What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-10 compared with 2022-02-11 · 172 added, 211 removed, 856 unchanged (31% of the section changed)

14 unchanged sentences

Directors, Executive Officers and Corporate Governance.

Some of the information required by this item is incorporated by reference to the information set forth under the captions “Election of Directors” and “Delinquent Section 16(a) Reports” in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the “Insperity Proxy Statement”).

Some of the information required by this item is incorporated by reference to the Insperity Proxy Statement.

Code of Business Conduct and Ethics

1 unchanged sentence

You can access our Code of Ethics on the Corporate Governance page of our website at insperity.com.

Changes in and waivers to the Code of Ethics for our directors, executive officers and certain senior financial officers will be posted on our Internet website within five business days and maintained for at least 12 months.

Changes in and waivers to the Code of Ethics for our directors, executive officers and certain senior financial officers will be posted on our website within five business days and maintained for at least 12 months.

Executive Compensation.

The information required by this item is incorporated by reference to the information set forth under the captions “Director Compensation” and “Executive Compensation” in the Insperity Proxy Statement.

The information required by this item is incorporated by reference to the Insperity Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated by reference to the information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Insperity Proxy Statement.

The information required by this item is incorporated by reference to the Insperity Proxy Statement.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated by reference to the information set forth under the caption “Certain Relationships and Related Transactions” in the Insperity Proxy Statement.

The information required by this item is incorporated by reference to the Insperity Proxy Statement.

Principal Accounting Fees and Services.

The information required by this item is incorporated by reference to the information set forth under the caption “Ratification and Appointment of Independent Public Accountants – Fees of Ernst & Young LLP” and “—Finance, Risk Management and Audit Committee Pre-Approval Policy for Audit and Non-Audit Services” in the Insperity Proxy Statement.

The information required by this item is incorporated by reference to the Insperity Proxy Statement.

2022 Form 10-K

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2001 Incentive Plan, as amended and restated (incorporated by reference to Appendix A to the Registrant’s definitive proxy statement on Schedule 14A filed on March 18, 2009 (No.

10.2 † Form of Director Stock Option Agreement (Annual Grant) (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-K for the year ended December 31, 2004).

10.3 † Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).

10.4 † Form of Director Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).

10.5 † Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).

10.6 † Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 22, 2013).

10.7 † Form of New Hire Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 22, 2013).

10.8 † Form of Named Executive Officer Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 22, 2013).

10.9 † Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on February 22, 2013).

10.10 † Form of Employee Award Notice and Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 2, 2015).

10.11 † Form of Executive Officer Restricted Stock Award Agreement for awards granted on or after March 29, 2016 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 1, 2016).

10.12 † Form of Employee Award Notice and Agreement under LTIP for awards granted on or after March 29, 2016 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on April 1, 2016).

2021 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

10.13 † Form of Restricted Stock Award Agreement for awards granted to certain senior personnel on or after March 29, 2016 (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 10-Q for the quarter ended March 31, 2016).

10.14 † Form of Restricted Stock Award Agreement for awards granted to other employees on or after March 29, 2016 (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 10-Q for the quarter ended March 31, 2016).

10.2 † Form of Restricted Stock Award Agreement for awards granted to executive officers on or after November 10, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2017).

4 unchanged sentences

10.7 † Form of Restricted Stock Unit Agreement for awards granted to other employees on or after December 30, 2019 (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-K for the year ended December 31, 2019).

10.21 † Form of Employee Award Notice and Agreement under LTIP granted on or after November 10, 2017 (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended September 30, 2017).

2022 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

10.8 † Form of Employee Award Notice and Agreement under LTIP granted on or after December 30, 2019 (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K for the year ended December 31, 2019).

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10.11 † First Amendment and Appendix A to Directors Compensation Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 25, 2015).

10.26 † Board of Directors Compensation Arrangements (incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 7, 2005).

10.12 † Directors Compensation Plan (as amended and restated April 1, 2017) (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2017).

