What changed in this filing

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Item 1. Business

2022-02-11 compared with 2021-02-12 · 103 added, 149 removed, 377 unchanged (40% of the section changed)

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Workforce Synchronization, which generally is offered only to our middle market client segment, is a lower cost offering with a typically longer commitment that includes the same compliance and administrative services as Workforce Optimization and allows those clients to select, for an additional fee, from the strategic HR products and services that are included with Workforce Optimization.

In addition to our PEO HR Outsourcing solutions, we offer Workforce Acceleration TM , a comprehensive service that includes traditional payroll and human capital management solutions.

We also offer a number of other business performance solutions, including Comprehensive Traditional Payroll and Human Capital Management, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services, many of which are offered as a cloud-based software solution.

In addition to our PEO HR Outsourcing solutions, we offer our Workforce Acceleration TM solution, a comprehensive service that includes traditional payroll and human capital management solutions.

We also offer a number of other business performance solutions, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services, many of which are offered as a cloud-based software solution.

These other products and services are offered separately or along with our PEO HR Outsourcing solutions or with Workforce Acceleration.

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These solutions relieve business owners and key executives of many employer-related administrative and regulatory burdens, which enable them to focus on the core competencies of their businesses.

Our PEO HR Outsourcing solutions also promote employee performance through human resources management techniques designed to improve employee satisfaction.

Our PEO HR Outsourcing solutions also promote employee performance through human capital management techniques designed to improve employee engagement and satisfaction.

We enter into a Client Service Agreement (“CSA”) with each of our PEO HR Outsourcing solutions clients under which we and our client act as co-employers of the employees who work at the client’s worksite, or worksite employees (“WSEEs”).

Under the CSA, we assume responsibility for personnel administration and assist our clients in complying with employment-related governmental regulations, while the client retains the employees’ services in its business and remains the employer for other purposes.

We charge a comprehensive service fee (“comprehensive service fee” or “gross billing”), which is invoiced concurrently with the processing of payroll for the WSEEs of the client.

We charge a comprehensive service fee

2021 Form 10-K

(“comprehensive service fee” or “gross billing”), which is invoiced concurrently with the processing of payroll for the WSEEs of the client.

The comprehensive service fee consists of the payroll of our WSEEs plus an additional amount reflected as a percentage of the payroll cost of the WSEEs.

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In advisory areas, such as recruiting, employee performance management and employee training, we employ a high-touch approach designed to ensure that our clients receive the personal attention and expertise needed to create a customized human resources solution.

We utilize a variety of information technology capabilities to deliver our PEO HR Outsourcing solutions, including Insperity Premier TM , our cloud-based human capital management platform through which we, along with our clients and WSEEs, manage payroll, benefits, retirement solutions and other HR-related information, creating efficiencies for all parties.

As of December 31, 2020, we had 70 offices, including 82 sales offices in 40 markets.

We utilize a variety of information technology capabilities to deliver our PEO HR Outsourcing solutions, including Insperity Premier through which we, along with our clients and WSEEs, manage employee administration, payroll, payroll tax, benefits, retirement solutions and other HR-related information, creating efficiencies for all parties.

As of December 31, 2021, we had 68 physical office locations in 40 markets.

To take advantage of economic efficiencies, multiple sales offices may share a physical location.

In addition, we had four regional service centers along with human resources and client service personnel located in a majority of our 40 sales markets, which serviced an average of 268,978 WSEEs per month in the fourth quarter of 2021.

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Our telephone number at that address is (281) 358-8986, and our website address is www.insperity.com.

2020 Form 10-K

quarterly reports on Form 10-Q, current reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

Our stock is traded on the New York Stock Exchange under the symbol “NSP.” We file or furnish periodic reports with the Securities and Exchange Commission (“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

Through the investor relations section of our website, we make available electronic copies of the documents that we file or furnish to the SEC, the charters of the standing committees of our Board of Directors and other documents related to our corporate governance, including our Code of Conduct.

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Printed copies of our committee charters and other governance documents and filings can be requested by writing to our corporate secretary at the address above.

Information on our website is not a part of, and is not incorporated into, this report or any other report we may file with or furnish to the SEC, whether before or after the date of this report and irrespective of any general incorporation language therein.

