June 30, 2019 and 2018, respectively. The decrease when comparing the second quarter of 2019 with the same period in 2018, is primarily due to a one-time benefit associated with prior year tax expense. The increase in the year to date rates for 2019 when compared to the same period in 2018, consisted primarily from a decrease in tax benefits recognized from excess tax benefits related to stock-based compensation.

During the six months ended June 30, 2019, there was an increase of $1 million in our unrecognized tax benefits. The total amount of gross interest and penalties accrued was immaterial. It is reasonably possible the amount of the unrecognized benefit could increase or decrease within the next twelve months, which would have an impact on net income.

39

FINANCIAL STATEMENTS

We are subject to tax in U.S. federal and various state and local jurisdictions, as well as Canada. We are not subject to any material income tax examinations in federal or state jurisdictions for tax years prior to January 1, 2012. We previously paid Notices of Proposed Assessments disallowing employment tax credits totaling $11 million, plus interest of $4 million in connection with the IRS examination of Gevity HR, Inc. and its subsidiaries, which was acquired by TriNet in June 2009. TriNet filed suit in June 2016 to recover the disallowed credits, and the issue is being resolved through the litigation process. TriNet and the U.S. filed cross motions for summary judgment in federal district court. On September 17, 2018, the federal district court granted TriNet's motion for summary judgment and denied the U.S.'s motion. On January 18, 2019, the federal district court entered judgment in favor of TriNet in the amount of $15 million, plus interest. The U.S. filed a notice of appeal of the federal district court's decision on March 18, 2019. The U.S. filed its opening brief in the court of appeals on June 10, 2019 and we filed our answering brief on July 24, 2019. We will continue to vigorously defend our position through the litigation process.

NOTE 9. EARNINGS PER SHARE (EPS)

The following table presents the computation of our basic and diluted EPS attributable to our common stock:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share data)	2019		2018		2019		2018
Net income	$	46	$	58	$	109	$	112
Weighted average shares of common stock outstanding	70		70		70		70
Basic EPS	$	0.65	$	0.82	$	1.56	$	1.59
Net income	$	46	$	58	$	109	$	112
Weighted average shares of common stock outstanding	70		70		70		70
Dilutive effect of stock options and restricted stock units	1		3		1		2
Weighted average shares of common stock outstanding	71		73		71		72
Diluted EPS	$	0.64	$	0.80	$	1.53	$	1.55
Common stock equivalents excluded from income per diluted share because of their anti-dilutive effect	—		—		1		1

40

FINANCIAL STATEMENTS

NOTE 10. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

We use an independent pricing source to determine the fair value of our AFS. The independent pricing source utilizes various pricing models for each asset class; including the market approach. The inputs and assumptions for the pricing models are market observable inputs including trades of comparable securities, dealer quotes, credit spreads, yield curves and other market-related data.

We have not adjusted the prices obtained from the independent pricing service and we believe the prices received from the independent pricing service are representative of the prices that would be received to sell the assets at the measurement date (exit price).

The carrying value of the Company's cash equivalents and restricted cash equivalents approximate their fair values due to their short-term maturities. The Company's restricted investments are valued using quoted market prices and multiple dealer quotes.

We did not have any Level 3 financial instruments recognized in our balance sheet as of June 30, 2019 and December 31, 2018. There were no transfers between levels as of June 30, 2019 and December 31, 2018.

Fair Value Measurements on a Recurring Basis

The following table summarizes our financial instruments by significant categories and fair value measurement on a recurring basis as of June 30, 2019 and December 31, 2018.

(in millions)	Level 1		Level 2		Total
June 30, 2019
Cash equivalents:
Money market mutual funds	$	89	$	—	89
Total cash equivalents	89		—		89
Investments:
Asset-backed securities	—		35		35
Corporate bonds	—		95		95
U.S. government agencies and government-sponsored agencies	—		5		5
U.S. treasuries	—		54		54
Other debt securities	—		4		4
Total investments	—		193		193
Restricted cash equivalents:
Money market mutual funds	43		—		43
Commercial paper	18		—		18
Total restricted cash equivalents	61		—		61
Restricted investments:
U.S. treasuries	—		5		5
Exchange traded fund	1		—		1
Certificate of deposit	—		—		—
Total restricted investments	1		5		6
Total unrestricted and restricted cash equivalents and investments	$	151	$	198	$	349

41

FINANCIAL STATEMENTS

(in millions)	Level 1		Level 2		Total
December 31, 2018
Cash equivalents
Money market mutual funds	$	4	$	—	$	4
U.S. treasuries	—		1		1
Total cash equivalents	4		1		5
Investments
Asset-backed securities	—		33		33
Corporate bonds	—		99		99
U.S. government agencies and government-sponsored agencies	—		7		7
U.S. treasuries	—		41		41
Other debt securities	—		9		9
Total investments	—		189		189
Restricted cash equivalents:
Money market mutual funds	48		—		48
Commercial paper	20		—		20
Total restricted cash equivalents	68		—		68
Restricted investments:
U.S. treasuries	—		5		5
Exchange traded fund	1		—		1
Certificate of deposit	—		2		2
Total restricted investments	1		7		8
Total unrestricted and restricted cash equivalents and investments	$	73	$	197	$	270

Fair Value of Financial Instruments Disclosure

Long-Term Debt

Our long-term debt is a floating rate debt and the fair value of our floating rate debt approximates its carrying value (exclusive of issuance costs) at June 30, 2019. The fair value of our floating rate debt is estimated based on a discounted cash flow, which incorporates credit spreads and market interest rates to estimate the fair value and is considered Level 3 in the hierarchy for fair value measurement.

Derivative Instruments

In June 2019, we entered into an interest rate collar derivative transaction with no upfront premium to mitigate the risk of changes in interest rates on the interest payments on a portion of our floating rate debt. If short-term interest rates increase, we will incur higher interest expense on any future outstanding balances of floating rate debt. We use this derivative as part of our interest rate risk management strategy and designated it as a cash flow hedge. If interest rates rise above the cap strike rate on the contract, we will receive variable-rate amounts and if interest rates fall below the floor strike rate on the contract, we will pay variable-rate amounts.

The following table summarizes the fair value of our derivative instruments at June 30, 2019:

	June 30, 2019
					Fair Market Value
(in millions)	Hedge type	Final settlement date	Notional amount		Other current assets		Accounts payable and other current liabilities
Derivatives designated as hedging instruments
Collar - LIBOR	Cash flow	May 2022	$	213	$	—	$	—

42

FINANCIAL STATEMENTS

The pre-tax effect of derivative instruments for the three and six months ended June 30, 2019 is insignificant and we estimate that an insignificant amount of net derivative gains or losses included in other comprehensive income will be reclassified into earnings within the following 12 months. There were no cash flows associated with the derivative for the three months and six months ended June 30, 2019.

As of June 30, 2019, we do not hold, nor have we posted, any collateral related to the above derivative instrument.

The interest rate collar derivative is classified as Level 2 in the fair value hierarchy as its value is determined using observable inputs such as forward LIBOR curves.

43

OTHER INFORMATION

Legal Proceedings

For the information required in this section, refer to Note 6 in the condensed consolidated financial statements and related notes included in this Form 10-Q.

Risk Factors

There have been no material changes in our risk factors disclosed in Part 1, Item 1A, of our 2018 Form 10-K.

Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities

Not applicable.

(b) Use of Proceeds from Sales of Unregistered Securities

Not applicable.

(c) Issuer Purchases of Equity Securities

The following table provides information about our purchases of TriNet common stock during the quarter ended June 30, 2019:

Period	Total Number of Shares Purchased (1)	Weighted Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (2)	Approximate Dollar Value ($ millions) of Shares that May Yet be Purchased Under the Plans (2)
April 1- April 30, 2019	146,761	$	60.91	144,500	$	329
May 1 - May 31, 2019	238,763	$	62.08	161,200	$	319
June 1 - June 30, 2019	88,183	$	65.91	87,000	$	313
Total	473,707			392,700

(1) Includes shares surrendered by employees to us to satisfy tax withholding obligations that arose upon vesting of RSUs granted pursuant to approved plans.

(2) We repurchased a total of approximately $25 million of our outstanding common stock during the period ended June 30, 2019.

As of June 30, 2019, we had approximately $313 million remaining for repurchases under our stock repurchase program. Stock repurchases under the program are primarily intended to offset the dilutive effect of share-based employee incentive compensation. The purchases were funded from existing cash and cash equivalents balances.

Our stock repurchases are subject to certain restrictions under the terms of our 2018 credit facility. For more information about our 2018 credit facility and our stock repurchases, refer to Notes 7 and 9 in Part II, Item 8. Financial Statements and Supplementary Data of our 2018 Form 10-K.

Defaults Upon Senior Securities

Not applicable.

Mine Safety Disclosures

Not applicable.

Other Information

Not applicable.

44

OTHER INFORMATION

Exhibits

Incorporated herein by reference is a list of the exhibits contained in the Exhibit Index below.

EXHIBIT INDEX

		Incorporated by Reference
Exhibit No.	Exhibit	Form	File No.	Exhibit	Filing Date	Filed Herewith
10.1	TriNet Group, Inc. 2019 Equity Incentive Plan					X
10.2	Form of Notice of Restricted Stock Unit Award and Restricted Stock Unit Award Agreement under the TriNet Group, Inc. 2019 Equity Incentive Plan					X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Document has been furnished, is deemed not filed and is not to be incorporated by reference into any of TriNet Group, Inc.’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.

45

SIGNATURES

SIGNATURES

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

	TRINET GROUP, INC.
Date: July 25, 2019		By:	/s/ Burton M. Goldfield
			Burton M. Goldfield
			Chief Executive Officer
Date: July 25, 2019		By:	/s/ Richard Beckert
			Richard Beckert
			Chief Financial Officer
Date: July 25, 2019		By:	/s/ Michael P. Murphy
			Michael P. Murphy
			Chief Accounting Officer

46

EX-10.1

TRINET GROUP, INC.
2019 EQUITY INCENTIVE PLAN

Section 1.Purpose. The purpose of the TriNet Group, Inc. 2019 Equity Incentive Plan (as amended from time to time, the “Plan”) is to motivate and reward employees and other individuals to perform at the highest level and contribute significantly to the success of TriNet Group, Inc., a Delaware corporation (the “Company”), thereby furthering the best interests of the Company and its stockholders.

Section 2.Definitions. As used in the Plan, the following terms shall have the meanings set forth below:

(a)“Affiliate” means any entity that, directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Company.

(b)“Award” means any Option, SAR, Restricted Stock, RSU, Performance Award, Other Cash-Based Award or Other Stock-Based Award granted under the Plan.

(c)“Award Agreement” means any agreement, contract or other instrument or document (including in electronic form) evidencing any Award granted under the Plan, which may, but need not, be executed or acknowledged by a Participant.

(d)“Beneficial Owner” has the meaning ascribed to such term in Rule 13d-3 under the Exchange Act.

(e)“Beneficiary” means a Person entitled to receive payments or other benefits or exercise rights that are available under the Plan in the event of the Participant’s death. If no such Person can be named or is named by the Participant, or if no Beneficiary designated by such Participant is eligible to receive payments or other benefits or exercise rights that are available under the Plan at the Participant’s death, such Participant’s Beneficiary shall be such Participant’s estate.

(f)“Board” means the Board of Directors of the Company.

(g)“Cause” is as defined in the Participant’s Service Agreement, if any, or if not so defined, unless otherwise defined in the Participant’s applicable Award Agreement, means the Participant’s: (i) conviction of, plea of guilty to, or plea of nolo contendere to, (x) a felony or (y) any other criminal offense involving moral turpitude, fraud or dishonesty; (ii) the commission of, attempted commission of, or participation in an act of fraud, dishonesty, embezzlement or misappropriation, in each case, against the Company or any of its Affiliates; (iii) misconduct or gross negligence in providing services to the Company or its Affiliates; (iv) conduct that the Participant knew or reasonably should have known would be injurious to, or otherwise have an adverse impact on, the business or reputation of the Company or its Affiliates; (v) unauthorized use or disclosure of the Company’s confidential information or trade secrets; (vi) the Participant’s breach or violation of any policies, rules, procedures, guidelines or statutory duties of the Company or its Affiliates; or (vii) the Participant’s material breach of any applicable Service Agreement, Award Agreement or any restrictive covenant obligations or any other material contract or agreement between the Participant and the Company or any of its Affiliates.

(h)“Change in Control” means, unless otherwise the occurrence of any one or more of the following events:

(i)any Person, other than any Non-Change in Control Person, is (or becomes, during any 12-month period) the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 50% or more of the total voting power of the stock of the Company; provided that the provisions of this subsection (i) are not intended to apply to or include as a Change in Control any transaction that is specifically excepted from the definition of Change in Control under subsection (iii) below;

(ii)a change in the composition of the Board such that, during any 12-month period, the individuals who, as of the beginning of such period, constitute the Board (the “Existing Board”) cease for any reason to constitute at least 50% of the Board; provided, however, that any individual becoming a member of the Board subsequent to the beginning of such period whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the Directors immediately prior to the date of such appointment or election shall be considered as though such individual were a member of the Existing Board; providedfurther,that, notwithstanding the foregoing, in the event that the Board increases the number of members of the Board, no individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 or Regulation 14A promulgated under the Exchange Act or successor statutes or rules containing analogous concepts) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or Person other than the Board, shall in any event be considered to be a member of the Existing Board;

(iii)the consummation of a merger or consolidation of the Company with any other corporation or other entity, or the issuance of voting securities in connection with a merger or consolidation of the Company pursuant to applicable stock exchange requirements; provided that immediately following such merger or consolidation the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity of such merger or consolidation or parent entity thereof) 50% or more of the total voting power of the Company’s stock (or, if the Company is not the surviving entity of such merger or consolidation, 50% or more of the total voting power of the stock of such surviving entity or parent entity thereof); and provided, further, that a merger or consolidation that is determined by the Existing Board prior to such merger or consolidation to have been effected solely to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 50% or more of either the then-outstanding Shares or the combined voting power of the Company’s then-outstanding voting securities shall not be considered a Change in Control; or

(iv)the sale or disposition by the Company of all or substantially all of the Company’s assets.

Notwithstanding the foregoing or any other provision of this Plan, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.

Notwithstanding the foregoing or any provision of any Award Agreement to the contrary, for any Award that provides for accelerated distribution on a Change in Control of amounts that constitute “deferred compensation” (as defined in Section 409A of the Code), if the event that constitutes such Change in Control does not also constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the Company’s assets (in either case, as defined in Section 409A of the Code), such amount shall not be distributed on such Change in Control but instead shall vest as of such Change in Control and shall be distributed on the scheduled payment date specified in the applicable Award Agreement, except to the extent that earlier distribution would not result in the Participant who holds such Award incurring interest or additional tax under Section 409A of the Code.

(i)“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules, regulations and guidance thereunder. Any reference to a provision in the Code shall include any successor provision thereto.

(j)“Committee” means the compensation committee of the Board unless another committee is designated by the Board. If there is no compensation committee of the Board and the Board does not designate another committee, references herein to the “Committee” shall refer to the Board.

(k)“Consultant” means any individual, including an advisor, who is providing services to the Company or any Affiliate or who has accepted an offer to provide such services or consultancy from the Company or any Affiliate.

(l)“Director” means any member of the Board.

(m)“Disability” means, with respect to a Participant, “disability” as defined in the Participant’s Service Agreement, if any, or if not so defined, unless otherwise provided in the Participant’s applicable Award Agreement, a disability that would qualify as such under the Company’s long-term disability plan. Notwithstanding the foregoing, with respect to any payment pursuant to an Award that is subject to Section 409A of the Code that is triggered upon a Disability, Disability means that the Participant is disabled as defined under Section 409A(a)(2)(C) of the Code.

(n)“Effective Date” means the date on which the Plan is approved by the Company’s stockholders.

(o)“Employee” means any individual, including any officer, employed by the Company or any Affiliate or any prospective employee or officer who has accepted an offer of employment from the Company or any Affiliate, with the status of employment determined based upon such factors as are deemed appropriate by the Committee in its discretion, subject to any requirements of the Code or applicable laws.

(p)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules, regulations and guidance thereunder. Any reference to a provision in the Exchange Act shall include any successor provision thereto.

(q)“Fair Market Value” means (%3) with respect to Shares, the closing price of a Share on the trading day immediately preceding the date of determination (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred), on the principal stock market or exchange on which the Shares are quoted or traded, or if Shares are not so quoted or traded, the fair market value of a Share as determined by the Committee in good faith and in a manner that complies with Sections 409A and 422 of the Code, and (%3) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee in good faith and in a manner that complies with Sections 409A and 422 of the Code.

(r)“Incentive Stock Option” means an option representing the right to purchase Shares from the Company (or portion of such option), granted pursuant to the provisions of ‎Section 6, that meets the requirements of Section 422 of the Code and is not designated as a Non-Qualified Stock Option by the Committee.

(s)“Intrinsic Value” with respect to an Option or SAR Award means (%3) the excess, if any, of the price or implied price per Share in a Change in Control or other event over(%3) the exercise or hurdle price of such Award multipliedby(%3) the number of Shares covered by such Award.

(t)“Non-Change in Control Person” means (i) any employee plan established by the Company or any Subsidiary; (ii) the Company or any of its Affiliates; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) a corporation owned, directly or indirectly, by stockholders of the Company in substantially the same proportions as their ownership of the Company.

(u)“Non-Employee Director” means any Director who is not an employee of the Company or any Subsidiary.

(v)“Non-Qualified Stock Option” means an option representing the right to purchase Shares from the Company (or portion of such option), granted pursuant to ‎Section 6, that does not meet the requirements of Section 422 of the Code or is designated as a Non-Qualified Stock Option by the Committee.

(w)“Option” means an Incentive Stock Option or a Non-Qualified Stock Option.

(x)“Other Cash-Based Award” means an Award granted pursuant to ‎Section 11, including cash awarded as a bonus or upon the attainment of specified performance criteria or otherwise as permitted under the Plan.

(y)“Other Stock-Based Award” means an Award granted pursuant to ‎Section 11 that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of Shares, including convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, dividend rights or dividend equivalent rights or Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee.

(z)“Participant” means the recipient of an Award granted under the Plan.

(aa)“Performance Award” means an Award (or portion thereof) granted pursuant to ‎Section 10.

(bb)“Performance Period” means the period established by the Committee with respect to any Performance Award during which the performance goals specified by the Committee with respect to such Award are to be measured.

(cc)“Person” has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

(dd)“Prior Plan” means the TriNet Group, Inc. 2009 Equity Incentive Plan.

(ee)“Restricted Stock” means any Share subject to certain restrictions and forfeiture conditions, granted pursuant to ‎Section 8.     

(ff)“RSU” means a contractual right to receive the value of one Share (or a percentage of such value) in cash, Shares or a combination thereof, granted pursuant to ‎Section 9 that is denominated in Shares. Awards of RSUs may include the right to receive dividend equivalents.

(gg)“SAR” means any right granted pursuant to ‎Section 7 to receive upon exercise by the Participant or settlement, in cash, Shares or a combination thereof, the excess of (%3) the Fair Market Value of one Share on the date of exercise or settlement over (%3) the exercise or hurdle price of the right on the date of grant.