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Long-Term Incentive Program (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 2, 2015).

2021 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

10.21 † Insperity, Inc.

6 unchanged sentences

(fka Administaff of Texas, Inc.) and United Healthcare Insurance Company (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2005).

10.40 (+) Amendment to Minimum Premium Financial Agreement, as amended and restated effective January 1, 2005, by and between Insperity Holdings, Inc., and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2007).

10.41 (+) Amendment to Minimum Premium Administrative Services Agreement, as amended and restated effective January 1, 2005, by and between Insperity Holdings, Inc., and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2007).

10.25 (+) Amendment to Minimum Premium Financial Agreement, as amended effective January 1, 2009, by and between Insperity Holdings, Inc.

4 unchanged sentences

(fka Administaff of Texas, Inc.) and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2013).

2022 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

10.28 (+) Amendment to Minimum Premium Administrative Services Agreement, as amended effective January 1, 2013, by and between Insperity Holdings, Inc.

10 unchanged sentences

and UnitedHealthcare Insurance Company, effective as of January 1, 2017 (incorporated by reference to Exhibit 10.39 to the Registrant’s Form 10-K for the year ended December 31, 2016).

10.51 (+) Letter of Agreement dated May 3, 2018 by and between Insperity Holdings, Inc.

and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2018).

2021 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

10.34 (+) Amendment to Minimum Premium Administrative Services Agreement (as previously amended effective January 1, 2016) by and between Insperity Holdings, Inc., and United Healthcare Insurance Company entered into as of January 1, 2019 (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2019).

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10.41 Third Amendment to Amended and Restated Credit Agreement dated April 28, 2021 (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 10-Q for the quarter ended March 31, 2021).

10.42 Fourth Amendment to the Amended and Restated Credit Agreement dated June 30, 2022 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on July 6, 2022).

10.43 Standard Form of Agreement Between Owner and Contractor dated February 8, 2019 between Insperity Service, L.P.

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10.44 Consulting agreement between Insperity, Inc.

M incks dated February 25, 2021 (incorporated by re ference to Exhibit 10 .1 to the Registrant ’ s Form 8 -K filed on February 26, 2021).

Mincks dated February 25, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 26, 2021).

2022 Form 10-K

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

21.1 * Subsidiaries of Insperity, Inc.

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101.INS * Inline 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 * Inline XBRL Taxonomy Extension Schema Document.

101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document.

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/s/ Douglas S.

Senior Vice President of Finance

Executive Vice President of Finance,

Chief Financial Officer and Treasurer

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/s/ Douglas S.

Sharp Senior Vice President of Finance

Sharp Chief Financial Officer and Treasurer

Sharp Executive Vice President of Finance,

Chief Financial Officer and Treasurer

(Principal Financial Officer)

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CONSOLIDATED FINANCIAL STATEMENTS

Estimation of the Cost of Incurred Health Insurance Claims

Description of the Matter As discussed in Note 1 of the consolidated financial statements under “Health Insurance Costs”, the Company provides the majority of its health insurance coverage to its worksite employees through a fully insured health insurance policy with UnitedHealthcare (“United”).

Estimation of the Cost of Incurred but Not Reported Health Insurance Claims

Description of the Matter As discussed in Note 1 of the consolidated financial statements under “Health Insurance Costs”, the Company provides the majority of its health insurance coverage to its employees through a fully insured health insurance policy with UnitedHealthcare (“United”).

While the policy with United is a fully insured plan, as a result of certain contractual terms, the Company accounts for this plan using a partially self-funded insurance accounting model.

Accordingly, the Company records the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees as benefits expense, which is a component of direct costs.

The estimated incurred claims under the Company’s United insurance policy are based upon:

Accordingly, the Company records the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees, as benefits expense, which is a component of Payroll taxes, benefits and workers’ compensation costs in the consolidated statement of operations.

The estimated incurred but not reported claims under the Company’s United insurance policy are based upon:

(i) the level of claims processed during each quarter;

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and (iii) the number of participants in the plan, including both active and COBRA enrollees.