The PEO industry began to evolve in the early 1980s largely in response to the burdens placed on small and medium-sized employers by an increasingly complex legal and regulatory environment.

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• the significant costs, time and specialized knowledge required to purchase or develop the technology infrastructure to administer benefits, HR and payroll processing on an integrated basis

2021 Form 10-K

A significant factor in the development of the PEO industry has been increasing recognition and acceptance of PEOs and the co-employer relationship by federal and state governmental authorities.

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Following the establishment of the voluntary certification program by the Internal Revenue Service of the United States (“IRS”) and Treasury Department, our PEO subsidiary, Insperity PEO Services, L.P., received its designation as a CPEO from the IRS.

2020 Form 10-K

Service Offerings

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Both of our PEO HR Outsourcing solutions offer the following:

• benefits and payroll administration

• payroll and benefits administration

• health and workers’ compensation insurance programs

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Among the employment-related laws and regulations that may affect a client are the following:

• Internal Revenue Code (the “Code”) • Genetic Information Nondiscrimination Act of 2008

• Federal Income Contribution Act (FICA) • Drug-Free Workplace Act

• Federal Unemployment Tax Act (FUTA) • Occupational Safety and Health Act (OSHA)

• Fair Labor Standards Act (FLSA) • Worker Adjustment and Retraining Notification Act (WARN)

• Employee Retirement Income Security Act, as amended (ERISA) • Uniformed Services Employment and Reemployment Rights Act (USERRA)

• Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) • State unemployment and employment security laws

• Immigration Reform and Control Act (IRCA) • State workers’ compensation laws

• Title VII (Civil Rights Act of 1964) • Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”)

• Health Insurance Portability and Accountability Act (HIPAA) • Patient Protection and Affordable Care Act (PPACA)

• Age Discrimination in Employment Act (ADEA) • State and local law equivalents of the foregoing

• Americans with Disabilities Act (ADA) • The Families First Coronavirus Response Act (FFCRA)

• The Family and Medical Leave Act (FMLA) • The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act

2021 Form 10-K

• Internal Revenue Code (the “Code”) • Occupational Safety and Health Act (OSHA)

• Federal Income Contribution Act (FICA) • Worker Adjustment and Retraining Notification Act (WARN)

• Federal Unemployment Tax Act (FUTA) • Uniformed Services Employment and Reemployment Rights Act (USERRA)

• Fair Labor Standards Act (FLSA) • State unemployment and employment security laws

• Employee Retirement Income Security Act, as amended (ERISA) • State workers’ compensation laws

• Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) • Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”)

• Immigration Reform and Control Act (IRCA) • Patient Protection and Affordable Care Act (PPACA)

• Title VII (Civil Rights Act of 1964) • State and local law equivalents of the foregoing

• Health Insurance Portability and Accountability Act (HIPAA) • The Families First Coronavirus Response Act (FFCRA)

• Age Discrimination in Employment Act (ADEA) • The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act

• Americans with Disabilities Act (ADA) • The Consolidated Appropriations Act, 2021 (CAA)

• The Family and Medical Leave Act (FMLA) • The American Rescue Plan Act of 2021 (ARPA)

• Genetic Information Nondiscrimination Act of 2008 • Paycheck Protection Program and Healthcare Enhancement Act (PPP)

• Drug-Free Workplace Act

These laws and regulations are complex, and in some instances overlapping.

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• an adoption assistance program

2021 Form 10-K

• group term life insurance

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• paid family leave, where required by law

The group health plan includes medical, dental, vision and prescription drug coverage, as well as a work-life program.

• COBRA administration

The group health plan includes medical, dental, vision and prescription drug coverage, as well as an employee well-being program.

All benefit plans are provided to eligible employees based on the specific eligibility provisions of each plan.

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COBRA coverage is extended to eligible terminated WSEEs and other eligible individuals in accordance with applicable law.

We believe that the variety and comprehensive nature of our benefit plan offerings are generally not available to employees in our small and medium-sized business target market and are usually offered only by larger companies that can spread program costs over a much larger group of employees.

We believe that the variety and comprehensive nature of our benefit plan offerings are generally not available to employees in our small and medium-sized business target market and allow our clients to compete with the type and level of benefits usually offered only by companies with a larger group of employees.

As a result, we believe the availability of these benefit plans provides our clients with a competitive advantage that small and medium-sized businesses are typically unable to attain on their own.