(hh)“SEC” means the U.S. Securities and Exchange Commission.

(ii)“Service Agreement” means any offer letter or employment, severance, consulting or similar agreement between the Company or any of its Subsidiaries and the Participant.

(jj)“Share” means a share of the Company’s common stock, $0.000025 par value.

(kk)“Subsidiary” means an entity of which the Company, directly or indirectly, holds all or a majority of the value of the outstanding equity interests of such entity or a majority of the voting power with respect to the voting securities of such entity. Whether employment by or service with a Subsidiary is included within the scope of this Plan shall be determined by the Committee.

(ll)“Substitute Award” means an Award granted in assumption of, or in substitution for, an outstanding award previously granted by a company or other business acquired by the Company or with which the Company combines.

(mm)“Termination of Service” means, in the case of a Participant who is an Employee, cessation of the employment relationship such that the Participant is no longer an employee of the Company or any Affiliate, or, in the case of a Participant who is a Consultant or Non-Employee Director, the date the performance of services for the Company or any Affiliate has ended; provided, however, that in the case of a Participant who is an Employee, the transfer of employment from the Company to an Affiliate, from an Affiliate to the Company, from one Affiliate to another Affiliate or, unless the Committee determines otherwise, the cessation of employee status but the continuation of the performance of services for the Company or an Affiliate, as applicable, as a Non-Employee Director or Consultant shall not be deemed a cessation of service that would constitute a Termination of Service; provided, further, that a Termination of Service shall be deemed to occur for a Participant employed by a Subsidiary when a Subsidiary ceases to be a Subsidiary unless such Participant’s employment continues with the Company or another Subsidiary. Notwithstanding the foregoing, with respect to any Award subject to Section 409A of the Code (and not exempt therefrom), a Termination of Service occurs when a Participant experiences a “separation of service” (as such term is defined under Section 409A of the Code).

Section 3.Eligibility.

(a)Any Employee, Non-Employee Director or Consultant shall be eligible to be selected to receive an Award under the Plan, to the extent that an offer of an Award or a receipt of such Award is permitted by applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.

(b)Holders of options and other types of awards granted by a company or other business that is acquired by the Company or with which the Company combines are eligible for grants of Substitute Awards under the Plan to the extent permitted under applicable regulations of any stock exchange on which the Company is listed.

Section 4.Administration.

(a)Administration of the Plan. The Plan shall be administered by the Committee. All decisions of the Committee shall be final, conclusive and binding upon all parties, including the Company, its stockholders, Participants and any Beneficiaries thereof. The Committee may issue rules and regulations for administration of the Plan.

(b)Delegation of Authority. To the extent permitted by applicable law, including under Section 157(c) of the Delaware General Corporation Law, the Committee may delegate to one or more officers of the Company some or all of its authority under the Plan, including the authority to grant Options and SARs or other Awards in the form of Share rights (except that such delegation shall not be applicable to any Award for a Person then covered by Section 16 of the Exchange Act), and the Committee may delegate to one or more committees of the Board (which may consist of solely one Director) some or all of its authority under the Plan, including the authority to grant all types of Awards, in accordance with applicable law.

(c)Authority of Committee. Subject to the terms of the Plan and applicable law, the Committee (or its delegate) shall have full discretion and authority to: (%3) designate Participants; (%3) determine the type or types of Awards (including Substitute Awards) to be granted to each Participant under the Plan; (%3) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) Awards; (%3) determine the terms and conditions of any Award and prescribe the form of each Award Agreement which need not be identical for each Participant; (%3) determine whether, to what extent and under what circumstances Awards may be settled or exercised in cash, Shares, other Awards, other property, net settlement, or any combination thereof, or canceled, forfeited or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (%3) determine whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (%3) amend terms or conditions of any outstanding Awards; (%3) correct any defect, supply any omission and reconcile any inconsistency in the Plan or any Award, in the manner and to the extent it shall deem desirable to carry the Plan into effect; (%3) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (%3) establish, amend, suspend or waive such rules and regulations and appoint such agents, trustees, brokers, depositories and advisors and determine such terms of their engagement as it shall deem appropriate for the proper administration of the Plan and due compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations; and (%3) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan and due compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations. Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards or administer the Plan. In any such case, the Board shall have all of the authority and responsibility granted to the Committee herein.

Section 5.Shares Available for Awards.

(a)Subject to adjustment as provided in ‎Section 5(c) and except for Substitute Awards, the maximum number of Shares available for issuance under the Plan as of the Effective Date shall equal 2,700,000 Shares (the “Share Pool”).

(b)If any Award is forfeited, cancelled, expires, terminates or otherwise lapses or is settled in cash, in whole or in part, without the delivery of Shares, then the Shares covered by such forfeited, expired, terminated or lapsed Award shall again be available for grant under the Plan. Any Shares withheld in respect of taxes or tendered or withheld to pay the exercise price of Options shall again be available for grant under the Plan.

(c)In the event that the Committee determines that, as a result of any dividend or other distribution (other than an ordinary dividend or distribution), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, separation, rights offering, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, issuance of Shares pursuant to the anti-dilution provisions of securities of the Company, or other similar corporate transaction or event affecting the Shares, or of changes in applicable laws, regulations or accounting principles, an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, subject to compliance with Section 409A of the Code and other applicable law, adjust equitably so as to ensure no undue enrichment or harm (including by payment of cash), any or all of:

(i)the number and type of Shares (or other securities) which thereafter may be made the subject of Awards, including the aggregate limits specified in ‎Section 5(a) and ‎Section 5(e);

(ii)the number and type of Shares (or other securities) subject to outstanding Awards; and

(iii)the grant, purchase, exercise or hurdle price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award;

provided, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

(d)Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or Shares acquired by the Company.

(e)Subject to adjustment as provided in ‎Section 5‎(c)(i), the maximum number of Shares available for issuance with respect to Incentive Stock Options shall be equal to the Share Pool.

Section 6.Options.The Committee is authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

(a)The exercise price per Share under an Option shall be determined by the Committee at the time of grant; provided, however, that, except in the case of Substitute Awards, such exercise price shall not be less than the Fair Market Value of a Share on the date of grant of such Option.

(b)The term of each Option shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such Option. The Committee shall determine the time or times at which an Option becomes vested and exercisable in whole or in part.

(c)The Committee shall determine the method or methods by which, and the form or forms, including cash, Shares, other Awards, other property, net settlement, broker-assisted cashless exercise or any combination thereof, having a Fair Market Value on the exercise date equal to the exercise price of the Shares as to which the Option shall be exercised, in which payment of the exercise price with respect thereto may be made or deemed to have been made.

(d)No grant of Options may be accompanied by a tandem award of dividend equivalents or provide for dividends, dividend equivalents or other distributions to be paid on such Options (except as provided under ‎Section 5(c)).

(e)The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. Incentive Stock Options may be granted only to Participants who were employees of the Company or of a parent or subsidiary corporation (as defined in Section 424 of the Code) at all times during the period beginning on the date of the granting of the Incentive Stock Option and ending on the day three (3) months (or, in the case of an employee whose Termination of Services was due to death or Disability, one (1) year) before the date of the exercise of the Incentive Stock Option. Notwithstanding any designation as an Incentive Stock Option, to the extent that the aggregate Fair Market Value of Shares subject to a Participant’s Incentive Stock Options that become exercisable for the first time during any calendar year exceeds $100,000, such excess Options shall be treated as Non-Qualified Stock Options. For purposes of the foregoing, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date of the grant of such Incentive Stock Option. No Incentive Stock Options may be issued more than ten years following the earlier of (i) the date of adoption or (ii) the most recent date of approval of the Plan by the stockholders of the Company.

Section 7.Stock Appreciation Rights.The Committee is authorized to grant SARs to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

(a)SARs may be granted under the Plan to Participants either alone (“freestanding”) or in addition to other Awards granted under the Plan (“tandem”) and may, but need not, relate to a specific Option granted under ‎Section 6.

(b)The exercise or hurdle price per Share under a SAR shall be determined by the Committee; provided, however, that, except in the case of Substitute Awards, such exercise or hurdle price shall not be less than the Fair Market Value of a Share on the date of grant of such SAR.

(c)The term of each SAR shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such SAR. The Committee shall determine the time or times at which a SAR may be exercised or settled in whole or in part.

(d)Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of Shares subject to the SAR multiplied by the excess, if any, of the Fair Market Value of one Share on the exercise date over the exercise or hurdle price of such SAR. The Company shall pay such excess in cash, in Shares valued at Fair Market Value, or any combination thereof, as determined by the Committee.

(e)No grant of SARs may be accompanied by a tandem award of dividend equivalents or provide for dividends, dividend equivalents or other distributions to be paid on such SARs (except as provided under ‎Section 5(c)).

Section 8.Restricted Stock. The Committee is authorized to grant Awards of Restricted Stock to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

(a)The Award Agreement shall specify the vesting schedule.

(b)Awards of Restricted Stock shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.

(c)Subject to the restrictions set forth in the applicable Award Agreement, a Participant generally shall have the rights and privileges of a stockholder with respect to Awards of Restricted Stock, including the right to vote such Shares of Restricted Stock and the right to receive dividends. In the event of the payment of a dividend in connection with a Share of Restricted Stock, such dividend shall be subject to the same restrictions and vesting conditions as the Share of Restricted Stock.

(d)The Committee may, in its discretion, specify in the applicable Award Agreement that any or all dividends or other distributions paid on Awards of Restricted Stock prior to vesting be paid either in cash or in additional Shares and either on a current or deferred basis and that such dividends or other distributions may be reinvested in additional Shares, which may be subject to the same restrictions as the underlying Awards.

(e)Any Award of Restricted Stock may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration.

(f)The Committee may provide in an Award Agreement that an Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to an Award of Restricted Stock, the Participant shall be required to file promptly a copy of such election with the Company and the applicable Internal Revenue Service office.

Section 9.RSUs. The Committee is authorized to grant Awards of RSUs to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

(a)The Award Agreement shall specify the vesting schedule and the delivery schedule (which may include deferred delivery later than the vesting date).

(b)Awards of RSUs shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.

(c)An RSU shall not convey to the Participant the rights and privileges of a stockholder with respect to the Share subject to the RSU, such as the right to vote or the right to receive dividends, unless and until a Share is issued to the Participant to settle the RSU.

(d)The Committee may, in its discretion, specify in the applicable Award Agreement that any or all dividend equivalents or other distributions paid on Awards of RSUs prior to vesting or settlement, as applicable, be paid either in cash or in additional Shares and either on a current or deferred basis and that such dividend equivalents or other distributions may be reinvested in additional Shares. In the event a dividend equivalent is awarded in connection with an RSU prior to vesting or settlement, such dividend equivalent shall be subject to the same restrictions and vesting conditions as the underlying RSU.

(e)Shares delivered upon the vesting and settlement of an RSU Award may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration.

(f)The Committee may determine the form or forms (including cash, Shares, other Awards, other property or any combination thereof) in which payment of the amount owing upon settlement of any RSU Award may be made.

Section 10.Performance Awards. The Committee is authorized to grant Performance Awards to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

(a)A Performance Award may be denominated as a cash amount, number of Shares or units or a combination thereof and is an Award (or a portion thereof) which may be earned upon achievement or satisfaction of one or more performance conditions specified by the Committee. In addition, the Committee may specify that any other Award (or portion thereof) shall constitute a Performance Award by conditioning the grant to a Participant or the right of a Participant to exercise the Award (or any portion thereof) or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. Subject to the terms of the Plan, the performance goals to be achieved during any Performance Period, the length of any Performance Period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee.

(b)If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or other events or circumstances render the performance objectives unsuitable, the Committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable such that it does not provide any undue enrichment or harm. Performance measures may vary from Performance Award to Performance Award and from Participant to Participant, and may be established on a stand-alone basis, in tandem or in the alternative. The Committee shall have the power to impose such other restrictions on Awards subject to this ‎Section 10(b) as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements of any applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.

(c)Settlement of Performance Awards shall be in cash, Shares, other Awards, other property, net settlement, or any combination thereof, as determined in the discretion of the Committee.

(d)A Performance Award shall not convey to the Participant the rights and privileges of a stockholder with respect to the Share subject to the Performance Award, such as the right to vote (except as relates to Restricted Stock) or the right to receive dividends, unless and until Shares are issued to the Participant to settle the Performance Award. The Committee, in its sole discretion, may provide that a Performance Award shall convey the right to receive dividend equivalents on the Shares underlying the Performance Award with respect to any dividends declared during the period that the Performance Award is outstanding, in which case, such dividend equivalent rights shall accumulate and shall be paid in cash or Shares on the settlement date of the Performance Award, subject to the Participant’s earning of the Shares underlying the Performance Awards with respect to which such dividend equivalents are paid upon achievement or satisfaction of performance conditions specified by the Committee. Shares delivered upon the vesting and settlement of a Performance Award may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration. In the event a dividend equivalent is awarded in connection with a Performance Award, such dividend equivalent shall be subject to the same restrictions and vesting conditions as the underlying Performance Award. For the avoidance of doubt, unless otherwise determined by the Committee, no dividend equivalent rights shall be provided with respect to any Shares subject to Performance Awards that are not earned or otherwise do not vest or settle pursuant to their terms.

(e)The Committee may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with a Performance Award.

Section 11.Other Cash-Based Awards and Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant Other Cash-Based Awards (either independently or as an element of or supplement to any other Award under the Plan) and Other Stock-Based Awards. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this ‎Section 11 shall be purchased for such consideration, and paid for at such times, by such methods and in such forms, including cash, Shares, other Awards, other property, net settlement, broker-assisted cashless exercise or any combination thereof, as the Committee shall determine;providedthat the purchase price therefor shall not be less than the Fair Market Value of such Shares on the date of grant of such right.

Section 12.Effect of Termination of Service or a Change in Control on Awards.

(a)The Committee may provide, by rule or regulation or in any applicable Award Agreement, or may determine in any individual case, the circumstances in which, and the extent to which, an Award may be accelerated, exercised, settled, vested, paid or forfeited in the event of the Participant’s Termination of Service prior to the end of a Performance Period or vesting, exercise or settlement of such Award. Notwithstanding the foregoing, (i) in the event the Participant’s Termination of Service is for any reason other than due to death or Disability, and except as further limited by the Committee, the Participant must exercise any vested Incentive Stock Options no later than three (3) months following the Participant’s Termination of Service, and (ii) in the event the Participant’s Termination of Service is due to death or Disability, the Participant or the Participant’s Beneficiaries must exercise any vested Incentive Stock Options no later than one year following the Participant’s Termination of Service.

(b)In the event of a Change in Control, the Committee may, in its sole discretion, and on such terms and conditions as it deems appropriate, take any one or more of the following actions with respect to any outstanding Award, which need not be uniform with respect to all Participants and/or Awards:

(i)continuation or assumption of such Award by the Company (if it is the surviving corporation) or by the successor or surviving entity or its parent;

(ii)substitution or replacement of such Award by the successor or surviving entity or its parent with cash, securities, rights or other property to be paid or issued, as the case may be, by the successor or surviving entity (or a parent or subsidiary thereof), with substantially the same terms and value as such Award (including any applicable performance targets or criteria with respect thereto);

(iii)acceleration of the vesting of such Award and the lapse of any restrictions thereon and, in the case of an Option or SAR Award, acceleration of the right to exercise such Award during a specified period (and the termination of such Option or SAR Award without payment of any consideration therefor to the extent such Award is not timely exercised), in each case, upon (A) the Participant’s involuntary Termination of Service (including upon a termination of the Participant’s employment by the Company (or a successor entity or its parent) without Cause or by the Participant for “good reason” (as such term may be defined in the applicable Award Agreement, Service Agreement or, if not otherwise defined, a definition as may be established by the Committee in such Change in Control, as the case may be) or (B) the failure of the successor or surviving entity (or its parent) to continue or assume such Award;

(iv) in the case of a Performance Award, determination of the level of attainment of the applicable performance condition(s), including waiving the performance conditions applicable to all or any portion of any Performance Award that is not vested as of the date of such Change in Control and providing that the relevant portion of such Award shall vest as of a date specified by the Committee, subject to the Participant’s continuous service with the Company and its Affiliates or such other terms and conditions imposed by the Committee in its discretion; and

(v)cancellation of such Award in consideration of a payment, with the form, amount and timing of such payment determined by the Committee in its sole discretion, subject to the following: (A) such payment shall be made in cash, securities, rights and/or other property; (B) the amount of such payment shall equal the value of such Award, as determined by the Committee in its sole discretion; provided that, in the case of an Option or SAR Award, if such value equals the Intrinsic Value of such Award, such value shall be deemed to be valid; providedfurther that, if the Intrinsic Value of an Option or SAR Award is equal to or less than zero, the Committee may, in its sole discretion, provide for the cancellation of such Award without payment of any consideration therefor (for the avoidance of doubt, in the event of a Change in Control, the Committee may, in its sole discretion, terminate any Option or SAR Awards for which the exercise or hurdle price is equal to or exceeds the per Share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor); and (C) such payment shall be made promptly following such Change in Control or on a specified date or dates following such Change in Control; provided that the timing of such payment shall comply with Section 409A of the Code.

Section 13.General Provisions Applicable to Awards.

(a)Awards shall be granted for such cash or other consideration, if any, as the Committee determines; provided that in no event shall Awards be issued for less than such minimal consideration as may be required by applicable law.

(b)Awards may, in the discretion of the Committee, be granted either alone or in addition to or in tandem with any other Award or any award granted under any other plan of the Company. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

(c)Subject to the terms of the Plan, payments or transfers to be made by the Company upon the grant, exercise or settlement of an Award may be made in the form of cash, Shares, other Awards, other property, net settlement, or any combination thereof, as determined by the Committee in its discretion at the time of grant, and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of dividend equivalents in respect of installment or deferred payments.

(d)Except as may be permitted by the Committee or as specifically provided in an Award Agreement, (%3) no Award and no right under any Award shall be assignable, alienable, saleable or transferable by a Participant other than by will or pursuant to ‎Section 13(e) and (%3) during a Participant’s lifetime, each Award, and each right under any Award, shall be exercisable only by such Participant or, if permissible under applicable law, by such Participant’s guardian or legal representative. The provisions of this ‎Section 13(d) shall not apply to any Award that has been fully exercised or settled, as the case may be, and shall not preclude forfeiture of an Award in accordance with the terms thereof.

(e)A Participant may designate a Beneficiary or change a previous Beneficiary designation only at such times as prescribed by the Committee, in its sole discretion, and only by using forms and following procedures approved or accepted by the Committee for that purpose.

(f)All certificates for Shares and/or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the SEC, any stock market or exchange upon which such Shares or other securities are then quoted, traded or listed, and any applicable securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(g)The Committee may impose restrictions on any Award with respect to non-competition, non-solicitation, confidentiality and other restrictive covenants as it deems necessary or appropriate in its sole discretion.

Section 14.Amendments and Terminations.