Auditing management’s estimation of the cost of incurred health insurance claims was subjective and judgmental due to the significant estimation required in determining the medical completion rates.

Estimating actual claims incurred is subjective due to the large number of plan participants and the possibility that the number, magnitude, nature, and the timing of processing of current period claims may not be comparable to historical results experienced by the Company.

Auditing management’s estimate of the cost of incurred but not reported health insurance claims was subjective and judgmental due to the significant estimation required in determining the medical reserve.

Estimating incurred but not reported claims is subjective due to the large number of plan participants and the possibility that the number, nature, magnitude, and the timing of processing of current period claims may not be comparable to historical results experienced by the Company.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the estimation process, including, among others, controls over the completeness and accuracy of the data used to estimate the cost of incurred health insurance claims and the review and approval processes that management has in place for the assumptions applied and the calculation of the cost of incurred health insurance claims.

With the support of our actuarial specialists, we performed an independent assessment of the estimated cost of incurred health insurance claims.

Our audit procedures included, among others, assessing (i) the Company’s health insurance cost estimation methodologies, (ii) significant assumptions used to develop the medical completion rates, which includes the incurred but not reported component, (iii) the accuracy and completeness of the claims processed and the number of plan participants used in the Company’s computation, as well as (iv) the historical accuracy of management’s estimates of the cost of incurred health insurance claims.

Our audit procedures included, among others, assessing (i) the Company’s health insurance cost estimation methodologies, (ii) significant assumptions used to develop the medical completion rates, which includes the incurred but not reported component, (iii) the accuracy and completeness of the claims processed data and the number of plan participants used in the Company’s computation, as well as (iv) the historical accuracy of management’s estimates of the cost of incurred health insurance claims.

Our testing of the medical completion rate assumptions included comparing the completion rate assumptions used by management to the completion rates experienced in historical periods and assessing whether contrary evidence exists with respect to the completion rate assumptions utilized by the Company to estimate the cost of incurred health insurance claims.

We compared the Company’s estimate to a range developed by our actuarial specialists based on independently selected assumptions and historical data.

Furthermore, we involved our actuarial specialists to assist in our evaluation of the Company’s methodologies and compared the Company’s estimate to a range developed by our actuarial specialists based on the historical claim data and independently selected assumptions.

2022 Form 10-K

1 unchanged sentence

Estimation of the Cost of Incurred Workers’ Compensation Claims

Description of the Matter As discussed in Note 1 of the consolidated financial statements under “Workers’ Compensation Costs”, the Company provides workers’ compensation insurance, including ongoing health care and indemnity coverage, to its worksite employees whereby claims are paid over numerous years following the date of injury.

Description of the Matter As discussed in Note 1 of the consolidated financial statements under “Workers’ Compensation Costs”, the Company provides workers’ compensation insurance, including ongoing health care and indemnity coverage, to its employees whereby claims are paid over numerous years following the date of injury.

Under the Company’s insurance program, the Company has financial responsibility for a significant portion of the workers’ compensation claims.

Accordingly, the accrual related to incurred costs includes estimates that take into account the ongoing development of claims and therefore requires a significant level of judgment.

The estimated accrued claims are based on (i) the loss development rate which is primarily based upon the nature of worksite employees’ job responsibilities, the location of worksite employees, the historical frequency and severity of workers’ compensation claims, (ii) an estimate of future cost trends, and (iii) discount rates which correspond to the weighted-average estimated claim payout period.

Auditing management’s estimation of the cost of incurred workers’ compensation claims was subjective due to the significant estimation required in determining the loss development rate and future cost trends.

These assumptions have a significant effect on the valuation of the liability.

Accordingly, the accrual related to incurred costs, which is recorded in accrued workers’ compensation costs in the consolidated balance sheets, includes estimates that take into account the ongoing development of claims and therefore requires a significant level of judgment.