Insperity Premier.

Insperity Premier is our cloud-based human capital management platform for our PEO HR Outsourcing solutions and is available to our clients with minimal implementation effort or cost.

Insperity Premier is our cloud-based human capital management platform for our PEO HR Outsourcing solutions and is available to our clients with minimal implementation effort.

It is designed to provide our service providers with insight into client and WSEE HR information to better support their needs.

Insperity Premier provides role-based access to a wide range of human capital management functions, along with personalized content to the

2020 Form 10-K

managers, owners and WSEEs of our PEO HR Outsourcing solutions clients, including:

Insperity Premier provides role-based access to a wide range of human capital management functions, along with personalized content to the managers, owners and WSEEs of our PEO HR Outsourcing solutions clients, including:

For managers and client owners:

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• access to client-specific compliance-related information relevant to many HR areas

• reporting and analytics tools to create, view, save and export reports and data about employees and to do more complex analysis and visualization of their workforce data with the Insperity People Analytics solution

• reporting and analytics tools to create, view, save, and export reports and data about employees and to perform more complex analysis and visualization of their workforce data with the Insperity People Analytics solution

• ability to manage employee time and attendance information, absences, and paid time off

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• access to view, edit, and change a range of employee profile information

• online check stubs, pay history, W-2s, update W-4 forms and other state forms

• online check stubs, pay history, W-2s, W-4 forms, and other state forms

• employee-specific benefits content, including summary plan descriptions, enrollment status, and tools to assist with benefits selection for Insperity-sponsored plans

2021 Form 10-K

• access to 401(k) retirement plan information for covered plans

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• performance management tools including self-reviews and review history, if offered by client

• ability to submit time and attendance information, absences and paid time off requests

• ability to submit time and attendance information, absences, and paid time off requests, if offered by client

• mobile access to perform a wide range of employee-specific activities such as reporting time and attendance and paid time off, view pay stubs, insurance coverage and ID cards, view 401(k) balances and other commonly accessed data

Personnel Management .

In addition to the services that we deliver through Insperity Premier, we provide a wide variety of personnel management services that give our clients access to HR advisors and additional resources normally found only in the human resources departments of large companies.

People Management .

In addition to the services we deliver through Insperity Premier, we provide a wide variety of human capital management services that give our clients access to HR advisors and additional resources normally found only in the human resources departments of large companies.

All PEO HR Outsourcing solutions clients have access to our advice concerning personnel policies and practices, including recruiting, discipline, and termination procedures.

Other personnel management services we provide include:

Other human capital management services we provide include:

• drafting and reviewing personnel policies and employee handbooks

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• performing prospective employee screening and background investigations

2020 Form 10-K

• designing performance appraisal processes and forms

• designing performance appraisal processes and tools

• professional development and issues-oriented training

• employee counseling

• employee coaching and counseling

• substance abuse awareness training

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Employer Liability Management .

Under the CSA, we assume many of the employment-related responsibilities associated with the administrative functions, benefit plans administration and personnel management services we provide.

Under the CSA, we assume many of the employment-related responsibilities associated with the administrative functions, benefit plans administration and human capital management services we provide.

For many of those employment-related responsibilities that are the responsibility of the client or of both the client and us, we may assist our clients in managing and limiting liability.

This assistance may include safety-related risk management reviews as well as the implementation by our clients of safety programs designed to reduce workplace accidents and, consequently, workers’ compensation claims.

This assistance may include safety-related risk management reviews as well as the implementation by our clients of safety programs, for which our clients are responsible, that are designed to reduce workplace accidents and, consequently, workers’ compensation claims.

We also provide guidance to clients for avoiding discrimination, sexual harassment and civil rights violations, and we assist with termination decisions when consulted to attempt to minimize liability on those grounds.

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We believe the middle market sector, which we generally define as those companies with employees ranging from approximately 150 to 5,000 WSEEs, has historically been under-served by the PEO industry.

Currently, we have a dedicated sales management, service personnel and consulting staff who concentrate solely on the middle market sector.

Our average number of WSEEs per month in our middle market sector decreased 5.6% from 2019, representing approximately 24.4% and 25.7% of our total average paid WSEEs during 2020 and 2019, respectively.