(a)Amendment or Termination of the Plan. Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan, the Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided, however, that no such amendment, alteration, suspension, discontinuation or termination shall be made without (%3) stockholder approval if such approval is required by applicable law or the rules of the stock market or exchange, if any, on which the Shares are principally quoted or traded or (%3) subject to ‎Section 5(c) and ‎Section 12, the consent of the affected Participant, if such action would materially adversely affect the rights of such Participant under any outstanding Award, except (x) to the extent any such amendment, alteration, suspension, discontinuance or termination is made to cause the Plan to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations or (y) to impose any “clawback” or recoupment provisions on any Awards (including any amounts or benefits arising from such Awards) in accordance with ‎Section 19. Notwithstanding anything to the contrary in the Plan, the Committee may amend the Plan, or create sub-plans, in such manner as may be necessary to enable the Plan to achieve its stated purposes in any jurisdiction in a tax-efficient manner and in compliance with local rules and regulations.

(b)Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company, each Award shall terminate immediately prior to the consummation of such action, unless otherwise determined by the Committee.

(c)Terms of Awards. The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate any Award theretofore granted, prospectively or retroactively, without the consent of any relevant Participant or holder or Beneficiary of an Award; provided, however, that, subject to ‎Section 5(c) and ‎Section 12, no such action shall materially adversely affect the rights of any affected Participant or holder or Beneficiary under any Award theretofore granted under the Plan, except (x) to the extent any such action is made to cause the Plan to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations, or (y) to impose any “clawback” or recoupment provisions on any Awards (including any amounts or benefits arising from such Awards) in accordance with ‎Section 19. The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of events (including the events described in ‎Section 5(c)) affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

(d)No Repricing. Notwithstanding the foregoing, except as provided in ‎Section 5(c), no action (including the repurchase of Options or SAR Awards (in each case, that are “out of the money”) for cash and/or other property) shall directly or indirectly, through cancellation and regrant or any other method, reduce, or have the effect of reducing, the exercise or hurdle price of any Award established at the time of grant thereof without approval of the Company’s stockholders.

Section 15.Prior Plan.

(a)Following the Effective Date, no additional stock awards shall be granted under the Prior Plan. All Awards granted on or after the Effective Date shall be subject to the terms of this Plan.

(b)Any shares remaining available for future issuance under the Prior Plan as of the Effective Date shall not be available under the Prior Plan as of the Effective Date.

(c)From and after the Effective Date, all outstanding stock awards granted under the Prior Plan shall remain subject to the terms and conditions of the Prior Plan; provided, however, any Shares associated with stock awards granted under the Prior Plan that (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or repurchased by the Company or (iii) are reacquired, withheld or not issued to satisfy a tax withholding obligation in connection with an award will immediately be added to the Share Pool as set forth in ‎Section 5(a).

Section 16.Miscellaneous.

(a)No Employee, Consultant, Director, Participant, or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of employees, Participants or holders or Beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.

(b)The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any Subsidiary. Further, the Company or any applicable Subsidiary may at any time dismiss a Participant, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement or in any other agreement binding on the parties. The receipt of any Award under the Plan is not intended to confer any rights on the receiving Participant except as set forth in the applicable Award Agreement.

(c)Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

(d)The Committee may authorize the Company to withhold from any Award granted or any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to the Participant the amount (in cash, Shares, other Awards, other property, net settlement, or any combination thereof) of applicable withholding taxes due in respect of an Award, its exercise or settlement or any payment or transfer under such Award or under the Plan and to take such other action (including providing for elective payment of such amounts in cash or Shares by such Participant) as may be necessary to satisfy all obligations for the payment of such taxes and, unless otherwise determined by the Committee in its discretion, to the extent such withholding would not result in liability classification of such Award (or any portion thereof) pursuant to FASB ASC Subtopic 718-10.

(e)If any provision of the Plan or any Award Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award Agreement, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and any such Award Agreement shall remain in full force and effect.

(f)Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.

(g)No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash or other securities shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.

(h)Awards may be granted to Participants who are non-United States nationals or employed or providing services outside the United States, or both, on such terms and conditions different from those applicable to Awards to Participants who are employed or providing services in the United States as may, in the judgment of the Committee, be necessary or desirable to recognize differences in local law, tax policy or custom. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Participants on assignments outside their home country.

Section 17.Effective Date of the Plan. The Plan shall be effective as of the Effective Date, subject to prior approval by the Board.

Section 18.Term of the Plan. No Award shall be granted under the Plan after the earliest to occur of (%3) the 10-year anniversary of the Effective Date; (%3) the maximum number of Shares available for issuance under the Plan have been issued; or (%3) the Board terminates the Plan in accordance with ‎Section 14(a). However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date, and the authority of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award, or to waive any conditions or rights under any such Award, and the authority of the Board to amend the Plan, shall extend beyond such date.

Section 19.Cancellation or “Clawback” of Awards. The Committee shall have full authority to implement any policies and procedures necessary to comply with Section 10D of the Exchange Act and any rules promulgated thereunder and any other regulatory regimes. Notwithstanding anything to the contrary contained herein, any Awards granted under the Plan (including any amounts or benefits arising from such Awards) shall be subject to any clawback or recoupment arrangements or policies the Company has in place from time to time, and the Committee may, to the extent permitted by applicable law and stock exchange rules or by any applicable Company policy or arrangement, and shall, to the extent required, cancel or require reimbursement of any Awards granted to the Participant or any Shares issued or cash received upon vesting, exercise or settlement of any such Awards or sale of Shares underlying such Awards.

Section 20.Section 409A of the Code. With respect to Awards subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code, and the provisions of the Plan and any Award Agreement shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code, and the Plan shall be operated accordingly. If any provision of the Plan or any term or condition of any Award would otherwise frustrate or conflict with this intent, the provision, term or condition shall be interpreted and deemed amended so as to avoid this conflict. Notwithstanding anything in the Plan to the contrary, if the Board considers a Participant to be a “specified employee” under Section 409A of the Code at the time of such Participant’s “separation from service” (as defined in Section 409A of the Code), and any amount hereunder is “deferred compensation” subject to Section 409A of the Code, any distribution of such amount that otherwise would be made to such Participant with respect to an Award as a result of such “separation from service” shall not be made until the date that is six months after such “separation from service,” except to the extent that earlier distribution would not result in such Participant’s incurring interest or additional tax under Section 409A of the Code. If an Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the Participant’s right to such series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment, and if an Award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations), the Participant’s right to such dividend equivalents shall be treated separately from the right to other amounts under the Award. Notwithstanding the foregoing, the tax treatment of the benefits provided under the Plan or any Award Agreement is not warranted or guaranteed, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by any Participant on account of non-compliance with Section 409A of the Code.

Section 21.Successors and Assigns. The terms of the Plan shall be binding upon and inure to the benefit of the Company and any successor entity, including any successor entity contemplated by ‎Section 12(b).

Section 22.Data Protection. By participating in the Plan, the Participant consents to the holding and processing of personal information provided by the Participant to the Company or any Affiliate, trustee or third party service provider, for all purposes relating to the operation of the Plan. These include:

(a)administering and maintaining Participant records;

(b)providing information to the Company, any Subsidiary, trustees of any employee benefit trust, registrars, brokers or third party administrators of the Plan;

(c)providing information to future purchasers or merger partners of the Company or any Affiliate, or the business in which the Participant works; and

(d)transferring information about the Participant to any country or territory that may not provide the same protection for the information as the Participant’s home country.

Section 23.Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, without application of the conflicts of law principles thereof.

EX-10.2

TRINET GROUP, INC.2019 EQUITY INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK UNIT AWARD

TriNet Group, Inc. (the “Company”), pursuant to the TriNet Group, Inc. 2019 Equity Incentive Plan (as may be amended form time to time, the “Plan”), hereby awards to the Participant a time-based Restricted Stock Unit (“RSUs”) Award for the number of shares of the Company’s Common Stock set forth below (the “Award”). The Award is subject to all of the terms and conditions as set forth in this Notice of Restricted Stock Unit Award (this “Notice”), including the vesting schedule set forth below, the Plan, the Restricted Stock Unit Award Agreement (the “RSU Agreement”) and the Restrictive Covenants Agreement, all of which are attached hereto and incorporated herein in their entirety (this Notice, the RSU Agreement and the Restrictive Covenants Agreement, including any country-specific appendix attached thereto, collectively, the “Award Agreement”).  Except as otherwise indicated, any capitalized term used but not defined shall have the meaning ascribed to such term in Plan.

Participant:

Award Number:

Date of Grant:

Number of Shares Subject to Award:

Vesting Schedule:

Acceptance, Acknowledgment and Receipt

By accepting the Award Agreement, the Participant hereby:

• acknowledges receipt of, and represents that Participant understands, this Notice, the RSU Agreement, the Restrictive Covenants Agreement and the Plan;

• acknowledges and agrees that this Notice, the RSU Agreement (including any exhibits attached thereto), the Restrictive Covenants Agreement and the Plan set forth the entire understanding between the Participant and the Company regarding this Award and supersede all prior oral or written agreements, promises and/or representations on that subject with the exception of (i) equity awards previously granted and delivered to the Participant, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law or listing standards applicable to the Company, and (iii) any written employment or severance arrangement that would provide for vesting acceleration;

• acknowledges and confirms the Participant’s consent to receive electronically the Award Agreement, the Plan and any other Plan documents or other related communications that the Company wishes or is required to deliver;

• acknowledges that a copy of the Plan and the related Plan documents were made available to the Participant; and

• agrees that the electronic acceptance of the Award Agreement constitutes a legally binding acceptance of the Award Agreement, and that the electronic acceptance of the Award Agreement shall have the same force and effect as if the Award Agreement was physically signed.

TRINET GROUP, INC.2019 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

The Participant has been granted an Award (the “Award”) of Restricted Stock Units (“RSUs”) pursuant to the TriNet Group, Inc. 2019 Equity Incentive Plan (as it may be amended from time to time, the “Plan”), the Notice of Restricted Stock Unit Award (the “Notice”) and this Restricted Stock Unit Award Agreement (this “Agreement”), dated as of the Date of Grant set forth in the Grant Notice for this Award (the “Grant Date”). Except as otherwise indicated, any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan.

1.Issuance of Shares. Each RSU shall represent the right to receive one Share upon the vesting of such RSU, as determined in accordance with and subject to the terms of this Agreement, the Plan and the Notice. The number of RSUs is set forth in the Notice.

2.Vesting Dates. Subject to Sections 3 and 4, the Award shall vest on the dates set forth in the Notice.

3.Termination of Service. Except as otherwise provided for in any employment-related agreement between the Participant and the Company, upon a Termination of Service, the Committee, in its sole discretion, shall determine whether and to what extent any unvested RSUs may vest, settle, be paid or forfeited; provided that in the event of a Termination of Service for Cause, the Committee may determine whether and to what extent any vested RSUs may be forfeited. Absent such exercise of discretion, in the event of the Participant’s Termination of Service for any reason, any RSUs that are not vested as of the date of such Termination of Service will be forfeited without payment of any consideration to Participant.

4.Change in Control. In the event of a Change in Control, the RSUs will be treated in accordance with Section 12(b) of the Plan.

5.Restrictive Covenants. As a condition precedent to the grant of the Award, the Participant agrees to be subject to the restrictive covenants as set forth in APPENDIX A (the “Restrictive Covenants Agreement”).

6.Transfer of RSUs.

(a)General Prohibition on Transfer. Except as may be permitted by the Committee, neither the Award nor any right under the Award shall be pledged, assignable, alienable, saleable or transferable by the Participant except as provided in this Section 6. This provision shall not apply to any portion of the Award that has been fully settled and shall not preclude forfeiture of any portion of the Award in accordance with the terms herein.

(b)Death. The Award may be transferable by will or pursuant to the laws of descent and distribution. In addition, upon receiving written permission from the Board or its duly authorized designee, the Participant may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect transactions under the Plan, designate a third party who, in the event of the Participant’s death, will thereafter be entitled to receive any distribution of Common Stock or other consideration to which the Participant was entitled at the time of the Participant’s death pursuant to this Agreement. In the absence of such a designation, the Participant’s executor or administrator of his or her estate will be entitled to receive, on behalf of the Participant’s estate, such Common Stock or other consideration.

(c)Certain Trusts. Upon receiving written permission from the Board or its duly authorized designee, the Participant may transfer the Award to a trust if that Participant is considered to be the sole beneficial owner (determined under Section 671 of the Internal Revenue Code (the “Code”) and applicable state law) while the Award is held in the trust, provided that the Participant and the trustee enter into transfer and other agreements required by the Company.

(d)Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that the Participant and the designated transferee enter into transfer and other agreements required by the Company, the Participant may transfer the Award or the Participant’s right to receive the distribution of Common Stock or other consideration thereunder, pursuant to a domestic relations order that contains the information required by the Company to effectuate the transfer. The Participant is encouraged to discuss the proposed terms of any division of this Award with the Company prior to finalizing the domestic relations order to help ensure the required information is contained within the domestic relations order.

7.Voting Rights. The Participant shall have no voting rights or any other rights as a stockholder of the Company with respect to the RSUs unless and until the Participant becomes the record owner of the Shares underlying the RSUs.

8.Dividend Equivalents. Except as provided in the Notice, if a cash dividend is declared on Shares during the period commencing on the Grant Date and ending on the date on which the Shares underlying the RSUs are distributed to the Participant pursuant to this Agreement, the Committee shall determine, in its sole discretion, whether the Participant will be eligible to receive an amount in cash (a “Dividend Equivalent”) equal to the dividend that the Participant would have received had the Shares underlying the RSUs been held by the Participant as of the time at which such dividend was declared. If applicable, each Dividend Equivalent will be paid to the Participant in cash as soon as reasonably practicable (and in no event later than 30 days) after the applicable Vesting Date of the corresponding RSUs. For clarity, no Dividend Equivalent will be paid with respect to any RSUs that are forfeited.

9.Distribution of Shares.

(a)Subject to the provisions of this Agreement, upon the vesting of any of the RSUs, the Company shall deliver to the Participant, as soon as reasonably practicable (and in no event later than 30 days) after the applicable Vesting Date, one Share for each such RSU. Upon the delivery of Shares, such Shares shall be fully assignable, alienable, saleable and transferrable by the Participant; provided that any such assignment, alienation, sale, transfer or other alienation with respect to such Shares shall be in accordance with applicable securities laws and any applicable Company policy.

(b)Notwithstanding the foregoing, in the event that (i) the Participant is subject to the Company’s policy permitting certain individuals to sell shares only during certain “window” periods, in effect from time to time or the Participant is otherwise prohibited from selling shares of the Company’s Common Stock in the public market and any shares covered by the Award are scheduled to be delivered on a day (the “Original Distribution Date”) that does not occur during an open “window period” applicable to the Participant, as determined by the Company in accordance with such policy, or does not occur on a date when the Participant is otherwise permitted to sell shares of the Company’s Common Stock on the open market, and (ii) the Company elects not to satisfy its obligations for Tax-Related Items (as defined in Section 10(a) below) by withholding shares from the Participant’s distribution, then such shares will not be delivered on such Original Distribution Date and will instead be delivered on the first business day of the next occurring open “window period” applicable to the Participant pursuant to such policy (regardless of whether the Participant is still providing Continuous Service at such time) or the next business day when the Participant is not prohibited from selling shares of the Company’s Common Stock in the open market, but in no event later than the fifteenth (15^th) day of the third calendar month of the calendar year following the calendar year in which the shares of Common Stock originally became vested. The form of such delivery (e.g., a stock certificate or electronic entry evidencing such shares) will be determined by the Company. In all cases, the delivery of shares under this Award is intended to comply with Treasury Regulation Section 1.409A-1(b)(4) and will be construed and administered in such manner.

10.Responsibility for Taxes.

(a)The Participant acknowledges that, regardless of any action taken by the Company or the Employer, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or settlement of the Award, the subsequent sale of Shares acquired upon settlement of the Award and the receipt of any dividends and/or Dividend Equivalents; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b)Prior to any relevant taxable or tax withholding event, as applicable, the Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any applicable withholding obligations with regard to all Tax-Related Items in the manner determined by the Company and/or the Employer from time to time, which may include: (i) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer; (ii) requiring the Participant to remit the aggregate amount of such Tax-Related Items to the Company in full, in cash or by check, bank draft or money order payable to the order of the Company or the Employer; (iii) through a procedure whereby the Participant delivers irrevocable instructions to a broker reasonably acceptable to the Committee to sell Shares obtained upon settlement of the Award and to deliver promptly to the Company an amount of the proceeds of such sale equal to the amount of the Tax-Related Items; (iv) by a “net settlement” under which the Company reduces the number of Shares issued on settlement of the Award by the number of Shares with an aggregate fair market value that equals the amount of the Tax-Related Items associated with such settlement; or (v) any other method of withholding determined by the Company and permitted by applicable law.

(c)The Participant acknowledges and agrees that, absent an affirmative election otherwise, such Tax-Related Items shall be satisfied through “net settlement” as set forth in Section 10(b)(iv).

(d)Depending on the withholding method, the Company or the Employer may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent number of Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the settled Award, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

(e)Finally, the Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.

11.Not Salary, Pensionable Earnings or Base Pay. The Participant acknowledges that the Award shall not be included in or deemed to be a part of (a) salary, normal salary or other ordinary compensation, (b) any definition of pensionable or other earnings (however defined) for the purpose of calculating any benefits payable to or on behalf of the Participant under any pension, retirement, termination or dismissal indemnity, severance benefit, retirement indemnity or other benefit arrangement of the Company or any Affiliate (including the Employer) or (c) any calculation of base pay or regular pay for any purpose.

12.Cancellation/Clawback. The Participant hereby acknowledges and agrees that the Participant and the Award are subject to the terms and conditions of Section 19 (Cancellation or “Clawback” of Awards) of the Plan.

13.Provisions of Plan Control. This Agreement is subject to all the terms, conditions and provisions of the Plan, including the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. The Plan is incorporated herein by reference. If and to the extent that this Agreement conflicts or is inconsistent with the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.

14.Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

TriNet Group, Inc.

One Park Place

Suite 600

Dublin, CA 94568

Attention: Chief Legal Officer

If to the Participant, to the address of the Participant on file with the Company.

15.No Right to Continued Service. The grant of the Award shall not be construed as giving the Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any Affiliate (including the Employer).

16.No Right to Future Awards. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.

17.Restrictive Legends. The shares issued under the Award will be endorsed with appropriate legends as determined by the Company.

18.Entire Agreement. This Agreement, the Plan, the Notice and any other agreements, schedules, exhibits and other documents referred to herein or therein constitute the entire agreement and understanding between the parties in respect of the subject matter hereof and supersede all prior and contemporaneous arrangements, agreements and understandings, both oral and written, whether in term sheets, presentations or otherwise, between the parties with respect to the subject matter hereof.

19.Severability. If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Board, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall remain in full force and effect.

20.Amendment; Waiver. No amendment or modification of any provision of this Agreement that has a material adverse effect on the Participant shall be effective unless signed in writing by or on behalf of the Company and the Participant; provided that the Company may amend or modify this Agreement without the Participant’s consent in accordance with the provisions of the Plan or as otherwise set forth in this Agreement. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. Any amendment or modification of or to any provision of this Agreement, or any waiver of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which such amendment, modification or waiver is made or given.

21.Assignment. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Participant.

22.Successors and Assigns; No Third-Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the Company and the Participant and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the Company and the Participant, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

23.No Advice Regarding Grant; Opportunity to Obtain Advice of Counsel. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of the underlying shares of Common Stock. The Participant is hereby advised to consult with the Participant’s own personal tax, financial and/or legal advisors regarding the Tax-Related Items arising in connection with the Award. By accepting the Award, the Participant acknowledges and agrees that he or she has done so or knowingly and voluntarily declined to do so. The Participant acknowledges and agrees that he or she has reviewed the Agreement, the Notice and the Plan in their entirety, including any exhibits or other documents referred to herein or therein, and have had the opportunity to obtain the advice of counsel prior to executing and accepting the Award, and fully understood the provisions of the Award.

24.Dispute Resolution. All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Company’s or the Employer’s mandatory dispute resolution procedures, if any, as may be in effect from time to time with respect to matters arising out of or relating to the Participant’s employment with the Company or the Employer.

25.Governing Law; Venue.All matters arising out of or relating to this Agreement and the transactions contemplated hereby, including its validity, interpretation, construction, performance and enforcement, shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its principles of conflict of laws. Notwithstanding any arbitration agreement that otherwise may exist between the Participant and the Company, the Participant and the Company agree that, in the event of any dispute arising under this Agreement, any such dispute is not subject to arbitration, and the Participant and the Company instead hereby mutually confer exclusive jurisdiction and venue for any dispute in any way related to this Agreement on the state, provincial or federal court having original jurisdiction for the location in which the Participant last worked for the Company, and the Participant and the Company both agree not to bring any litigation in any way related to this Agreement in any other court or forum.

26.Imposition of other Requirements and Participant Undertaking. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Award and on any Shares to be issued upon settlement of the Award, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. The Participant agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to accomplish the foregoing or to carry out or give effect to any of the obligations or restrictions imposed on either the Participant or the RSU pursuant to this Agreement.

27.References. References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participant’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

EXHIBIT A

RESTRICTIVE COVENANT AGREEMENT

As a material condition to the grant of the Award provided for under the Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement ( the “Award Agreement”) by and between the grant recipient (“Employee”) and TriNet Group, Inc. (collectively with its Subsidiaries and Affiliates, “TriNet”) of even date hereof, Employee enters into and agrees to be bound by this Restrictive Covenant Agreement (the “Agreement”), made by and between Employee and TriNet effective as of the date Employee accepts the Award. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement or the TriNet Group, Inc. 2009 Equity Incentive Plan.

SECTION 1.Confidential Information.

1.1Non-Disclosure. Employee agrees that during and after employment with TriNet, Employee will not (i) directly or indirectly disclose to any person or entity, or use, except for the sole benefit of TriNet, any of TriNet’s confidential or proprietary information or trade secrets (collectively, “Company Information”) or (ii) publish or submit for publication, any article or book relating to TriNet, its development projects, or other aspects of TriNet business. By way of illustration and not limitation, Company Information shall include TriNet’s trade secrets; research and development plans or projects; data and reports; computer materials such as software programs, instructions, source and object code, and printouts; products prospective products, inventions, developments, and discoveries; data compilations, development databases; business improvements; business plans (whether pursued or not); ideas; budgets; unpublished financial statements; licenses; pricing strategy and cost data; information regarding the skills and compensation of any employees, non-employee directors or consultants of TriNet (other than Employee); the personally identifying and protected health information of any employee, non-employee director or consultant of TriNet (other than Employee), including worksite employees of TriNet customers; lists of current and potential customers of TriNet; information about customers’ purchasing history, pricing, preferences and profitability; strategies, forecasts and other marketing information and techniques; employment and recruiting strategies and processes; sales practices, strategies, methods, forecasts, compensation plans, and other sales information; investor information; and the identities of TriNet’s suppliers, vendors, and contractors, and all information about those supplier, vendor and contractor relationships such as contact person(s), pricing and other terms. The definition of Company Information shall include both “know-how” (i.e., information about what works well) and “negative know-how” (i.e., information about what does not work well). Employee further acknowledges and agrees that all Company Information is confidential and proprietary and shall remain the exclusive property of TriNet.

1.2Improper Use of Trade Secret Information. In furtherance of Employee’s promises in this Section 1, Employee agrees that during Employee’s employment and for a period of one year following termination of employment with TriNet, Employee will not, for Employee’s own benefit or for the benefit of a competitor of TriNet, use TriNet’s trade secrets, or use Employee’s knowledge of TriNet’s trade secret customer information, directly or indirectly, to (i) identify TriNet customers for solicitation, (ii) facilitate the solicitation of TriNet’s customers, or (iii) otherwise compete unfairly with TriNet.

SECTION 2.Permitted Disclosures. Nothing in this Agreement limits Employee’s ability to communicate directly with and provide information, including documents, not otherwise protected from disclosure by any applicable law or privilege, to the Securities and Exchange Commission (the “SEC”) or any other federal, state or local governmental agency or commission or self-regulatory organization regarding possible legal violations, without disclosure to TriNet.  TriNet may not retaliate against Employee for any of these activities, and nothing in the Agreement requires Employee to waive any monetary award or other payment to which Employee might become entitled from the SEC or any other government agency or self-regulatory organization as a result of such communication. Employee understands that these restrictions on disclosure or use of Company Information shall not limit in any way any right Employee may have to disclose or use information, including but not limited to information about unlawful acts in the workplace such as sexual harassment, pursuant to the National Labor Relations Act or any other applicable federal, state, or local law, including the right to communicate with co-workers for the purpose of improving terms and conditions of employment. Moreover, nothing in this Agreement prohibits Employee from notifying TriNet that Employee is going to make a report or disclosure to law enforcement. Further, pursuant to the Defend Trade Secrets Act of 2016, Employee shall not have criminal or civil liability under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition and without limiting the preceding sentence, if Employee files a lawsuit for retaliation by TriNet for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney and may use the trade secret information in the court proceeding, if Employee (X) files any document containing the trade secret under seal and (Y) does not disclose the trade secret, except pursuant to court order.

SECTION 3.Notice of Resignation. In the event Employee resigns Employee’s employment with TriNet and is immediately prior to such resignation employed in the TriNet Sales department in any position, or in any other part of TriNet with a job code of Executive Director or above, then in order to help effectuate and ensure an orderly transition, Employee shall provide TriNet with sixty (60) days’ notice of Employee’s resignation from TriNet as more specifically set forth below. Sub-sections 3.1 through 3.4, below, apply only if immediately prior to the prescribed notice, Employee is employed in the TriNet Sales department in any position, or in any other part of TriNet with a title of Executive Director or above.

3.1.Sixty (60) Days’ Notice. Employee will provide sixty days’ notice of Employee’s resignation in writing submitted to Employee’s direct supervisor and the Human Resources Department via email to MYHR@trinet.com, and such written notice shall include a disclosure of any new position or affiliation Employee has accepted, intends to accept or is considering accepting upon expiration of the Notice Period. (The first sixty (60) days following submission of a resignation in compliance with this Agreement as outlined below shall be the “Notice Period.”) Employee further agrees to give TriNet notice pursuant to this Section 3 immediately upon communicating to any prospective new employer that Employee has accepted or will be accepting an offer of employment with another employer.

3.2.        Duties and Cooperation During Notice Period. During the Notice Period Employee’s manager may ask Employee to take steps to help transition responsibility for ongoing projects and/or other job duties. Employee agrees to perform these duties and tasks, as Employee’s manager in his or her sole discretion may direct, including without limitation any or all of the following: (i) organize files and notes of any projects for transition; (ii) meet with Employee’s managers or their designee to review files and other data to help ensure that TriNet personnel are aware of and understand any files, projects or other business related data; (iii) meet with Employee’s manager or his/her designee to review the status of any projects, work, clients or personnel for which Employee was assigned responsibility, in order to help ensure that business needs may be seamlessly transitioned to and serviced by other TriNet personnel; (iv) otherwise being available to TriNet, as requested by Employee’s managers, to provide reasonable assistance to effectuate an orderly transition of files, projects, data, client service or personnel responsibilities, and any other job duties, prior to Employee’s last day of employment. The foregoing list is neither intended to be an exhaustive list of the transition-related tasks Employee may be required to perform, nor is it a promise that TriNet will have Employee engage in any or all of the listed tasks. There may be times during the Notice Period when TriNet is preparing for the transition in a way that does not involve Employee’s active engagement, and as such TriNet at its sole discretion may instruct Employee not to come into work or otherwise enter TriNet’s premises on some or all days of the Notice Period.

3.3.Conduct During Notice Period. During the Notice Period, Employee will be a TriNet employee, will remain on TriNet’s payroll, will receive the same base rate of pay, and will continue to be eligible for all employee benefits just as in the period prior to Employee’s giving Notice of Resignation to TriNet. Employee’s primary job duties during the Notice Period will involve providing assistance to TriNet to effectuate an orderly transition of duties to other TriNet personnel as assigned by Employee’s manager. During the Notice Period, Employee shall: (i) not discuss or communicate about Employee’s impending departure from TriNet with clients or others who are not employees of TriNet unless authorized in writing to do so by Employee’s manager; (ii) not take any TriNet data, records or information off the premises of any TriNet office or facility; (iii) not remotely access TriNet systems (Employee understands that such accessibility may be terminated during the Notice Period); (iv) return to Employee’s TriNet manager, within one business day of tendering Employee’s notice of resignation, all files, data and information relating to TriNet clients or business which Employee may have had off premises during the course of Employee’s employment; (v) not use any social networking system or function to update any clients about Employee’s employment status with TriNet and/or any impending change of such status; and (vi) if Employee has had remote access to TriNet computer systems or if Employee has ever used a non-TriNet issued computer or electronic device for work, Employee will, upon TriNet’s request, make such personal computer(s) or other electronic devices available to TriNet and/or its computer forensic experts for imaging and searching to verify that all TriNet client data and any other non-public information has been removed. Employee understands and agrees that a core purpose of the Notice Period is to enable the orderly transition of files, data and client responsibility to other TriNet employees, and accordingly Employee understands and agrees that TriNet is free to and may elect to engage in a variety of transition-related activities, including but not limited to notifying clients of Employee’s intent to leave TriNet, informing clients of the identity of other TriNet employees being assigned to service their accounts, introducing the clients to other TriNet personnel, and/or holding meetings with clients that may or may not include Employee, as Employee’s manager may elect. Employee agrees and understands that during the Notice Period, Employee owes TriNet an unmitigated duty of loyalty, and that Employee shall do nothing during the Notice Period that Employee intends or reasonably expects to further Employee’s interests or the interests of Employee’s new employer to the actual or potential detriment of TriNet.

3.4.At Will. Employee understands and agrees that nothing in this Agreement changes Employee’s "at will" employment status, and that TriNet may end the employment relationship at any time, with or without notice, for any reason or no reason at all. Likewise, Employee is free to end the employment relationship at any time, subject only to Employee’s obligation to provide notice in the manner described herein. Without limitation of the foregoing, Employee understands that TriNet retains the right in its absolute and sole discretion to terminate Employee’s employment after receiving notice from Employee pursuant to this Agreement, at which point Employee’s employment and the Notice Period will come to an end (including any associated obligation by TriNet to continue Employee’s salary and benefits during the Notice Period), but in no event shall TriNet terminate Employee’s employment or the Notice Period sooner than two (2) weeks after the date on which Employee gives notice of resignation pursuant to Section 3 (provided, however, that TriNet retains the right as set forth above to determine what duties, if any, will be performed, and/or whether and to what extent Employee’s attendance may be required during such two-week period).

SECTION 4.Non-Solicitation.

4.1.Customer Non-Solicitation. Employee will not, directly or indirectly, during employment with TriNet and for twelve (12) months following termination or separation of such employment for any reason, solicit or attempt to solicit any of TriNet’s customers or the business or patronage of such customers, either for him/herself of on behalf of any other person, partnership, corporation, or other entity. This restriction is limited to (a) customers Employee serviced, solicited or interacted with at any time during the 24 months immediately preceding termination of employment with TriNet; (b) customers serviced or solicited by other TriNet employees whom Employee supervised during the 24 months immediately preceding termination of employment with TriNet; and (c) customers about whom Employee had access to Confidential Information during the 24 months immediately preceding termination of employment with TriNet.

4.1.1.California & North Dakota. Sub-section 4.1, above, does not apply if the state in which Employee last worked for TriNet was California or North Dakota, provided, however, that with respect to Notice of Resignation and Non-Solicitation of customers Employee nevertheless is bound by the terms of Sections 3 and 1.2 above.

4.1.2.Oklahoma. Section 4.1 does not apply if the state in which Employee last worked for TriNet was Oklahoma, in which case Employee will not, during employment with TriNet and for twelve (12) months following termination or separation of employment for any reason, directly solicit TriNet’s Established Customers or the business or patronage of such Established Customers either for Employee’s own purposes or on behalf of any other person, partnership, corporation, or other entity. The term “Established Customers” in this Section 4.1.2. means customers who were active customers of TriNet at the time of termination of Employee’s employment with TriNet. This restriction on direct solicitation of Established Customers is further limited to (a) Established Customers that Employee serviced, solicited, or interacted with at any time during the 24 months immediately preceding Employee’s termination of employment with TriNet; and (b) Established Customers serviced or solicited by other TriNet employees whom Employee supervised during the 24 months immediately preceding Employee’s termination of employment with TriNet.

4.2.Employee Non-Solicitation. Employee will not, directly or indirectly, during employment with TriNet and for twelve (12) months following termination or separation of employment for any reason, solicit or recruit any TriNet employee(s), non-employee director(s) or consultant(s) of TriNet to accept a position with another company or entity, nor otherwise encourage or induce any TriNet employee, non-employee director or consultant to terminate their employment or affiliation with TriNet. This restriction applies only to (a) employees Employee supervised at any time during the 24 months immediately preceding termination of employment with TriNet, (b) employees with whom Employee worked in the same office at any time during the 24 months immediately preceding termination of employment with TriNet, and (c) employees with whom Employee otherwise had material contact at any time during the 24 months immediately preceding termination of employment with TriNet.

SECTION 5.Non-Competition. During Employee’s employment with TriNet, and for a period of twelve (12) months immediately following termination or separation of such employment for any reason, Employee will not directly or indirectly engage in, or become financially interested or invested in, any business, enterprise, or other profit-seeking entity (as owner, partner, director, officer, member, creditor, consultant, or employee) in competition with any portion of the business conducted or contemplated by TriNet at any time during Employee’s employment with TriNet, and in or with which Employee was involved, anywhere within the territory and/or geographic scope of responsibilities assigned to Employee at any time during the 24 months immediately preceding his/her termination of employment with TriNet. Employee has the right to consult with Employee’s counsel prior to accepting this Agreement.

5.1.California, Oklahoma, North Dakota. Section 5, above, does not apply if the state in which Employee last worked for TriNet was California, Oklahoma or North Dakota.

5.2.Massachusetts. If Employee last worked for TriNet in Massachusetts, then Employee hereby agrees that Employee’s acceptance of the Award identified in this Agreement, and Employee’s enjoyment of the financial opportunities flowing from such participation, provide Employee with a valuable investment opportunity which constitutes other mutually agreed consideration supporting Employee’s agreement to abide by the restrictions contained herein for purposes of compliance with Massachusetts law relating to non-competition agreements.

SECTION 6.Reasonableness of Restrictions. Employee acknowledges and agrees that compliance with the non-disclosure, non-solicitation, and non-competition covenants above is both reasonable and necessary to protect TriNet’s legitimate business interests, including its goodwill, its confidential business information, its customer and employee relationships and investment therein, and its reputation, and that Employee’s violation of these covenants is inconsistent with TriNet’s provision of equity ownership incentive grants as contemplated by the Award Agreement. Employee further acknowledges and agrees that Employee’s post-employment competition, and/or Employee’s solicitation of TriNet customers during this limited period of time, in violation of the non-competition and non-solicitation covenants above, would be contrary to the purpose, goal, and intent of TriNet’s agreement to provide Employee with the equity incentive award provided to Employee in the Award Agreement, and that but for Employee’s consent to such post-employment restrictions, the equity incentive award herein would not otherwise be awarded to Employee. Employee further acknowledges that Employee’s participation in equity ownership incentive grants is fully optional on the part of Employee, and that Employee opts to participate fully understanding that the foregoing covenants and restrictions would be conditions of such participation.

SECTION 7.Irreparable Harm/Injunctive Relief. Employee acknowledges and agrees that any breach of Employee’s obligations under the Non-Disclosure, Notice of Resignation, Non-Solicitation, and/or Non-Competition covenants above, as applicable, will result in irreparable and continuing harm and injury to TriNet for which there is no adequate remedy at law. Employee further agrees that in the event Employee breaches the non-disclosure, non-solicitation, and/or non-competition covenants, TriNet shall be entitled to seek and obtain temporary, preliminary, and permanent injunctive relief to enforce the specific terms of these covenants. Employee further agrees and consents that in any action seeking temporary or preliminary injunctive relief to enforce any of the foregoing restrictions, TriNet and Employee shall be entitled to engage in expedited discovery in aid of proceedings seeking temporary and/or preliminary injunctive relief, including expedited document production, interrogatories, and depositions limited at the expedited stage to those topics that are relevant to temporary and/or preliminary injunctive relief.

SECTION 8.Other Provisions. If any provision of this Agreement is found to be invalid or unenforceable, the parties hereto agree that a court may modify, alter or amend such provision to the extent necessary to make it enforceable. If a court declines to modify, alter or amend the provision to make it enforceable, then the remaining provisions of this Agreement shall remain in full force and effect. This Agreement is assignable by TriNet and will be binding upon and inure to the benefit of TriNet’s successors, assigns and affiliated entities. Employee agrees that, should TriNet, or any subsidiary or unit of TriNet in which Employee works, be acquired by, merge with, or otherwise combine with another business entity, TriNet’s rights under this Agreement will be automatically assigned to the surviving entity, and such entity will have all rights to enforce this Agreement. Employee hereby consents to any such actual or deemed automatic assignment. Notwithstanding the foregoing, Employee may not assign this Agreement.

SECTION 9.Governing Law; Venue. The terms of this Agreement and any disputes arising out of it shall be governed by, and construed in accordance with, the laws of the state or province in which Employee was last employed by TriNet, without giving effect to such state or province’s conflict of law principles. Employee agrees and understands that such state or province’s laws will govern as set forth herein regardless of whether Employee moves Employee’s residence or place of employment to another state or location after termination of employment with TriNet. Notwithstanding any arbitration agreement that otherwise may exist between Employee and TriNet, Employee and TriNet agree that in the event of any dispute arising under this Agreement, any such dispute is not subject to arbitration, and Employee and TriNet instead hereby mutually confer exclusive jurisdiction and venue for any dispute in any way related to this Agreement on the state, provincial or federal court having original jurisdiction for the location in which Employee last worked for TriNet, and Employee and TriNet both agree not to bring any litigation in any way related to this Agreement in any other court or forum.