Currently, we have a dedicated sales management, service personnel and consulting staff who concentrate solely on the

2021 Form 10-K

middle market sector.

Although our average number of WSEEs per month in our middle market sector increased 4.2% from 2020, the middle market sector as a percentage of our overall WSEE count declined over this period, representing approximately 23.8% and 24.4% of our total average paid WSEEs during 2021 and 2020, respectively.

Clients with an average number of WSEEs exceeding 1,000 paid WSEEs represented 1.9% and 4.7% of our total average paid WSEEs during 2021 and 2020, respectively.

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We also strive to leverage our relationships with our customers to enable cross-selling of our various products and services.

During 2020 and 2019, revenues from our other products and services offerings as a percentage of our total revenues were 0.9% and 1.0%, respectively.

During 2021 and 2020, revenues from our other products and services offerings as a percentage of our total revenues were 0.9% in both periods.

Following are the key components of our other products and services, which are offered separately or as a bundle:

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In addition, through a strategic partner, Workforce Acceleration clients have access to a national, licensed insurance brokerage that specializes in the insurance needs of small businesses.

2020 Form 10-K

Time and Attendance.

Our Time and Attendance products and services provide small to medium-sized businesses with software, hardware and services to track, allocate, and analyze employee resources and provide inputs into clients’ payroll processing and accounting systems.

The service is primarily delivered as a cloud-based solution or an on-premise installation.

For customers utilizing Time and Attendance in conjunction with our PEO HR Outsourcing solutions, we provide access through Insperity Premier.

Performance Management.

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The CSA provides for an ongoing relationship between Insperity and the PEO HR Outsourcing solutions client.

For most clients, the CSA generally is an annual contract subject to earlier termination by Insperity or the client upon 30 days’ written notice or upon shorter notice in the event of default.

CSAs for our middle market clients are generally two-year contracts, subject to earlier termination by clients upon payment of a termination fee or otherwise by the parties upon an event of default.

For most clients, the CSA generally establishes pricing for a period

2021 Form 10-K

of one year and is subject to termination by Insperity or the client upon 30 days’ written notice or upon shorter notice in the event of default.

CSAs for our middle market clients generally establish pricing for two years and are subject to termination by clients upon payment of a termination fee or otherwise by the parties upon an event of default.

The CSA establishes our comprehensive service fee, which is subject to periodic adjustments to account for changes in the composition of the client’s workforce, employee benefit election changes, and statutory changes that affect our costs.

Under the CSA, clients active in January of any year are obligated to pay the estimated payroll tax component of the comprehensive service fee in a manner that reflects the pattern of incurred payroll tax costs.

Under the CSA, clients are obligated to pay the estimated payroll tax component of the comprehensive service fee in a manner that reflects the pattern of incurred payroll tax costs.

This practice aligns clients’ payments to us with our obligations to make payments to tax authorities, which are higher in the earlier part of the year and decrease as limits on wages subject to payroll tax are reached.

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These liabilities are not contingent on the prepayment by the client of the associated comprehensive service fee.

Instead, as a result of our employment relationship with each of our WSEEs, we are liable for payment of salary and wages to the WSEEs as reported by the client and are responsible for providing specified employee benefits to such persons regardless of whether the client

2020 Form 10-K

pays the associated comprehensive service fee.

The client retains the employees’ services and remains liable for complying with certain government regulations that require control of the worksite or daily supervisory responsibility or is otherwise beyond our ability to assume.

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• Professional licensing requirements, fidelity bonding, and professional liability insurance

2021 Form 10-K

• Ownership and protection of all client intellectual property rights

• COBRA, HIPAA, PPACA, the Code and ERISA compliance for client-sponsored employee benefit plans

• For clients electing payroll tax deferrals and tax credits under the FFCRA and CARES Act, the client has sole responsibility for determining eligibility under the programs and for reporting and depositing deferred amounts with the U.S.

• For clients electing payroll tax deferrals and claiming tax credits under the FFCRA, the CARES Act, PPP, CAA, and ARPA (collectively, the “COVID Relief Programs”), the client has sole responsibility for determining eligibility under the programs and depositing deferred payroll tax amounts with the U.S.

Treasury as they become due

Concurrent Responsibilities

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Our incurred costs in excess of annual premiums with respect to this exposure have historically been insignificant to our operating results.