***

Employee understands and acknowledges that Employee has the right to consult with Employee’s attorney to obtain legal counsel prior to making the choice to accept this Agreement and the restrictions contained herein.

IN WITNESS WHEREOF, Employee accepts the obligations under this Agreement and will be deemed to have accepted and signed this Agreement upon Employee’s acceptance of the Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement to which it is attached.

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Burton M. Goldfield, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TriNet Group, 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 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 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: July 25, 2019

/s/ Burton M. Goldfield

Burton M. Goldfield

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard Beckert, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TriNet Group, 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 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 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: July 25, 2019

/s/ Richard Beckert

Richard Beckert

Chief Financial Officer

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 TriNet Group, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ending June 30, 2019 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company does hereby certify, pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002), that:

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

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

The foregoing certification (i) is given to such officers’ knowledge, based upon such officers’ investigation as such officers reasonably deem appropriate; and (ii) is being furnished solely pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002) and is not being filed as part of the Report or as a separate disclosure document and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

Date: July 25, 2019	/s/ Burton M. Goldfield
	Burton M. Goldfield
	Chief Executive Officer
Date: July 25, 2019	/s/ Richard Beckert
	Richard Beckert
	Chief Financial Officer

XML

Cover - shares	6 Months Ended
	Jun. 30, 2019	Jul. 18, 2019
Document And Entity Information [Abstract]
Title of 12(b) Security	Common stock par value $0.000025 per share
Entity Incorporation, State or Country Code	DE
Entity Registrant Name	TRINET GROUP INC
Trading Symbol	TNET
Entity Central Index Key	0000937098
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	43646
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		69,935,199
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-36373
Entity Tax Identification Number	95-3359658
Entity Address, Address Line One	One Park Place, Suite 600
Entity Address, Postal Zip Code	94568
Entity Address, City or Town	Dublin,
Entity Address, State or Province	CA
City Area Code	510
Local Phone Number	352-5000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Security Exchange Name	NYSE

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 219	$ 228
Investments	76	54
Restricted cash, cash equivalents and investments	672	942
Accounts receivable, net	10	11
Unbilled revenue, net	341	304
Prepaid expenses, net	64	48
Other current assets	73	59
Total current assets	1,455	1,646
Restricted cash, cash equivalents and investments, noncurrent	200	187
Investments, noncurrent	117	135
Property & equipment, net	89	79
Operating lease right-of-use asset	60	0
Goodwill	289	289
Other intangible assets, net	18	21
Other assets	90	78
Total assets	2,318	2,435
Current liabilities:
Accounts payable and other current liabilities	40	45
Long-term debt	22	22
Client deposits	67	56
Accrued wages	377	352
Accrued health insurance costs, net	143	135
Accrued workers' compensation costs, net	64	67
Payroll tax liabilities and other payroll withholdings	473	729
Operating lease liabilities	17	0
Insurance premiums and other payables	16	19
Total current liabilities	1,219	1,425
Long-term debt, noncurrent	380	391
Accrued workers' compensation costs, noncurrent, net	148	158
Deferred taxes	67	68
Operating lease liabilities, noncurrent	55	0
Other non-current liabilities	10	18
Total liabilities	1,879	2,060
Commitments and contingencies (see Note 6)
Stockholders’ equity:
Preferred stock	0	0
Common stock and additional paid-in capital	667	641
Accumulated deficit	(229)	(266)
Accumulated other comprehensive income	1	0
Total stockholders' equity	439	375
Total liabilities & stockholders' equity	$ 2,318	$ 2,435

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Preferred stock
Preferred stock, par value (in dollars per share)	$ 0.000025	$ 0.000025
Preferred stock, shares authorized (in shares)	20,000,000	20,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock
Common stock, par value (in dollars per share)	$ 0.000025	$ 0.000025
Common stock, shares authorized (in shares)	750,000,000	750,000,000
Common stock, shares issued (in shares)	69,991,145	70,596,559
Common stock, shares outstanding (in shares)	69,991,145	70,596,559

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total revenues	$ 935	$ 850	$ 1,869	$ 1,711
Costs and operating expenses:
Insurance costs	704	630	1,387	1,271
Cost of providing services	63	51	127	108
Sales and marketing	52	41	98	80
General and administrative	36	31	72	62
Systems development and programming	13	11	25	24
Depreciation and amortization of intangible assets	12	10	23	19
Total costs and operating expenses	880	774	1,732	1,564
Operating income	55	76	137	147
Other income (expense):
Interest expense, bank fees and other	(6)	(7)	(11)	(13)
Interest income	7	3	13	5
Income before provision for income taxes	56	72	139	139
Income tax expense	10	14	30	27
Net income	46	58	109	112
Other comprehensive income, net of tax	1	1	1	0
Comprehensive income	$ 47	$ 59	$ 110	$ 112
Net income per share:
Basic (in dollars per share)	$ 0.65	$ 0.82	$ 1.56	$ 1.59
Diluted (in dollars per share)	$ 0.64	$ 0.80	$ 1.53	$ 1.55
Weighted average shares:
Basic (in shares)	69,703,792	70,448,809	69,806,319	70,250,273
Diluted (in shares)	71,074,751	72,561,891	71,151,219	72,404,539
Professional service revenues
Total revenues	$ 127	$ 115	$ 263	$ 244
Insurance service revenues
Total revenues	$ 808	$ 735	$ 1,606	$ 1,467

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Millions	Total	Common Stock and Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2017	$ 206	$ 583	$ (377)	$ 0
Issuance of common stock from exercise of stock options		6
Issuance of common stock for employee stock purchase plan		3
Stock-based compensation expense		19
Net income	112		112
Repurchase of common stock			(30)
Awards effectively repurchased for required employee withholding taxes			(10)
Other comprehensive income	0			0
Balance at Jun. 30, 2018	309	611	(302)	0
Balance at Mar. 31, 2018	262	595	(332)	(1)
Issuance of common stock from exercise of stock options		3
Issuance of common stock for employee stock purchase plan		3
Stock-based compensation expense		10
Net income	58		58
Repurchase of common stock			(22)
Awards effectively repurchased for required employee withholding taxes			(6)
Other comprehensive income	1			1
Balance at Jun. 30, 2018	309	611	(302)	0
Balance at Dec. 31, 2018	375	641	(266)	0
Issuance of common stock from exercise of stock options		2
Issuance of common stock for employee stock purchase plan		4
Stock-based compensation expense		20
Net income	109		109
Repurchase of common stock	(62)		(62)
Awards effectively repurchased for required employee withholding taxes			(10)
Other comprehensive income				1
Balance at Jun. 30, 2019	439	667	(229)	1
Balance at Mar. 31, 2019	406	651	(245)	0
Issuance of common stock from exercise of stock options		1
Issuance of common stock for employee stock purchase plan		4
Stock-based compensation expense		11
Net income	46		46
Repurchase of common stock			(24)
Awards effectively repurchased for required employee withholding taxes			(6)
Other comprehensive income				1
Balance at Jun. 30, 2019	$ 439	$ 667	$ (229)	$ 1

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Net income	$ 109	$ 112
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27	24
Noncash lease expense	10	0
Stock-based compensation	20	19
Changes in operating assets and liabilities:
Accounts receivable	3	11
Unbilled revenue	(36)	35
Prepaid expenses	18	9
Other assets	(30)	(45)
Accounts payable and other current liabilities	(11)	(28)
Client deposits	10	(24)
Accrued wages	25	(28)
Accrued health insurance costs	(13)	(13)
Accrued workers' compensation costs	9	(8)
Payroll taxes payable and other payroll withholdings	(256)	(588)
Operating lease liabilities	(9)	0
Other liabilities	(2)	(1)
Net cash used in operating activities	(162)	(543)
Investing activities
Purchases of marketable securities	(65)	(203)
Proceeds from sale and maturity of marketable securities	65	63
Acquisitions of property and equipment	(25)	(26)
Net cash used in investing activities	(25)	(166)
Financing activities
Repurchase of common stock	(62)	(30)
Proceeds from issuance of common stock from employee stock purchase plan	4	3
Proceeds from issuance of common stock from exercised options	2	5
Awards effectively repurchased for required employee withholding taxes	(10)	(10)
Proceeds from issuance of notes payable, net	0	210
Payments for extinguishment of debt	0	(204)
Repayment of debt	(11)	(10)
Net cash used in financing activities	(77)	(36)
Net decrease in unrestricted and restricted cash and cash equivalents	(264)	(745)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period	1,349	1,738
End of period	1,085	993
Supplemental disclosures of cash flow information
Interest paid	9	8
Income taxes paid, net	33	24
Supplemental schedule of noncash investing and financing activities
Payable for purchase of property and equipment	$ 8	$ 2

XML

Description of Business and Significant Accounting Policies - (Notes)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

TriNet Group, Inc. (TriNet, or the Company, we, our and us), a professional employer organization, provides comprehensive human resources solutions for small to midsize businesses under a co-employment model. These HR solutions include multi-state payroll processing and tax administration, employee benefits programs, including health insurance and retirement plans, workers' compensation insurance and claims management, employment and benefit law compliance, and other HR-related services. Through the co-employment relationship, we are the employer of record for certain employment-related administrative and regulatory purposes for the worksite employees, including:

• compensation through wages and salaries,

• employer payroll-related tax payments,

• employee payroll-related tax withholdings and payments,

• employee benefit programs, including health and life insurance, and others, and

• workers' compensation coverage.

Our clients are responsible for the day-to-day job responsibilities of the WSEs.

We operate in one reportable segment. All of our service revenues are generated from external clients. Less than 1% of our revenue is generated outside of the U.S.

Basis of Presentation

These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Rules and Regulations of the Securities and Exchange Commission. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, that are normal and recurring in nature, necessary for fair financial statement presentation. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results anticipated for the full year. These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in Part II, Item 8 Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K).

Reclassifications

Certain prior year amounts have been reclassified to conform to current period presentation. Effects on the cash flow statement due to reclassifications are summarized below:

	Six Months Ended June 30, 2018
(in millions)	As previously reported			Reclassified amounts			As revised
Operating activities
Accounts receivable	$	—		$	11		$	11
Unbilled revenue	—			35			35
Prepaid income taxes	2			(2		)	—
Prepaid expenses and other current assets	(23		)	23			—
Prepaid expenses	—			(9		)	(9		)
Workers' compensation collateral receivable	(6		)	6			—
Accounts payable and other current liabilities	(14		)	(14		)	(28		)
Client deposits	—			(24		)	(24		)
Accrued wages	—			(28		)	(28		)
Accrued corporate wages	(5		)	5			—
Accrued health insurance costs	—			(13		)	(13		)
Accrued workers' compensation costs	—			(8		)	(8		)
Workers' compensation loss reserves and other non-current liabilities	(4		)	4			—
Payroll taxes payable and other payroll withholdings	—			(588		)	(588		)
Worksite employee related assets	4			(4		)	—
Worksite employee related liabilities	(652		)	652			—
Other assets	—			(45		)	(45		)
Other liabilities	—			(1		)	(1		)

Effects on the consolidated statements of income and comprehensive income due to reclassifications are summarized below:

	Three Months Ended									Six months ended
	June 30, 2018									June 30, 2018
(in millions)	As previously reported			Reclassified amounts			As revised			As previously reported			Reclassified amounts			As revised
Depreciation	$	8		$	(8	)	$	—		$	16		$	(16	)	$	—
Amortization of intangible assets	2			(2		)	—			3			(3		)	—
Depreciation and amortization of intangible assets	—			10			10			—			19			19
Interest expense, bank fees and other, net	(4		)	4			—			(8		)	8			—
Interest expense, bank fees and other	—			(7		)	(7		)	—			(13		)	(13		)
Interest income	—			3			3			—			5			5
Other comprehensive income, net of tax	—			1			1			—			—			—
Comprehensive income	58			1			59			112			—			112

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts and related disclosures. Significant estimates include:

• liability for unpaid losses and loss adjustment expenses (accrued workers' compensation costs) related to workers' compensation and workers' compensation collateral receivable,

• accrued health insurance costs,

• liability for insurance premiums payable,

• valuation of the investment portfolio,

• impairments of goodwill and other intangible assets,

• income tax assets and liabilities, and

• liability for legal contingencies.

These estimates are based on historical experience and on various other assumptions that we believe to be reasonable from the facts available to us. Some of the assumptions are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial statements could be materially affected.

Accrued Health Insurance Costs

We sponsor and administer a number of fully insured, risk-based employee benefit plans, including group health, dental, and vision as an employer plan sponsor under section 3(5) of the ERISA. In the six months ended June 30, 2019, the majority of our group health insurance costs related to risk-based plans. Our remaining group health insurance costs were for guaranteed-cost policies.

Accrued health insurance costs are established to provide for the estimated unpaid costs of reimbursing the carriers for paying claims within the deductible layer in accordance with risk-based health insurance policies. These accrued costs include estimates for reported losses, plus estimates for claims incurred but not paid. We assess accrued health insurance costs regularly based upon independent actuarial studies that include other relevant factors such as current and historical claims payment patterns, plan enrollment and medical trend rates.

In certain carrier contracts we are required to prepay the expected claims activity for subsequent periods. These prepaid balances by agreement permit net settlement of obligations and offset the accrued health insurance costs. As of June 30, 2019 and December 31, 2018, prepayments included in accrued health insurance costs were $39 million and $33 million, respectively. When the prepaid is in excess of our recorded liability, the net asset position is included in prepaid expenses. As of June 30, 2019 and December 31, 2018, accrued health insurance costs included in prepaid expenses were $51 million and $50 million, respectively.

Derivative Instruments

In June 2019, we entered into a interest rate collar derivative transaction with no upfront premium to mitigate the risk of changes in interest rates on our floating rate debt. This derivative, for which we have elected and qualify for cash flow hedge accounting, is recorded on the balance sheet at its fair value. Changes in the derivative’s fair value are recorded each period in other comprehensive income until the underlying monthly interest payment and the corresponding portion of the derivative are settled, at which point changes in fair value are recorded in net income. We evaluate this derivative each quarter to determine that it remains effective by comparing the remaining cash flows of the derivative against the related interest payments of our floating rate debt. We do not enter into any derivatives for trading or other speculative purposes.

Leases

We adopted ASU 2016-02 - Leases (ASC 842) effective January 1, 2019 using the optional transition method, under which we recognized the cumulative effects of initially applying the standard as an adjustment to the opening balance of retained earnings on January 1, 2019 with unchanged comparative periods. As part of this adoption, we elected the following practical expedients:

• not to reassess 1) whether any contracts that existed prior to adoption have or contain leases, 2) the classification of our existing leases or 3) initial direct costs for existing leases,

• to use the practical expedient of using hindsight to determine the lease terms and evaluate any impairments in right-of-use assets upon transition, and

• not separately record non-lease and lease components for all leases in which we act as a lessee.

We determine if a new contractual arrangement is a lease at contract inception. If a contract contains a lease, we evaluate whether it should be classified as an operating or a finance lease. If applicable as a lease, we record our lease liabilities and ROU assets based on the future minimum lease payments over the lease term and only include options to renew a lease in the minimum lease payments if it is reasonably certain that we will exercise that option. For certain leases with original terms of twelve months or less we recognize the lease expense as incurred and we do not recognize lease liabilities and ROU assets.

We measure our lease liabilities based on the future minimum lease payments discounted over the lease term. We determine our discount rate at lease inception using our incremental borrowing rate, which is based on our outstanding term debts that are collateralized by certain corporate assets. As of June 30, 2019, the weighted-average rate used in discounting the lease liability was 4.6%.

We measure our ROU assets based on the associated lease liabilities adjusted for any lease incentives such as tenant improvement allowances and classify operating ROU assets in other assets in our condensed consolidated balance sheet. For operating leases, we recognize expense for lease payments on a straight-line basis over the lease term.

Recent Accounting Pronouncements

Recently adopted accounting guidance

Leases - In February of 2016, the FASB issued ASC 842, which replaced existing lease guidance under GAAP. Under this guidance, we recognize on our condensed balance sheet lease liabilities representing the present value of future lease payments and an associated right-of-use asset representing our right to use or control the use of specified assets for the lease term for any operating lease with a term greater than one year.

The impact of our adoption of ASC 842 did not have a material impact on our income statement or cash flow statement. The impact on our condensed balance sheets is as follows:

	June 30, 2019
(in millions)	As reported			Balance Using Previous Standard		Increase (Decrease)
Balance sheet
Assets
Operating lease right-of-use assets	$	60		$	—	$	60
Liabilities
Operating lease liabilities	17			—		17
Operating lease liabilities, noncurrent	55			11		44
Equity
Accumulated deficit	(229		)	—		(229		)

Recently issued accounting pronouncements

Credit Losses - In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326), which requires financial assets to be presented at the net amount expected to be collected. We will be required to use forward-looking information when evaluating an allowance for our accounts receivable, unbilled revenue and other financial assets measured at amortized cost. Topic 326 also modifies the impairment guidance for available-for-sale debt securities to require an allowance for credit losses. We will adopt Topic 326 effective January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings. We are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes and systems.

XML

Cash, Cash Equivalents and Investments - (Notes)

6 Months Ended

Jun. 30, 2019

Cash and Cash Equivalents [Abstract]

CASH, CASH EQUIVALENTS AND INVESTMENTS

CASH, CASH EQUIVALENTS AND INVESTMENTS

Under the terms of the agreements with certain of our workers' compensation and health benefit insurance carriers, we are required to maintain collateral in trust accounts for the benefit of specified insurance carriers and to reimburse the carriers’ claim payments within our deductible layer. We invest a portion of the collateral amounts in marketable securities. We report the current and noncurrent portions of these trust accounts as restricted cash, cash equivalents and investments on the consolidated balance sheets.

We require our clients to prefund their payroll and related taxes and other withholding liabilities before payroll is processed or due for payment. This prefund is included in restricted cash, cash equivalents and investments as payroll funds collected, which is designated to pay pending payrolls, payroll tax liabilities and other payroll withholdings.

We also invest available corporate funds, primarily in fixed income securities which meet the requirements of our corporate investment policy and are classified as available for sale (AFS).

Our total cash, cash equivalents and investments are summarized below:

	June 30, 2019						December 31, 2018
(in millions)	Cash and cash equivalents		Available-for-sale marketable securities		Total		Cash and cash equivalents		Available-for-sale marketable securities		Certificate of deposits		Total
Cash and cash equivalents	$	219	$	—	$	219	$	228	$	—	$	—	$	228
Investments	—		76		76		—		54		—		54
Restricted cash, cash equivalents and investments
Insurance carriers' security deposits	14		—		14		15		—		—		15
Payroll funds collected	519		—		519		783		—		—		783
Collateral for health benefits claims	75		—		75		75		—		—		75
Collateral for workers' compensation claims	63		1		64		66		1		—		67
Collateral to secure standby letter of credit	—		—		—		—		—		2		2
Total restricted cash, cash equivalents and investments	671		1		672		939		1		2		942
Investments, noncurrent	—		117		117		—		135		—		135
Restricted cash, cash equivalents and investments, noncurrent
Collateral for workers' compensation claims	195		5		200		182		5		—		187
Total	$	1,085	$	199	$	1,284	$	1,349	$	195	$	2	$	1,546

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Investments - (Notes)

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

INVESTMENTS

All of our investment securities that have a contractual maturity date greater than three months are classified as AFS. The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of our investments as of June 30, 2019 and December 31, 2018 are presented below.

	June 30, 2019								December 31, 2018
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset-backed securities	$	35	$	—	$	—	$	35	$	33	$	—	$	—	$	33
Corporate bonds	94		1		—		95		99		—		—		99
U.S. government agencies and government- sponsored agencies	5		—		—		5		7		—		—		7
U.S. treasuries	58		1		—		59		46		—		—		46
Exchange traded fund	1		—		—		1		1		—		—		1
Other debt securities	4		—		—		4		9		—		—		9
Total	$	197	$	2	$	—	$	199	$	195	$	—	$	—	$	195

Gross unrealized losses as of June 30, 2019 and December 31, 2018 were not material.

Unrealized losses on fixed income securities are principally caused by changes in interest rates and the financial condition of the issuer. In analyzing an issuer's financial condition, we consider whether the securities are issued by the federal government or its agencies, whether downgrades by credit rating agencies have occurred, and industry analysts' reports. As we have the ability to hold these investments until maturity, or for the foreseeable future, no decline was deemed to be other-than-temporary. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

The fair value of debt investments by contractual maturity are shown below:

(in millions)	June 30, 2019
One year or less	$	81
Over one year through five years	103
Over five years through ten years	7
Over ten years	7
Total fair value	$	198

The gross proceeds from sales and maturities of AFS securities for the three and six months ended June 30, 2019 and June 30, 2018 are presented below. We had immaterial realized gains and losses from sales of investments for the three and six months ended June 30, 2019 and June 30, 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Gross proceeds from sales	$	14	$	—	$	28	$	39
Gross proceeds from maturities	19		10		36		24

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Leases - (Notes)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

LEASES

Our leasing activities predominantly consist of leasing office space that we occupy, which we have classified as operating leases. Our leases are comprised of fixed payments with remaining lease terms of 1 to 9.3 years, some of which include options to extend for up to 15 years. As of June 30, 2019, we have not included any options to extend or cancel in the calculation of our lease liability or ROU asset. We do not have any significant residual value guarantees or restrictive covenants in our leases.

During the second quarter of 2019, we recognized operating lease expense of $5 million and we recognized $10 million during the first half of 2019.

During the second quarter of 2019, we paid $4 million to reduce operating lease liabilities and $8 million during the first half of 2019. During the second quarter of 2019, we recognized $5 million in new operating lease liabilities in exchange for ROU assets and we recognized $17 million during the first half of 2019.

As of June 30, 2019, the weighted average remaining lease term on our operating leases was 6.2 years. Future minimum lease payments as of June 30, 2019 and December 31, 2018 were as follows:

(in millions)	June 30, 2019 (2)			December 31, 2018 (3)
2019(1)	$	10		$	18
2020	18			17
2021	11			11
2022	10			9
2023	9			8
2024	6			5
2025 and thereafter	19			20
Total future minimum lease payments	$	83		$	88
Less: imputed interest	(11		)	N/A(4)
Total operating lease liabilities	72			N/A(4)
Current portion	17			N/A(4)
Non-current portion	55			N/A(4)

(1)    The remaining payments as of June 30, 2019 exclude those made during the six months ended June 30, 2019.

(2) Presented in accordance with ASC 842, which excludes base payments of $4 million for leases that do not yet have a commencement date.

(3)    Presented in accordance with ASC 840.

(4)    N/A - Not Applicable under ASC 840.

As of June 30, 2019, we have entered into two leases that have not commenced for terms up to 5 years. Those leases will require minimum lease payments over their terms of $4 million.

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Accrued Workers' Compensation Cost - (Notes)

6 Months Ended

Jun. 30, 2019

Insurance [Abstract]

ACCRUED WORKERS' COMPENSATION COSTS

ACCRUED WORKERS' COMPENSATION COSTS

The following table summarizes the accrued workers’ compensation cost activity for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019			2018
Total accrued costs, beginning of period	$	236		$	250		$	238		$	255
Incurred
Current year	16			19			35			39
Prior years	(11		)	(6		)	(16		)	(13		)
Total incurred	5			13			19			26
Paid
Current year	(2		)	(2		)	(3		)	(2		)
Prior years	(15		)	(17		)	(30		)	(35		)
Total paid	(17		)	(19		)	(33		)	(37		)
Total accrued costs, end of period	$	224		$	244		$	224		$	244

The following summarizes workers' compensation liabilities on the condensed consolidated balance sheets:

(in millions)	June 30, 2019			December 31, 2018
Total accrued costs, end of period	$	224		$	238
Collateral paid to carriers and offset against accrued costs	(12		)	(13		)
Total accrued costs, net of carrier collateral offset	$	212		$	225
Payable in less than 1 year (net of collateral paid to carriers of $3 at June 30, 2019 and December 31, 2018)	$	64		$	67
Payable in more than 1 year (net of collateral paid to carriers of $9 and $10 at June 30, 2019 and December 31, 2018, respectively)	148			158
Total accrued costs, net of carrier collateral offset	$	212		$	225

Incurred claims related to prior years represent changes in estimates for ultimate losses on workers' compensation claims. For the three and six months ended June 30, 2019, the change was primarily due to a decrease in estimate of ultimate losses related to older plan years and the recognition of current year development of ultimate losses.

As of June 30, 2019 and December 31, 2018, we had $55 million and $57 million, respectively, of collateral held by insurance carriers of which $12 million and $13 million, respectively, was offset against accrued workers' compensation costs as the agreements permit and are net settled against collateral held.

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Commitments and Contingencies - (Notes)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Contingencies

In August 2015, Howard Welgus, a purported stockholder, filed a putative securities class action lawsuit, Welgus v. TriNet Group, Inc., et. al., under the Securities Exchange Act of 1934 in the U.S. District Court for the Northern District of California. On December 18, 2017, the district court granted TriNet’s motion to dismiss the complaint, which had been amended in April 2016 and again in March 2017, in its entirety, without leave to amend. Plaintiff filed a notice of appeal of the district court’s order on January 17, 2018 and oral arguments were held before the Ninth Circuit Court of Appeals on March 14, 2019. On March 26, 2019, the Ninth Circuit Court of Appeals affirmed the district court’s dismissal of the amended complaint in its entirety. The deadline for Plaintiff-Appellant to petition the U.S. Supreme Court to review the decision by the Court of Appeals expired on June 24, 2019 and the litigation is therefore terminated.

We are and, from time to time, have been and may in the future become involved in various litigation matters, legal proceedings, and claims arising in the ordinary course of our business, including disputes with our clients or various class action, collective action, representative action, and other proceedings arising from the nature of our co-employment relationship with our clients and WSEs in which we are named as a defendant. In addition, due to the nature of our co-employment relationship with our clients and WSEs, we could be subject to liability for federal and state law violations, even if we do not participate in such violations. While our agreements with our clients contain indemnification provisions related to the conduct of our clients, we may not be able to avail ourselves of such provisions in every instance. We have accrued our current best estimates of probable losses with respect to these matters, which are individually and in aggregate immaterial to our consolidated financial statements.

While the outcome of the matters described above cannot be predicted with certainty, management currently does not believe that any such claims or proceedings will have a materially adverse effect on our consolidated financial position, results of operations, or cash flows. However, the unfavorable resolution of any particular matter or our reassessment of our exposure for any of the above matters based on additional information obtained in the future could have a material impact on our consolidated financial position, results of operations, or cash flows.

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Stockholders' Equity - (Notes)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Common Stock

The following table presents a rollforward of our common stock for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Shares issued and outstanding, beginning balance	70,079,747		70,363,251		70,596,559		69,818,392
Issuance of common stock from vested restricted stock units	213,991		389,875		500,710		1,000,141
Issuance of common stock from exercise of stock options	58,491		263,464		139,773		469,894
Issuance of common stock for employee stock purchase plan	112,623		84,525		112,623		84,525
Repurchase of common stock	(392,700	)	(434,766	)	(1,175,609	)	(594,799	)
Awards effectively repurchased for required employee withholding taxes	(81,007	)	(92,462	)	(182,911	)	(204,266	)
Shares issued and outstanding, ending balance	69,991,145		70,573,887		69,991,145		70,573,887

Equity-Based Incentive Plans

Our 2019 Equity Incentive Plan (the 2019 Plan), approved in May 2019, replaced our 2009 Equity Incentive Plan and provides for the grants of options (both non-qualified and incentive stock options), stock appreciation rights, restricted stock, RSUs, performance awards (each as defined in the 2019 Plan) and other cash- and stock-based awards. Shares available for grant as of June 30, 2019 were approximately 2,839,430.

Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs)

Time-based RSUs and RSAs generally vest over a four-year term. Performance-based RSUs and RSAs are subject to vesting requirements based on certain financial performance metrics as defined in the grant notice. Actual number of shares earned may range from 0% to 200% of the target award. Awards granted in 2019 and 2018 are based on a single-year performance period subject to subsequent multi-year vesting with 50% of the shares earned vesting in one year after the performance period and the remaining shares in the year after.

The following table summarizes RSU and RSA activity under our equity-based plans for the six months ended June 30, 2019:

	RSUs				RSAs
	Number of Units		Weighted-Average Grant Date Fair Value		Number of Units		Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2018	1,737,554		$	32.83	346,792		$	49.13
Granted	724,172		60.58		—		—
Vested	(511,813	)	30.34		(31,248	)	50.61
Forfeited	(106,737	)	36.52		(11,103	)	49.35
Nonvested at June 30, 2019	1,843,176		$	44.18	304,441		$	49.11

Equity-Based Compensation

Stock-based compensation expense is measured based on the fair value of the stock award on the grant date and recognized over the requisite service period for each separately vesting portion of the stock award. Stock-based compensation expense and other disclosures for stock-based awards made to our employees pursuant to the equity plans was as follows: 

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Cost of providing services	$	2	$	2	$	4	$	4
Sales and marketing	1		2		1		4
General and administrative	7		5		13		9
Systems development and programming costs	1		1		2		2
Total stock-based compensation expense	$	11	$	10	$	20	$	19

Stock Repurchases

In February 2019, our board of directors authorized a $300 million incremental increase to our ongoing stock repurchase program initiated in May 2014. During the six months ended June 30, 2019, we repurchased 1,175,609 shares of common stock for approximately $62 million. As of June 30, 2019, approximately $313 million remained available for further repurchases of our common stock under all authorizations from our board of directors under this program.

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Income Taxes - (Notes)

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our effective income tax rate was 17% and 19% for the second quarter of 2019 and 2018, respectively, and 21% and 19% for the six months ended June 30, 2019 and 2018, respectively. The decrease when comparing the second quarter of 2019 with the same period in 2018, is primarily due to a one-time benefit associated with prior year tax expense. The increase in the year to date rates for 2019 when compared to the same period in 2018, consisted primarily from a decrease in tax benefits recognized from excess tax benefits related to stock-based compensation.

During the six months ended June 30, 2019, there was an increase of $1 million in our unrecognized tax benefits. The total amount of gross interest and penalties accrued was immaterial. It is reasonably possible the amount of the unrecognized benefit could increase or decrease within the next twelve months, which would have an impact on net income.

We are subject to tax in U.S. federal and various state and local jurisdictions, as well as Canada. We are not subject to any material income tax examinations in federal or state jurisdictions for tax years prior to January 1, 2012. We previously paid Notices of Proposed Assessments disallowing employment tax credits totaling $11 million, plus interest of $4 million in connection with the IRS examination of Gevity HR, Inc. and its subsidiaries, which was acquired by TriNet in June 2009. TriNet filed suit in June 2016 to recover the disallowed credits, and the issue is being resolved through the litigation process. TriNet and the U.S. filed cross motions for summary judgment in federal district court. On September 17, 2018, the federal district court granted TriNet's motion for summary judgment and denied the U.S.'s motion. On January 18, 2019, the federal district court entered judgment in favor of TriNet in the amount of $15 million, plus interest. The U.S. filed a notice of appeal of the federal district court's decision on March 18, 2019. The U.S. filed its opening brief in the court of appeals on June 10, 2019 and we filed our answering brief on July 24, 2019. We will continue to vigorously defend our position through the litigation process.

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Earnings Per Share (EPS) - (Notes)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

EARNINGS PER SHARE (EPS)

EARNINGS PER SHARE (EPS)

The following table presents the computation of our basic and diluted EPS attributable to our common stock:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share data)	2019		2018		2019		2018
Net income	$	46	$	58	$	109	$	112
Weighted average shares of common stock outstanding	70		70		70		70
Basic EPS	$	0.65	$	0.82	$	1.56	$	1.59
Net income	$	46	$	58	$	109	$	112
Weighted average shares of common stock outstanding	70		70		70		70
Dilutive effect of stock options and restricted stock units	1		3		1		2
Weighted average shares of common stock outstanding	71		73		71		72
Diluted EPS	$	0.64	$	0.80	$	1.53	$	1.55
Common stock equivalents excluded from income per diluted share because of their anti-dilutive effect	—		—		1		1

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Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

We use an independent pricing source to determine the fair value of our AFS. The independent pricing source utilizes various pricing models for each asset class; including the market approach. The inputs and assumptions for the pricing models are market observable inputs including trades of comparable securities, dealer quotes, credit spreads, yield curves and other market-related data.

We have not adjusted the prices obtained from the independent pricing service and we believe the prices received from the independent pricing service are representative of the prices that would be received to sell the assets at the measurement date (exit price).

The carrying value of the Company's cash equivalents and restricted cash equivalents approximate their fair values due to their short-term maturities. The Company's restricted investments are valued using quoted market prices and multiple dealer quotes.

We did not have any Level 3 financial instruments recognized in our balance sheet as of June 30, 2019 and December 31, 2018. There were no transfers between levels as of June 30, 2019 and December 31, 2018.

Fair Value Measurements on a Recurring Basis

The following table summarizes our financial instruments by significant categories and fair value measurement on a recurring basis as of June 30, 2019 and December 31, 2018.

(in millions)	Level 1		Level 2		Total
June 30, 2019
Cash equivalents:
Money market mutual funds	$	89	$	—	89
Total cash equivalents	89		—		89
Investments:
Asset-backed securities	—		35		35
Corporate bonds	—		95		95
U.S. government agencies and government-sponsored agencies	—		5		5
U.S. treasuries	—		54		54
Other debt securities	—		4		4
Total investments	—		193		193
Restricted cash equivalents:
Money market mutual funds	43		—		43
Commercial paper	18		—		18
Total restricted cash equivalents	61		—		61
Restricted investments:
U.S. treasuries	—		5		5
Exchange traded fund	1		—		1
Certificate of deposit	—		—		—
Total restricted investments	1		5		6
Total unrestricted and restricted cash equivalents and investments	$	151	$	198	$	349

(in millions)	Level 1		Level 2		Total
December 31, 2018
Cash equivalents
Money market mutual funds	$	4	$	—	$	4
U.S. treasuries	—		1		1
Total cash equivalents	4		1		5
Investments
Asset-backed securities	—		33		33
Corporate bonds	—		99		99
U.S. government agencies and government-sponsored agencies	—		7		7
U.S. treasuries	—		41		41
Other debt securities	—		9		9
Total investments	—		189		189
Restricted cash equivalents:
Money market mutual funds	48		—		48
Commercial paper	20		—		20
Total restricted cash equivalents	68		—		68
Restricted investments:
U.S. treasuries	—		5		5
Exchange traded fund	1		—		1
Certificate of deposit	—		2		2
Total restricted investments	1		7		8
Total unrestricted and restricted cash equivalents and investments	$	73	$	197	$	270

Fair Value of Financial Instruments Disclosure

Long-Term Debt

Our long-term debt is a floating rate debt and the fair value of our floating rate debt approximates its carrying value (exclusive of issuance costs) at June 30, 2019. The fair value of our floating rate debt is estimated based on a discounted cash flow, which incorporates credit spreads and market interest rates to estimate the fair value and is considered Level 3 in the hierarchy for fair value measurement.

Derivative Instruments

In June 2019, we entered into an interest rate collar derivative transaction with no upfront premium to mitigate the risk of changes in interest rates on the interest payments on a portion of our floating rate debt. If short-term interest rates increase, we will incur higher interest expense on any future outstanding balances of floating rate debt. We use this derivative as part of our interest rate risk management strategy and designated it as a cash flow hedge. If interest rates rise above the cap strike rate on the contract, we will receive variable-rate amounts and if interest rates fall below the floor strike rate on the contract, we will pay variable-rate amounts.

The following table summarizes the fair value of our derivative instruments at June 30, 2019:

	June 30, 2019
					Fair Market Value
(in millions)	Hedge type	Final settlement date	Notional amount		Other current assets		Accounts payable and other current liabilities
Derivatives designated as hedging instruments
Collar - LIBOR	Cash flow	May 2022	$	213	$	—	$	—

The pre-tax effect of derivative instruments for the three and six months ended June 30, 2019 is insignificant and we estimate that an insignificant amount of net derivative gains or losses included in other comprehensive income will be reclassified into earnings within the following 12 months. There were no cash flows associated with the derivative for the three months and six months ended June 30, 2019.

As of June 30, 2019, we do not hold, nor have we posted, any collateral related to the above derivative instrument.

The interest rate collar derivative is classified as Level 2 in the fair value hierarchy as its value is determined using observable inputs such as forward LIBOR curves.

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Description of Business and Significant Accounting Policies - (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Segment Information

We operate in one reportable segment. All of our service revenues are generated from external clients. Less than 1% of our revenue is generated outside of the U.S.

Basis of Presentation

These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Rules and Regulations of the Securities and Exchange Commission. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, that are normal and recurring in nature, necessary for fair financial statement presentation. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results anticipated for the full year. These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in Part II, Item 8 Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K).

Reclassifications

Certain prior year amounts have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts and related disclosures. Significant estimates include:

• liability for unpaid losses and loss adjustment expenses (accrued workers' compensation costs) related to workers' compensation and workers' compensation collateral receivable,

• accrued health insurance costs,

• liability for insurance premiums payable,

• valuation of the investment portfolio,

• impairments of goodwill and other intangible assets,

• income tax assets and liabilities, and

• liability for legal contingencies.

These estimates are based on historical experience and on various other assumptions that we believe to be reasonable from the facts available to us. Some of the assumptions are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial statements could be materially affected.

Accrued Health Insurance Costs

We sponsor and administer a number of fully insured, risk-based employee benefit plans, including group health, dental, and vision as an employer plan sponsor under section 3(5) of the ERISA. In the six months ended June 30, 2019, the majority of our group health insurance costs related to risk-based plans. Our remaining group health insurance costs were for guaranteed-cost policies.

Accrued health insurance costs are established to provide for the estimated unpaid costs of reimbursing the carriers for paying claims within the deductible layer in accordance with risk-based health insurance policies. These accrued costs include estimates for reported losses, plus estimates for claims incurred but not paid. We assess accrued health insurance costs regularly based upon independent actuarial studies that include other relevant factors such as current and historical claims payment patterns, plan enrollment and medical trend rates.