2020 Form 10-K

Because we are a co-employer with the client for some purposes, it is possible that we could incur liability for violations of such laws, even if we are not responsible for the conduct giving rise to such liability.

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We serve clients and WSEEs located throughout the United States.

2021 Form 10-K

By region, our revenue distribution for the year ended December 31, 2021, was as follows:

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We focus heavily on client retention.

During 2020 and 2019, our retention rate was approximately 82% and 85%, respectively.

During 2021 and 2020, our retention rate was approximately 82% in both years.

For all PEO HR Outsourcing solutions clients, the average annual retention rate over the last five years was approximately 85%.

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and (4) competition from other PEOs or business services firms.

2020 Form 10-K

Marketing and Sales

As of December 31, 2021, we had 85 sales offices located in 40 markets.

Our sales offices typically consist of six to eight Business Performance Advisors (“BPAs”), a district sales manager, and an office administrator.

Our sales offices typically consist of seven to nine Business Performance Advisors (“BPAs”), a district sales manager, and an office administrator.

To take advantage of economic efficiencies, multiple sales offices may share a physical location.

Insperity’s markets and their respective year of entry are as follows:

Market Sales Offices Initial Entry Date Market Sales Offices Initial Entry Date

Houston 6 1986 Raleigh 1 2006

San Antonio 1 1989 Kansas City 1 2007

Austin 2 1989 Columbus 1 2010

Orlando 1 1989 Nashville 1 2011

Dallas/Fort Worth 6 1993 Philadelphia 2 2012

Atlanta 4 1994 Seattle 1 2015

Phoenix 2 1995 Indianapolis 1 2016

Chicago 5 1995 Fort Lauderdale 1 2017

Washington D.C.

2 1995 Milwaukee 1 2017

Denver 2 1996 Oklahoma City 1 2018

Los Angeles 7 1997 Pittsburgh 1 2018

Charlotte 1 1997 San Jose 1 2018

Louis 2 1998 Stamford 1 2018

San Francisco 3 1998 Portland 1 2019

New York 5 1999 Tampa 1 2019

Baltimore 2 2000 Las Vegas 1 2019

Newark 3 2000 Sacramento 1 2019

San Diego 2 2001 Providence 1 2019

Boston 3 2001 Salt Lake City 1 2020

Minneapolis 2 2002 Virginia Beach 1 2020

We identify markets using a systematic market evaluation and selection process.

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• existing relationships within a given market, such as vendor or client relationships

2021 Form 10-K

• expansion cost issues, such as advertising and overhead costs

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• long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the market

2020 Form 10-K

We develop a mix of national and local advertising media and a placement strategy tailored to each individual market.

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Nantz as a focal point of our brand marketing efforts.

Our organic growth model generates sales leads from five primary sources:

direct sales efforts, advertising, third-party channel programs, referrals, marketing alliances, and the Internet.

Our organic growth model generates sales leads from six primary sources:

direct sales efforts, digital advertising, traditional advertising, third-party channel programs, referrals, and marketing alliances.

These leads result in initial presentations to prospective PEO HR Outsourcing solutions clients, and ultimately, prospective PEO HR Outsourcing solutions client business profiles.

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During the same three-year period, our gross profit per WSEE and operating income per WSEE exceeded industry averages by 149% and 239%, respectively.

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Competition in the PEO industry revolves primarily around quality of services, scope of services, choice and quality of benefits packages, reputation, and price.

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and Paychex, Inc., and other national PEOs, such as TriNet Group, Inc.

In addition, we also face

2020 Form 10-K

competition from:

In addition, we also face competition from:

(1) fee-for-service providers such as payroll processors and human resources consultants;

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We provide group health insurance coverage to our WSEEs through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts, all of which provide fully insured policies or service contracts.

The health insurance contract with United provides approximately 87% of our health insurance coverage and expires on December 31, 2022, subject to cancellation by either party upon 180 days’ notice.

The health insurance contract with United provides approximately 87% of our participants’ health insurance coverage and expires on December 31, 2026, subject to cancellation by either party upon 180 days’ notice.

For a discussion of our contract with United, which is accounted for using a partially self-funded insurance accounting model, please read Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Benefits Costs.”

Our workers’ compensation coverage (the “Chubb Program”) has been provided through an arrangement with Chubb (formerly ACE American Insurance Company) since 2007.