In certain carrier contracts we are required to prepay the expected claims activity for subsequent periods. These prepaid balances by agreement permit net settlement of obligations and offset the accrued health insurance costs. As of June 30, 2019 and December 31, 2018, prepayments included in accrued health insurance costs were $39 million and $33 million, respectively. When the prepaid is in excess of our recorded liability, the net asset position is included in prepaid expenses. As of June 30, 2019 and December 31, 2018, accrued health insurance costs included in prepaid expenses were $51 million and $50 million, respectively.

Derivative Instruments

Derivative Instruments

In June 2019, we entered into a interest rate collar derivative transaction with no upfront premium to mitigate the risk of changes in interest rates on our floating rate debt. This derivative, for which we have elected and qualify for cash flow hedge accounting, is recorded on the balance sheet at its fair value. Changes in the derivative’s fair value are recorded each period in other comprehensive income until the underlying monthly interest payment and the corresponding portion of the derivative are settled, at which point changes in fair value are recorded in net income. We evaluate this derivative each quarter to determine that it remains effective by comparing the remaining cash flows of the derivative against the related interest payments of our floating rate debt. We do not enter into any derivatives for trading or other speculative purposes.

Leases

Leases

We adopted ASU 2016-02 - Leases (ASC 842) effective January 1, 2019 using the optional transition method, under which we recognized the cumulative effects of initially applying the standard as an adjustment to the opening balance of retained earnings on January 1, 2019 with unchanged comparative periods. As part of this adoption, we elected the following practical expedients:

• not to reassess 1) whether any contracts that existed prior to adoption have or contain leases, 2) the classification of our existing leases or 3) initial direct costs for existing leases,

• to use the practical expedient of using hindsight to determine the lease terms and evaluate any impairments in right-of-use assets upon transition, and

• not separately record non-lease and lease components for all leases in which we act as a lessee.

We determine if a new contractual arrangement is a lease at contract inception. If a contract contains a lease, we evaluate whether it should be classified as an operating or a finance lease. If applicable as a lease, we record our lease liabilities and ROU assets based on the future minimum lease payments over the lease term and only include options to renew a lease in the minimum lease payments if it is reasonably certain that we will exercise that option. For certain leases with original terms of twelve months or less we recognize the lease expense as incurred and we do not recognize lease liabilities and ROU assets.

We measure our lease liabilities based on the future minimum lease payments discounted over the lease term. We determine our discount rate at lease inception using our incremental borrowing rate, which is based on our outstanding term debts that are collateralized by certain corporate assets. As of June 30, 2019, the weighted-average rate used in discounting the lease liability was 4.6%.

We measure our ROU assets based on the associated lease liabilities adjusted for any lease incentives such as tenant improvement allowances and classify operating ROU assets in other assets in our condensed consolidated balance sheet. For operating leases, we recognize expense for lease payments on a straight-line basis over the lease term.

Recent Accounting Pronouncements

Recently adopted accounting guidance

Leases - In February of 2016, the FASB issued ASC 842, which replaced existing lease guidance under GAAP. Under this guidance, we recognize on our condensed balance sheet lease liabilities representing the present value of future lease payments and an associated right-of-use asset representing our right to use or control the use of specified assets for the lease term for any operating lease with a term greater than one year.

The impact of our adoption of ASC 842 did not have a material impact on our income statement or cash flow statement. The impact on our condensed balance sheets is as follows:

	June 30, 2019
(in millions)	As reported			Balance Using Previous Standard		Increase (Decrease)
Balance sheet
Assets
Operating lease right-of-use assets	$	60		$	—	$	60
Liabilities
Operating lease liabilities	17			—		17
Operating lease liabilities, noncurrent	55			11		44
Equity
Accumulated deficit	(229		)	—		(229		)

Recently issued accounting pronouncements

Credit Losses - In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326), which requires financial assets to be presented at the net amount expected to be collected. We will be required to use forward-looking information when evaluating an allowance for our accounts receivable, unbilled revenue and other financial assets measured at amortized cost. Topic 326 also modifies the impairment guidance for available-for-sale debt securities to require an allowance for credit losses. We will adopt Topic 326 effective January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings. We are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes and systems.

Fair Value Measurement

Fair Value of Financial Instruments

We use an independent pricing source to determine the fair value of our AFS. The independent pricing source utilizes various pricing models for each asset class; including the market approach. The inputs and assumptions for the pricing models are market observable inputs including trades of comparable securities, dealer quotes, credit spreads, yield curves and other market-related data.

We have not adjusted the prices obtained from the independent pricing service and we believe the prices received from the independent pricing service are representative of the prices that would be received to sell the assets at the measurement date (exit price).

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Description of Business and Significant Accounting Policies - (Tables)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Effects on cash flow due to new accounting pronouncements

Effects on the cash flow statement due to reclassifications are summarized below:

	Six Months Ended June 30, 2018
(in millions)	As previously reported			Reclassified amounts			As revised
Operating activities
Accounts receivable	$	—		$	11		$	11
Unbilled revenue	—			35			35
Prepaid income taxes	2			(2		)	—
Prepaid expenses and other current assets	(23		)	23			—
Prepaid expenses	—			(9		)	(9		)
Workers' compensation collateral receivable	(6		)	6			—
Accounts payable and other current liabilities	(14		)	(14		)	(28		)
Client deposits	—			(24		)	(24		)
Accrued wages	—			(28		)	(28		)
Accrued corporate wages	(5		)	5			—
Accrued health insurance costs	—			(13		)	(13		)
Accrued workers' compensation costs	—			(8		)	(8		)
Workers' compensation loss reserves and other non-current liabilities	(4		)	4			—
Payroll taxes payable and other payroll withholdings	—			(588		)	(588		)
Worksite employee related assets	4			(4		)	—
Worksite employee related liabilities	(652		)	652			—
Other assets	—			(45		)	(45		)
Other liabilities	—			(1		)	(1		)

Effects on income due to new accounting pronouncements

Effects on the consolidated statements of income and comprehensive income due to reclassifications are summarized below:

	Three Months Ended									Six months ended
	June 30, 2018									June 30, 2018
(in millions)	As previously reported			Reclassified amounts			As revised			As previously reported			Reclassified amounts			As revised
Depreciation	$	8		$	(8	)	$	—		$	16		$	(16	)	$	—
Amortization of intangible assets	2			(2		)	—			3			(3		)	—
Depreciation and amortization of intangible assets	—			10			10			—			19			19
Interest expense, bank fees and other, net	(4		)	4			—			(8		)	8			—
Interest expense, bank fees and other	—			(7		)	(7		)	—			(13		)	(13		)
Interest income	—			3			3			—			5			5
Other comprehensive income, net of tax	—			1			1			—			—			—
Comprehensive income	58			1			59			112			—			112

Effect of Adoption of ASU 2016-02

The impact on our condensed balance sheets is as follows:

	June 30, 2019
(in millions)	As reported			Balance Using Previous Standard		Increase (Decrease)
Balance sheet
Assets
Operating lease right-of-use assets	$	60		$	—	$	60
Liabilities
Operating lease liabilities	17			—		17
Operating lease liabilities, noncurrent	55			11		44
Equity
Accumulated deficit	(229		)	—		(229		)

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Cash, Cash Equivalents and Investments - (Tables)

6 Months Ended

Jun. 30, 2019

Cash and Cash Equivalents [Abstract]

Summary of Cash, Cash Equivalents and Investments

Our total cash, cash equivalents and investments are summarized below:

	June 30, 2019						December 31, 2018
(in millions)	Cash and cash equivalents		Available-for-sale marketable securities		Total		Cash and cash equivalents		Available-for-sale marketable securities		Certificate of deposits		Total
Cash and cash equivalents	$	219	$	—	$	219	$	228	$	—	$	—	$	228
Investments	—		76		76		—		54		—		54
Restricted cash, cash equivalents and investments
Insurance carriers' security deposits	14		—		14		15		—		—		15
Payroll funds collected	519		—		519		783		—		—		783
Collateral for health benefits claims	75		—		75		75		—		—		75
Collateral for workers' compensation claims	63		1		64		66		1		—		67
Collateral to secure standby letter of credit	—		—		—		—		—		2		2
Total restricted cash, cash equivalents and investments	671		1		672		939		1		2		942
Investments, noncurrent	—		117		117		—		135		—		135
Restricted cash, cash equivalents and investments, noncurrent
Collateral for workers' compensation claims	195		5		200		182		5		—		187
Total	$	1,085	$	199	$	1,284	$	1,349	$	195	$	2	$	1,546

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Investments - (Tables)

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Amortized Cost, Gross Unrealized Gains and Losses, Fair Values of Investments

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of our investments as of June 30, 2019 and December 31, 2018 are presented below.

	June 30, 2019								December 31, 2018
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset-backed securities	$	35	$	—	$	—	$	35	$	33	$	—	$	—	$	33
Corporate bonds	94		1		—		95		99		—		—		99
U.S. government agencies and government- sponsored agencies	5		—		—		5		7		—		—		7
U.S. treasuries	58		1		—		59		46		—		—		46
Exchange traded fund	1		—		—		1		1		—		—		1
Other debt securities	4		—		—		4		9		—		—		9
Total	$	197	$	2	$	—	$	199	$	195	$	—	$	—	$	195

Fair Value of Debt Investments by Contractual Maturity

The fair value of debt investments by contractual maturity are shown below:

(in millions)	June 30, 2019
One year or less	$	81
Over one year through five years	103
Over five years through ten years	7
Over ten years	7
Total fair value	$	198

Proceeds from available-for-sale securities

The gross proceeds from sales and maturities of AFS securities for the three and six months ended June 30, 2019 and June 30, 2018 are presented below. We had immaterial realized gains and losses from sales of investments for the three and six months ended June 30, 2019 and June 30, 2018.

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Gross proceeds from sales	$	14	$	—	$	28	$	39
Gross proceeds from maturities	19		10		36		24

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Leases - (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Operating lease payments

Future minimum lease payments as of June 30, 2019 and December 31, 2018 were as follows:

(in millions)	June 30, 2019 (2)			December 31, 2018 (3)
2019(1)	$	10		$	18
2020	18			17
2021	11			11
2022	10			9
2023	9			8
2024	6			5
2025 and thereafter	19			20
Total future minimum lease payments	$	83		$	88
Less: imputed interest	(11		)	N/A(4)
Total operating lease liabilities	72			N/A(4)
Current portion	17			N/A(4)
Non-current portion	55			N/A(4)

(1)    The remaining payments as of June 30, 2019 exclude those made during the six months ended June 30, 2019.

(2) Presented in accordance with ASC 842, which excludes base payments of $4 million for leases that do not yet have a commencement date.

(3)    Presented in accordance with ASC 840.

(4)    N/A - Not Applicable under ASC 840.

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Accrued Workers' Compensation Cost - (Tables)

6 Months Ended

Jun. 30, 2019

Insurance [Abstract]

Summary of Activities in Liability for Unpaid Claims and Claims Adjustment Expenses

The following table summarizes the accrued workers’ compensation cost activity for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019			2018
Total accrued costs, beginning of period	$	236		$	250		$	238		$	255
Incurred
Current year	16			19			35			39
Prior years	(11		)	(6		)	(16		)	(13		)
Total incurred	5			13			19			26
Paid
Current year	(2		)	(2		)	(3		)	(2		)
Prior years	(15		)	(17		)	(30		)	(35		)
Total paid	(17		)	(19		)	(33		)	(37		)
Total accrued costs, end of period	$	224		$	244		$	224		$	244

The following summarizes workers' compensation liabilities on the condensed consolidated balance sheets:

(in millions)	June 30, 2019			December 31, 2018
Total accrued costs, end of period	$	224		$	238
Collateral paid to carriers and offset against accrued costs	(12		)	(13		)
Total accrued costs, net of carrier collateral offset	$	212		$	225
Payable in less than 1 year (net of collateral paid to carriers of $3 at June 30, 2019 and December 31, 2018)	$	64		$	67
Payable in more than 1 year (net of collateral paid to carriers of $9 and $10 at June 30, 2019 and December 31, 2018, respectively)	148			158
Total accrued costs, net of carrier collateral offset	$	212		$	225

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Stockholders' Equity - (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of Common Stock

The following table presents a rollforward of our common stock for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Shares issued and outstanding, beginning balance	70,079,747		70,363,251		70,596,559		69,818,392
Issuance of common stock from vested restricted stock units	213,991		389,875		500,710		1,000,141
Issuance of common stock from exercise of stock options	58,491		263,464		139,773		469,894
Issuance of common stock for employee stock purchase plan	112,623		84,525		112,623		84,525
Repurchase of common stock	(392,700	)	(434,766	)	(1,175,609	)	(594,799	)
Awards effectively repurchased for required employee withholding taxes	(81,007	)	(92,462	)	(182,911	)	(204,266	)
Shares issued and outstanding, ending balance	69,991,145		70,573,887		69,991,145		70,573,887

Restricted Stock Unit and Restricted Stock Award Activity Under Equity-Based Plans

The following table summarizes RSU and RSA activity under our equity-based plans for the six months ended June 30, 2019:

	RSUs				RSAs
	Number of Units		Weighted-Average Grant Date Fair Value		Number of Units		Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2018	1,737,554		$	32.83	346,792		$	49.13
Granted	724,172		60.58		—		—
Vested	(511,813	)	30.34		(31,248	)	50.61
Forfeited	(106,737	)	36.52		(11,103	)	49.35
Nonvested at June 30, 2019	1,843,176		$	44.18	304,441		$	49.11

Performance Stock Unit and Performance Stock Award Activity Under Equity-Based Plans

The following table summarizes RSU and RSA activity under our equity-based plans for the six months ended June 30, 2019:

	RSUs				RSAs
	Number of Units		Weighted-Average Grant Date Fair Value		Number of Units		Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2018	1,737,554		$	32.83	346,792		$	49.13
Granted	724,172		60.58		—		—
Vested	(511,813	)	30.34		(31,248	)	50.61
Forfeited	(106,737	)	36.52		(11,103	)	49.35
Nonvested at June 30, 2019	1,843,176		$	44.18	304,441		$	49.11

Stock-based Compensation Expense

Stock-based compensation expense and other disclosures for stock-based awards made to our employees pursuant to the equity plans was as follows: 

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Cost of providing services	$	2	$	2	$	4	$	4
Sales and marketing	1		2		1		4
General and administrative	7		5		13		9
Systems development and programming costs	1		1		2		2
Total stock-based compensation expense	$	11	$	10	$	20	$	19

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Earnings Per Share (EPS) - (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Computation of Basic and Diluted EPS

The following table presents the computation of our basic and diluted EPS attributable to our common stock:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share data)	2019		2018		2019		2018
Net income	$	46	$	58	$	109	$	112
Weighted average shares of common stock outstanding	70		70		70		70
Basic EPS	$	0.65	$	0.82	$	1.56	$	1.59
Net income	$	46	$	58	$	109	$	112
Weighted average shares of common stock outstanding	70		70		70		70
Dilutive effect of stock options and restricted stock units	1		3		1		2
Weighted average shares of common stock outstanding	71		73		71		72
Diluted EPS	$	0.64	$	0.80	$	1.53	$	1.55
Common stock equivalents excluded from income per diluted share because of their anti-dilutive effect	—		—		1		1

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Financial Instruments and Fair Value Measurements - (Tables)

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Summary of Financial Instruments by Significant Categories and Fair Value Measurement on a Recurring Basis

The following table summarizes our financial instruments by significant categories and fair value measurement on a recurring basis as of June 30, 2019 and December 31, 2018.

(in millions)	Level 1		Level 2		Total
June 30, 2019
Cash equivalents:
Money market mutual funds	$	89	$	—	89
Total cash equivalents	89		—		89
Investments:
Asset-backed securities	—		35		35
Corporate bonds	—		95		95
U.S. government agencies and government-sponsored agencies	—		5		5
U.S. treasuries	—		54		54
Other debt securities	—		4		4
Total investments	—		193		193
Restricted cash equivalents:
Money market mutual funds	43		—		43
Commercial paper	18		—		18
Total restricted cash equivalents	61		—		61
Restricted investments:
U.S. treasuries	—		5		5
Exchange traded fund	1		—		1
Certificate of deposit	—		—		—
Total restricted investments	1		5		6
Total unrestricted and restricted cash equivalents and investments	$	151	$	198	$	349

(in millions)	Level 1		Level 2		Total
December 31, 2018
Cash equivalents
Money market mutual funds	$	4	$	—	$	4
U.S. treasuries	—		1		1
Total cash equivalents	4		1		5
Investments
Asset-backed securities	—		33		33
Corporate bonds	—		99		99
U.S. government agencies and government-sponsored agencies	—		7		7
U.S. treasuries	—		41		41
Other debt securities	—		9		9
Total investments	—		189		189
Restricted cash equivalents:
Money market mutual funds	48		—		48
Commercial paper	20		—		20
Total restricted cash equivalents	68		—		68
Restricted investments:
U.S. treasuries	—		5		5
Exchange traded fund	1		—		1
Certificate of deposit	—		2		2
Total restricted investments	1		7		8
Total unrestricted and restricted cash equivalents and investments	$	73	$	197	$	270

Schedule of Cash Flow Hedging Instruments

The following table summarizes the fair value of our derivative instruments at June 30, 2019:

	June 30, 2019
					Fair Market Value
(in millions)	Hedge type	Final settlement date	Notional amount		Other current assets		Accounts payable and other current liabilities
Derivatives designated as hedging instruments
Collar - LIBOR	Cash flow	May 2022	$	213	$	—	$	—

Schedule of Notional Amounts of Outstanding Derivative Positions

The following table summarizes the fair value of our derivative instruments at June 30, 2019:

	June 30, 2019
					Fair Market Value
(in millions)	Hedge type	Final settlement date	Notional amount		Other current assets		Accounts payable and other current liabilities
Derivatives designated as hedging instruments
Collar - LIBOR	Cash flow	May 2022	$	213	$	—	$	—

Fair Value

The following table summarizes the fair value of our derivative instruments at June 30, 2019:

	June 30, 2019
					Fair Market Value
(in millions)	Hedge type	Final settlement date	Notional amount		Other current assets		Accounts payable and other current liabilities
Derivatives designated as hedging instruments
Collar - LIBOR	Cash flow	May 2022	$	213	$	—	$	—

The pre-tax effect of derivative instruments for the three and six months ended June 30, 2019 is insignificant and we estimate that an insignificant amount of net derivative gains or losses included in other comprehensive income will be reclassified into earnings within the following 12 months. There were no cash flows associated with the derivative for the three months and six months ended June 30, 2019.

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Description of Business and Significant Accounting Policies - Effects on cash flow due to new accounting pronouncements (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Accounts receivable	$ 3	$ 11
Unbilled revenue	(36)	35
Prepaid income taxes		0
Prepaid expenses and other current assets		0
Prepaid expenses	(18)	(9)
Workers' compensation collateral receivable		0
Accounts payable and other current liabilities	(11)	(28)
Client deposits	10	(24)
Accrued wages	25	(28)
Accrued corporate wages		0
Accrued health insurance costs	(13)	(13)
Accrued workers' compensation costs	9	(8)
Workers' compensation loss reserves and other non-current liabilities		0
Payroll taxes payable and other payroll withholdings		(588)
Worksite employee related assets		0
Worksite employee related liabilities		0
Other assets	(30)	(45)
Other liabilities	$ (2)	(1)
As previously reported
Operating activities
Accounts receivable		0
Unbilled revenue		0
Prepaid income taxes		2
Prepaid expenses and other current assets		(23)
Prepaid expenses		0
Workers' compensation collateral receivable		(6)
Accounts payable and other current liabilities		(14)
Client deposits		0
Accrued wages		0
Accrued corporate wages		(5)
Accrued health insurance costs		0
Accrued workers' compensation costs		0
Workers' compensation loss reserves and other non-current liabilities		(4)
Payroll taxes payable and other payroll withholdings		0
Worksite employee related assets		4
Worksite employee related liabilities		(652)
Other assets		0
Other liabilities		0
Reclassified amounts
Operating activities
Accounts receivable		11
Unbilled revenue		35
Prepaid income taxes		(2)
Prepaid expenses and other current assets		23
Prepaid expenses		(9)
Workers' compensation collateral receivable		6
Accounts payable and other current liabilities		(14)
Client deposits		(24)
Accrued wages		(28)
Accrued corporate wages		5
Accrued health insurance costs		(13)
Accrued workers' compensation costs		(8)
Workers' compensation loss reserves and other non-current liabilities		4
Payroll taxes payable and other payroll withholdings		(588)
Worksite employee related assets		(4)
Worksite employee related liabilities		652
Other assets		(45)
Other liabilities		$ (1)

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Description of Business and Significant Accounting Policies - Effects on income due to new accounting pronouncements (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Depreciation		$ 0		$ 0
Amortization of intangible assets		0		0
Depreciation and amortization of intangible assets		10		19
Interest expense, bank fees and other, net		0		0
Interest expense, bank fees and other		(7)		(13)
Interest income		3		5
Other comprehensive income		1		0
Comprehensive income	$ 47	59	$ 110	112
As previously reported
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Depreciation		8		16
Amortization of intangible assets		2		3
Depreciation and amortization of intangible assets		0		0
Interest expense, bank fees and other, net		(4)		(8)
Interest expense, bank fees and other		0		0
Interest income		0		0
Other comprehensive income		0		0
Comprehensive income		58		112
Reclassified amounts
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Depreciation		(8)		(16)
Amortization of intangible assets		(2)		(3)
Depreciation and amortization of intangible assets		10		19
Interest expense, bank fees and other, net		4		8
Interest expense, bank fees and other		(7)		(13)
Interest income		3		5
Other comprehensive income		1		0
Comprehensive income		$ 1		$ 0

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Description of Business and Significant Accounting Policies - Additional Information (Details) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($) segment	Dec. 31, 2018 USD ($)
Product Information [Line Items]
Number of reportable segments | segment	1
Prepaid Insurance	$ 39	$ 33
Operating Lease, Weighted Average Discount Rate, Percent	4.60%
Non-US | Revenue | Foreign Sales
Product Information [Line Items]
Percent of concentration risk	1.00%
Health Care [Member]
Product Information [Line Items]
Prepaid Insurance	$ 51	$ 50

XML

Description of Business and Significant Accounting Policies - Effect of Adoption of ASU 2016-02 As Reported (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
New Accounting Pronouncement, Early Adoption [Line Items]
Operating lease right-of-use asset	$ 60	$ 0
Operating lease liabilities	17	0
Operating lease liabilities, noncurrent	55	0
Accumulated deficit	(229)	$ (266)
Balance Using Previous Standard
New Accounting Pronouncement, Early Adoption [Line Items]
Operating lease right-of-use asset	0
Operating lease liabilities	0
Operating lease liabilities, noncurrent	11
Accumulated deficit	0
Accounting Standards Update 2016-02 | Increase (Decrease)
New Accounting Pronouncement, Early Adoption [Line Items]
Operating lease right-of-use asset	60
Operating lease liabilities	17
Operating lease liabilities, noncurrent	44
Accumulated deficit	$ (229)

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Cash, Cash Equivalents and Investments - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Restricted Cash and Cash Equivalents Items [Line Items]
Cash and cash equivalents	$ 219	$ 228
Investments	76	54
Restricted cash, cash equivalents and investments	672	942
Investments, noncurrent	117	135
Restricted cash, cash equivalents and investments, noncurrent	200	187
Total unrestricted and restricted cash equivalents and investments	1,284	1,546
Cash and cash equivalents
Restricted Cash and Cash Equivalents Items [Line Items]
Cash and cash equivalents	219	228
Investments	0	0
Restricted cash, cash equivalents and investments	671	939
Investments, noncurrent	0	0
Total unrestricted and restricted cash equivalents and investments	1,085	1,349
Available-for-sale marketable securities
Restricted Cash and Cash Equivalents Items [Line Items]
Cash and cash equivalents	0	0
Investments	76	54
Restricted cash, cash equivalents and investments	1	1
Investments, noncurrent	117	135
Total unrestricted and restricted cash equivalents and investments	199	195
Certificate of deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Cash and cash equivalents		0
Investments		0
Restricted cash, cash equivalents and investments		2
Investments, noncurrent		0
Total unrestricted and restricted cash equivalents and investments		2
Insurance carriers' security deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	14	15
Insurance carriers' security deposits | Cash and cash equivalents
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	14	15
Insurance carriers' security deposits | Available-for-sale marketable securities
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	0	0
Insurance carriers' security deposits | Certificate of deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments		0
Payroll funds collected
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	519	783
Payroll funds collected | Cash and cash equivalents
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	519	783
Payroll funds collected | Available-for-sale marketable securities
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	0	0
Payroll funds collected | Certificate of deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments		0
Collateral for health benefits claims
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	75	75
Collateral for health benefits claims | Cash and cash equivalents
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	75	75
Collateral for health benefits claims | Available-for-sale marketable securities
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	0	0
Collateral for health benefits claims | Certificate of deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments		0
Collateral for workers' compensation claims
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	64	67
Restricted cash, cash equivalents and investments, noncurrent	200	187
Collateral for workers' compensation claims | Cash and cash equivalents
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	63	66
Restricted cash, cash equivalents and investments, noncurrent	195	182
Collateral for workers' compensation claims | Available-for-sale marketable securities
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	1	1
Restricted cash, cash equivalents and investments, noncurrent	5	5
Collateral for workers' compensation claims | Certificate of deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments		0
Restricted cash, cash equivalents and investments, noncurrent		0
Collateral to secure standby letter of credit
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	0	2
Collateral to secure standby letter of credit | Cash and cash equivalents
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	0	0
Collateral to secure standby letter of credit | Available-for-sale marketable securities
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments	$ 0	0
Collateral to secure standby letter of credit | Certificate of deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash, cash equivalents and investments		$ 2

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Investments - Amortized Cost, Gross Unrealized Gains and Losses, Fair Values of Investments (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Debt and Equity Securities
Amortized Cost	$ 197	$ 195
Gross Unrealized Gains	2	0
Gross Unrealized Losses	0	0
Fair Value	199	195
Asset-backed securities
Debt Securities
Amortized Cost	35	33
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	35	33
Corporate bonds
Debt Securities
Amortized Cost	94	99
Gross Unrealized Gains	1	0
Gross Unrealized Losses	0	0
Fair Value	95	99
U.S. government agencies and government- sponsored agencies
Debt Securities
Amortized Cost	5	7
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	5	7
U.S. treasuries
Debt Securities
Amortized Cost	58	46
Gross Unrealized Gains	1	0
Gross Unrealized Losses	0	0
Fair Value	59	46
Exchange traded fund
Equity Securities
Amortized Cost	1	1
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	1	1
Other debt securities
Debt Securities
Amortized Cost	4	9
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	$ 4	$ 9

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Investments - Fair Value of Debt Investments by Contractual Maturity (Details) $ in Millions	Jun. 30, 2019 USD ($)
Investments, Debt and Equity Securities [Abstract]
One year or less	$ 81
Over one year through five years	103
Over five years through ten years	7
Over ten years	7
Total fair value	$ 198

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Investments - Proceeds from available-for-sale securities (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Investments, Debt and Equity Securities [Abstract]
Gross proceeds from sales	$ 14	$ 0	$ 28	$ 39
Gross proceeds from maturities	$ 19	$ 10	$ 36	$ 24

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Leases - Additional Information (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($) Lease	Jun. 30, 2019 USD ($) Lease	Dec. 31, 2018 USD ($)
Operating Leased Assets [Line Items]
Operating lease expense	$ 5	$ 10
Operating lease payments	4	8
Operating lease right-of-use asset	5	17
Future Minimum Payments Due	$ 4	$ 4
Lease Term ( in years )	6 years 2 months 12 days	6 years 2 months 12 days
Renewal Term ( in years )	15 years	15 years
Less: imputed interest	$ 11	$ 11
Operating lease liabilities	17	17	$ 0
Operating lease liabilities, noncurrent	$ 55	$ 55	$ 0
Number of leases | Lease	2	2
Lease not yet commenced term (in years)	5 years	5 years
Payments	$ 4	$ 4
Minimum
Operating Leased Assets [Line Items]
Term of Contract ( in years )	1 year	1 year
Maximum
Operating Leased Assets [Line Items]
Term of Contract ( in years )	9 years 3 months 18 days	9 years 3 months 18 days

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Leases - Operating lease payments (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
2019	$ 10	$ 18
2020	18	17
2021	11	11
2022	10	9
2023	9	8
2024	6	5
2025 and thereafter	19	20
Total future minimum lease payments	83	88
Less: imputed interest	(11)
Total operating lease liabilities	72
Operating lease liabilities	17	0
Operating lease liabilities, noncurrent	55	$ 0
Future Minimum Payments Due	$ 4

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Accrued Workers' Compensation Cost - Summary of Workers' Compensation Loss Reserve Activity (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Total accrued costs, beginning of period	$ 236	$ 250	$ 238	$ 255
Incurred
Current year	16	19	35	39
Prior years	(11)	(6)	(16)	(13)
Total incurred	5	13	19	26
Paid
Current year	(2)	(2)	(3)	(2)
Prior years	(15)	(17)	(30)	(35)
Total paid	(17)	(19)	(33)	(37)
Total accrued costs, end of period	$ 224	$ 244	$ 224	$ 244

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Accrued Workers' Compensation Cost - Summary of Workers' Compensation Liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Insurance [Abstract]
Total accrued costs, end of period	$ 224	$ 236	$ 238	$ 244	$ 250	$ 255
Collateral paid to carriers and offset against accrued costs	(12)		(13)
Total accrued costs, net of carrier collateral offset	212		225
Payable in less than 1 year (net of collateral paid to carriers of $3 at June 30, 2019 and December 31, 2018)	64		67
Payable in more than 1 year (net of collateral paid to carriers of $9 and $10 at June 30, 2019 and December 31, 2018, respectively)	$ 148		$ 158

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Accrued Workers' Compensation Cost - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Financial Guarantee Insurance Contracts, Claim Liability [Line Items]
Collateral held by insurance carriers	$ 55	$ 57
Liability For Unpaid Claims And Claims Adjustment Expense, Collateral	$ 12	$ 13

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Stockholders' Equity - Schedule of common stock (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued beginning balance (In shares)	70,079,747	70,363,251	70,596,559	69,818,392
Repurchase of common stock (in shares)	(392,700)	(434,766)	(1,175,609)	(594,799)
Awards effectively repurchased for required employee withholding taxes (in shares)	(81,007)	(92,462)	(182,911)	(204,266)
Shares issued ending balance (In shares)	69,991,145	70,573,887	69,991,145	70,573,887
Issuance of common stock from vested restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock from vested restricted stock units (in shares)	213,991	389,875	500,710	1,000,141
Issuance of common stock from exercise of stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock from exercise of stock options (in shares)	58,491	263,464	139,773	469,894
Issuance of common stock for employee stock purchase plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock for employee stock purchase plan (in shares)	112,623	84,525	112,623	84,525

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Stockholders' Equity - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Feb. 06, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares)	2,839,430		2,839,430
Authorized Amount					$ 300
Repurchase of common stock (in shares)	392,700	434,766	1,175,609	594,799
Repurchase of common stock			$ 62
Amount available for further repurchases under stock repurchase program	$ 313		$ 313
Time-Based Restricted Stock Units and Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)			4 years
Performance-Based Restricted Stock Units and Restricted Stock Awards [Member] | Tranche 1
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)			1 year
Vesting percentage (as a percent)			50.00%
Minimum | Time-Based Restricted Stock Units and Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent			0.00%
Maximum | Time-Based Restricted Stock Units and Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent			200.00%

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Stockholders' Equity - RSU, RSA Activity Under Equity-Based Plans (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
RSUs
Number of Units
Nonvested At Dec 31, 2018 (in shares) | shares	1,737,554
Granted (in shares) | shares	724,172
Vested (in shares) | shares	(511,813)
Forfeited (in shares) | shares	(106,737)
Nonvested At June 30, 2019 (in shares) | shares	1,843,176
Weighted-Average Grant Date Fair Value
Nonvested at Dec 31, 2018 (in dollars per share) | $ / shares	$ 32.83
Granted (in dollars per share) | $ / shares	60.58
Vested (in dollars per share) | $ / shares	30.34
Forfeited (in dollars per share) | $ / shares	36.52
Nonvested at Jun 30, 2019 (in dollars per share) | $ / shares	$ 44.18
RSAs
Number of Units
Nonvested At Dec 31, 2018 (in shares) | shares	346,792
Granted (in shares) | shares	0
Vested (in shares) | shares	(31,248)
Forfeited (in shares) | shares	(11,103)
Nonvested At June 30, 2019 (in shares) | shares	304,441
Weighted-Average Grant Date Fair Value
Nonvested at Dec 31, 2018 (in dollars per share) | $ / shares	$ 49.13
Granted (in dollars per share) | $ / shares	0
Vested (in dollars per share) | $ / shares	50.61
Forfeited (in dollars per share) | $ / shares	49.35
Nonvested at Jun 30, 2019 (in dollars per share) | $ / shares	$ 49.11

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Stockholders' Equity - Stock-Based Compensation Expense (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 11	$ 10	$ 20	$ 19
Cost of providing services
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	2	2	4	4
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	1	2	1	4
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	7	5	13	9
Systems development and programming costs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 1	$ 1	$ 2	$ 2

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Income Taxes - Additional Information (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
	Jan. 18, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Contingency [Line Items]
Effective income tax rate		17.00%	19.00%	21.00%	19.00%
Unrecognized Tax Benefits		$ 1		$ 1
Amount awarded	$ 15
Internal Revenue Service
Income Tax Contingency [Line Items]
Income taxes paid		11
Interest payment		$ 4		$ 4

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Earnings Per Share (EPS) - Computation of Basic and Diluted EPS Attributable to Common Stock (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Basic EPS
Net income	$ 46	$ 58	$ 109	$ 112
Weighted average shares of common stock outstanding (in shares)	69,703,792	70,448,809	69,806,319	70,250,273
Basic earnings per share (in dollars per share)	$ 0.65	$ 0.82	$ 1.56	$ 1.59
Diluted EPS
Net income	$ 46	$ 58	$ 109	$ 112
Weighted average shares of common stock outstanding (in shares)	69,703,792	70,448,809	69,806,319	70,250,273
Dilutive effect of stock options and restricted stock units (in shares)	1,000,000	3,000,000	1,000,000	2,000,000
Weighted average shares of common stock outstanding (in shares)	71,074,751	72,561,891	71,151,219	72,404,539
Diluted earnings per share (in dollars per share)	$ 0.64	$ 0.80	$ 1.53	$ 1.55
Common stock equivalents excluded from income per diluted share because of their anti-dilutive effect ( in shares )	0	0	1,000,000	1,000,000

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Financial Instruments and Fair Value Measurements - Summary of Financial Instruments by Significant Categories and Fair Value Measurement on a Recurring Basis (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Financial Instruments [Line Items]
Total unrestricted and restricted cash equivalents and investments	$ 1,284	$ 1,546
Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Cash equivalents	89	5
Investments	193	189
Restricted cash equivalents	61	68
Restricted investments	6	8
Total unrestricted and restricted cash equivalents and investments	349	270
Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Cash equivalents	89	4
Investments	0	0
Restricted cash equivalents	61	68
Restricted investments	1	1
Total unrestricted and restricted cash equivalents and investments	151	73
Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Cash equivalents	0	1
Investments	193	189
Restricted cash equivalents	0	0
Restricted investments	5	7
Total unrestricted and restricted cash equivalents and investments	198	197
Asset-backed securities | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Investments	35	33
Asset-backed securities | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Investments	0	0
Asset-backed securities | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Investments	35	33
Corporate bonds | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Investments	95	99
Corporate bonds | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Investments	0	0
Corporate bonds | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Investments	95	99
U.S. government agencies and government- sponsored agencies | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Investments	5	7
U.S. government agencies and government- sponsored agencies | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Investments	0	0
U.S. government agencies and government- sponsored agencies | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Investments	5	7
U.S. treasuries | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Investments	54	41
Restricted investments	5	5
U.S. treasuries | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Investments	0	0
Restricted investments	0	0
U.S. treasuries | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Investments	54	41
Restricted investments	5	5
Other debt securities | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Investments	4	9
Other debt securities | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Investments	0	0
Other debt securities | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Investments	4	9
Exchange traded fund | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Restricted investments	1	1
Exchange traded fund | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Restricted investments	1	1
Exchange traded fund | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Restricted investments	0	0
Certificate of deposit
Fair Value, Financial Instruments [Line Items]
Total unrestricted and restricted cash equivalents and investments		2
Certificate of deposit | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Restricted investments	0	2
Certificate of deposit | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Restricted investments	0	0
Certificate of deposit | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Restricted investments	0	2
Money market mutual funds | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Cash equivalents	89	4
Restricted cash equivalents	43	48
Money market mutual funds | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Cash equivalents	89	4
Restricted cash equivalents	43	48
Money market mutual funds | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Cash equivalents	0	0
Restricted cash equivalents	0	0
U.S. treasuries | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Cash equivalents		1
U.S. treasuries | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Cash equivalents		0
U.S. treasuries | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Cash equivalents		1
Commercial paper | Fair Value Measurement on a Recurring Basis
Fair Value, Financial Instruments [Line Items]
Restricted cash equivalents	18	20
Commercial paper | Fair Value Measurement on a Recurring Basis | Level 1
Fair Value, Financial Instruments [Line Items]
Restricted cash equivalents	18	20
Commercial paper | Fair Value Measurement on a Recurring Basis | Level 2
Fair Value, Financial Instruments [Line Items]
Restricted cash equivalents	$ 0	$ 0

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Financial Instruments and Fair Value Measurements - Fair Value (Details) $ in Millions	Jun. 30, 2019 USD ($)
Debt Securities, Available-for-sale [Line Items]
Notional amount	$ 213
Other current assets
Debt Securities, Available-for-sale [Line Items]
Other current assets	0
Accounts payable and other current liabilities
Debt Securities, Available-for-sale [Line Items]
Other current assets	$ 0

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Label	Element	Value
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 3,000,000
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	0
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	0
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 0