Our workers’ compensation coverage (the “Chubb Program”) has been provided through an arrangement with Chubb(formerly ACE) since 2007.

The Chubb Program is a fully insured program whereby Chubb has the responsibility to pay all claims incurred under the policies regardless of whether we satisfy our responsibilities.

The current workers’ compensation coverage with Chubb expires on September 30, 2022.

Chubb has committed to extend coverage for two additional policy years (through September 30, 2023) subject to certain terms and conditions related to the division of responsibilities in the program.

Chubb has committed to certain expense and premium terms for two additional policy years (through September 30, 2024) subject to certain customary terms and conditions.

In the event we are unable to secure replacement coverage on competitive terms, significant disruption to our business could occur.

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• time and attendance collection and administration

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• payroll processing

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We administer our employee benefits through a proprietary application designed to process employee eligibility and enrollments, manage carrier relationships and maintain a variety of plan offerings.

Our retirement services

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operations are conducted utilizing an industry-leading retirement plan administration application in a third-party hosted environment.

Our retirement services operations are conducted utilizing an industry-leading retirement plan administration application in a third-party hosted environment.

Aspects of all of these components are delivered to our PEO HR Outsourcing solutions clients and WSEEs through Insperity Premier.

We utilize commercially available software and cloud-based solutions for other business functions such as finance and accounting, sales force activity management and customer relationship management.

Insperity has hosting facilities located at two separate leased facilities, located in Bryan, Texas and The Woodlands, Texas.

Insperity has hosting facilities located at two separate leased facilities, one of which serves as our primary facility.

These facilities host the majority of our business applications, information security infrastructure and network equipment.

Each hosting facility houses a mix of primary production applications, disaster recovery, replication and back-up applications, and pre-production environments, with the Bryan facility acting as our primary data center for all mission-critical applications.

Each hosting facility houses a mix of primary production applications, disaster recovery, replication and back-up applications, and pre-production environments.

Both hosting facilities have the capacity to run all of our critical business applications and have sufficient capacity to handle all of our operations on a stand-alone basis, if required.

We have an active Business Continuity Plan, which includes information technology capabilities and we utilize a variety of measures to ensure our Business Continuity Plan remains effective and available.

Our network infrastructure is designed to ensure appropriate connectivity exists among all of our facilities and employees and provides appropriate Internet connectivity to conduct business with our clients and WSEEs.

Our network infrastructure is designed to ensure appropriate connectivity exists among all of our facilities and provides appropriate Internet connectivity to conduct business with our clients and WSEEs.

The network infrastructure is provided through industry standard core network hardware and via high-speed network services provided by multiple vendors.

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best practice security policies and procedures;

annual corporate employee training on data security and privacy;

SOC-1 reports prepared by independent firms regarding key systems;

and a variety of measures designed to control access to sensitive and private information.

Industry Regulations

The operations for our PEO HR Outsourcing solutions are affected by numerous federal and state laws relating to tax, insurance and employment matters.

The operations for our PEO HR Outsourcing solutions are affected by numerous federal, state, and local laws relating to tax, insurance and employment matters.

By entering into a co-employer relationship with our WSEEs, we assume certain obligations and responsibilities of an employer under these federal and state laws.

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Subject to the issues discussed below, we believe that our operations are in compliance, in all material respects, with all applicable federal statutes and regulations.

2021 Form 10-K

Employee Benefit Plans

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These plans include:

• a group health plan, which includes medical, dental, vision and prescription drug coverage, as well as a work-life program

• a group health plan, which includes medical, dental, vision and prescription drug coverage, as well as an employee well-being program

• a 401(k) retirement plan

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• a health care flexible spending account plan

2020 Form 10-K

• an educational assistance program

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Historically, we believe that we have successfully marketed the compliance component of our service offering and that our compliance-related services have increased the value proposition of our service offering.

Employer Status .

In order to qualify for favorable tax treatment under the Code, employee benefit plans must be established and maintained by an employer for the exclusive benefit of its employees.

Generally, an entity is an “employer” of individuals for federal employment tax purposes if an employment relationship exists between the entity and the individuals under the common law test of employment.

In addition, the officers of a corporation are deemed to be employees of that corporation for federal employment tax purposes.

The common law test of employment, as applied by the IRS, involves an examination of approximately 20 factors to ascertain whether an employment relationship exists between a worker and a purported employer.

Generally, the test is applied to determine whether an individual is an independent contractor or an employee for federal employment tax purposes and not to determine whether each of two or more companies is a “co-employer.” Substantial weight is typically given to the question of whether the purported employer has the right to direct and control the details of an individual’s work.

Among the factors that appear to have been considered more important by the IRS are:

• the employer’s degree of behavioral control (the extent of instructions, training and the nature of the work)

• the financial control or the economic aspects of the relationship

• the intended relationship of the parties (whether employee benefits are provided, whether any contracts exist, whether services are ongoing or for a project, whether there are any penalties for discharge/termination, and the frequency of the business activity)

ERISA Requirements .

Employee pension and welfare benefit plans are also governed by ERISA.

ERISA defines “employer” as “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.” ERISA defines the term “employee” as “any individual employed by an employer.” The United States Supreme Court has held that the common law test of employment must be applied to determine whether an individual is an employee or an independent contractor under ERISA.

A definitive judicial interpretation of “employer” in the context of a PEO or employee leasing arrangement has not been established.

If Insperity were found not to be an employer with respect to WSEEs for ERISA purposes, its plans would not comply with ERISA and/or the Code.

Further, as a result of such finding, Insperity and its plans would not enjoy, with respect to WSEEs, the preemption of state laws provided by ERISA and could be subject to varying state laws and regulations as well as to claims based upon state common laws.

Even if such a finding were made, we believe we would not be materially adversely affected because we would endeavor to make available similar benefits at comparable costs.

In addition to ERISA and the Code, issues related to the relationship between Insperity and its WSEEs may also arise under other federal laws, including other federal income tax laws.

Employer Status and Employee Benefit Plans.

We are the sponsor of the employee benefit plans, participation in which, we offer to our WSEEs.

Our plans are governed by ERISA and the Code.

Our ability to sponsor these plans, to have them governed by ERISA, and to receive favorable tax treatment under the Code is dependent on our status as “employer” of the WSEEs.

Employer status is determined under various rules, regulations, and interpretations.

While we believe that we qualify as employer under applicable laws, please read Item 1.A.

“Risk Factors – A determination that we are not the employer of our WSEEs and an inability to offer alternate benefit plans could have a material adverse effect on our business.”

Patient Protection and Affordable Care Act.

The PPACA was signed into law on March 23, 2010.

The PPACA was subsequently amended on March 30, 2010, by the Reconciliation Act.

The PPACA and the Reconciliation Act (collectively the “Act”) entail sweeping health care reforms with original staggered effective dates from 2010 through 2018, some of which were subsequently extended until as late as 2020.

While the Act did not have a material adverse impact on our results of operations in 2020, the future impact of the following provisions or changes to the provisions, including any changes or a repeal that may result from a case pending before the U.S.

Supreme Court or future legislative actions, is unknown at this time.

2020 Form 10-K

Beginning in 2014, the Act provided for the establishment of state insurance exchanges (“Exchanges”) to make health insurance available to individuals and small employers (initially defined as 100 employees or less).

States had the option of building a state-based exchange, entering into a state-federal partnership exchange or accepting the federally-facilitated exchange.

States that accept the federally-facilitated exchange can transition to a state-based exchange at a later date.

The Exchanges provide consumers with educational services and information on available options and offer a variety of health plans.

Subsidies are available to qualifying individuals who purchase health insurance through the Exchanges.

As part of the Tax Cuts and Jobs Act enacted in December 2017, the requirements that individuals maintain health insurance coverage or pay a federal tax penalty, which was known as the individual mandate, was effectively eliminated beginning in 2019.

A limited number of states have enacted individual mandates.

At this time, the Exchanges, tax credits, individual mandates and subsidies have not had a material impact on our operations, but the impact of future changes to these provisions is unknown.

Additionally, in 2014, the Act ushered in a number of insurance market reforms for the small group and individual markets.

The reforms required guaranteed issue and renewability of coverage, eliminated certain underwriting practices by issuers, consolidated the number of risk pools in each state and restricted the permissible factors and variable ranges of those factors that can be considered in determining health insurance premiums.

Transition relief permitted states to delay the effective date of some of these reforms.

At this time, the insurance market reforms have not had a material adverse impact on our business operations, but the impact of future changes on our ability to attract and retain clients, or our ability to increase service fees to offset any increased costs is unknown.

Effective January 1, 2015, “pay or play” requirements applied to large employers with at least 50 full-time and full-time equivalent employees in the prior calendar year (“Applicable Large Employers” or “ALEs”).

ALEs who fail to offer “minimum essential coverage” satisfying minimum value and affordability requirements may be subject to a penalty if a full-time employee obtains coverage from an Exchange and receives a subsidy or tax credit for such coverage.

While clients are responsible for employer pay or play health care mandates under the CSA, the Insperity-sponsored group health plan qualifies as minimum essential coverage and is designed to satisfy the minimum value and affordability requirements.

Clients are not required to use the affordability safe harbor utilized by us.

Information contained in the Congressional Record, which specifically references PEOs, indicates that any pay or play penalties should apply separately to clients of a PEO and not at the PEO level.

However, the Act and subsequently issued IRS guidance do not expressly address the issue of whether the pay or play penalties apply only at the client level or whether the penalties can be applied at the PEO level.

At this time, we are unable to determine if pay or play penalties may be assessed against a PEO for coverage provided to WSEEs under a PEO sponsored plan.

As part of the Tax Extenders Act passed in 2019, the rules imposing excise taxes commencing in 2022 on employers and insurers who offer excessive health benefits under so-called “Cadillac plans” have been repealed.

At this time, we are unable to determine the effect that the repeal of these pending excise taxes will have on our business.

For a discussion of the impact of the Patient Protection and Affordable Care Act on our business, please read Item 1A.

“Risk Factors—PEO HR Outsourcing Solutions Risks—Health care reform could affect our health insurance plan and could lead to a significant disruption in our business.”

401(k) Retirement Plans.

6 unchanged sentences

• withholding of income tax requirements governed by Code Section 3401, et seq.

2021 Form 10-K

• obligations under FICA, governed by Code Section 3101, et seq.

• obligations under FUTA, governed by Code Section 3301, et seq.

2020 Form 10-K

Under these Code sections, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee portion of these taxes.

The SBEA provides that a CPEO shall be treated as the employer under Subtitle C – Employment Taxes of the Code and shall be responsible for reporting federal employment taxes rather than the CPEO clients.

The SBEA provides a CPEO shall be treated as the employer under Subtitle C – Employment Taxes of the Code and shall be responsible for reporting federal employment taxes rather than the CPEO clients.

For any client CSA that is not a CPEO contract, Code Section 3401, which applies to federal income tax withholding requirements, contains an exception to the general common law test applied to determine whether an entity is an “employer” for purposes of federal income tax withholding.

21 unchanged sentences

Human Capital

We believe that our ability to attract and retain highly motivated and skilled corporate employees with diverse backgrounds and experiences is critical to our continued success.

Our human capital management objective is to attract, develop, and retain qualified corporate employees as appropriate to support our growth, client service initiatives, and technology investments, while furthering our commitment to our culture, mission, and values.

2021 Form 10-K

We had approximately 3,600 corporate employees as of December 31, 2021.

2 unchanged sentences

The number of BPAs and trained BPAs impacts our ability to grow our customer base.

We refer to BPAs who have been employed for two months and completed initial sales training as “trained BPAs”.

During 2020 and 2019, the average number of BPAs were 645 and 590, respectively, while the average number of trained BPAs were 590 and 528, respectively.

We refer to BPAs who have been employed for two months and completed initial sales training as “trained BPAs.” During 2021 and 2020, the average number of BPAs were 650 and 645, respectively, while the average number of trained BPAs were 596 and 590, respectively.

We offer numerous programs and benefits in furtherance of our human capital management objective, including:

competitive compensation and benefits;

corporate 401(k) retirement plan with a matching component;

employee stock purchase program;

leadership development programs;

the Insperity MVP (Mission Values Performance) employee recognition program;

support during the COVID-19 pandemic, including flexible remote working arrangements;

and employee benevolence programs to provide additional assistance to corporate employees in times of need.

We monitor and evaluate the effectiveness of our human capital management efforts by seeking formal and informal feedback from our corporate employees, including periodic surveys of our corporate employees to obtain their opinions on key topics.

Intellectual Property

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business