The estimated accrued claims are based on (i) the loss development rate which is primarily based upon the historical frequency and severity of workers’ compensation claims and (ii) discount rates which correspond to the weighted-average estimated claim payout period.

Auditing management’s estimate of the cost of incurred workers’ compensation claims was subjective and judgmental due to the significant estimation required in determining the workers’ compensation reserve.

Estimating accrued claims is subjective given the nature of the inputs to the underlying actuarial model as referenced above.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the estimation process, including, among others, controls over the completeness and accuracy of data used to estimate the cost of incurred workers’ compensation claims and the review and approval processes that management has in place for the assumptions applied and the calculation of the cost of incurred workers’ compensation claims.

With the support of our actuarial specialists, we performed an independent assessment of the estimated cost of incurred workers’ compensation claims.

Our audit procedures included, among others, assessing (i) the Company’s workers’ compensation reserve methodologies, (ii) signiﬁcant assumptions used to develop the loss development rate, as well as (iii) the historical accuracy of management’s estimates of the cost of incurred workers’ compensation claims.

Our audit procedures included, among others, assessing (i) the Company’s workers’ compensation reserve methodologies, (ii) significant assumptions used to develop the loss development rate, as well as (iii) the historical accuracy of management’s estimates of the cost of incurred workers’ compensation claims.

Our audit procedures included testing the completeness and accuracy of the underlying claims and payroll data provided to management’s third-party actuaries and reviewing the Company's insurance contracts to assess the Company's self-insured retentions, deductibles, and coverage limits.

We compared the Company's reserved amount to a range developed by our actuarial specialists based on historical loss data and independently selected assumptions.

Furthermore, we involved our actuarial specialists to assist in our evaluation of the methodologies utilized by management‘s third-party actuaries in developing the reserves recorded by the Company and compared the Company's estimate to a range developed by our actuarial specialists based on the historical loss data and independently selected assumptions.

We have served as the Company’s auditor since 1991.

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Sarvadi Douglas S.

Chairman of the Board and Senior Vice President of Finance

Chief Executive Officer Chief Financial Officer and Treasurer

Chairman of the Board and

Chief Executive Officer Executive Vice President of Finance,

Chief Financial Officer and Treasurer

2022 Form 10-K

6 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Insperity, Inc.

as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 10, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 9, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Prepaid insurance 11,706 11,285

Other current assets 53,312 39,461

Income taxes receivable — 12,413

Other current assets 61,728 53,312

Total current assets 1,511,873 1,244,848

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Operating lease liabilities, net of current 55,587 64,192

Other accrued liabilities, net of current — 6,292

Total noncurrent liabilities 604,616 626,286

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120,000 shares authorized;

55,489 shares issued and outstanding)

55,489 shares issued and 37,881 shares and 38,330 shares outstanding, respectively)

Additional paid-in capital 151,144 109,179

Treasury stock, at cost ( 17,159 and 17,236 shares held in treasury)

Treasury stock, at cost ( 17,608 and 17,159 shares held in treasury, respectively)

( 725,532 ) ( 665,089 )

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Net income $ 179,350 $ 124,080 $ 138,237

Less distributed and undistributed earnings allocated to participating securities ( 210 ) ( 782 ) ( 1,759 )

Net income allocated to common shares $ 123,870 $ 137,455 $ 149,340

Net income per share of common stock

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Other comprehensive loss:

Unrealized gain (loss) on available-for-sale securities, net of tax ( 14 ) ( 7 ) 21

Unrealized loss on available-for-sale securities, net of tax ( 73 ) ( 14 ) ( 7 )

Comprehensive income $ 179,277 $ 124,066 $ 138,230

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(in thousands) Common Stock

Additional Paid

Issued Additional Paid

In Capital Treasury

Stock Accumulated

Comprehensive

Income (Loss)

Income (Loss) Retained

Earnings Total

Shares Amount

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Dividends paid — — — — — ( 61,869 ) ( 61,869 )

Unrealized gain on marketable securities, net of tax — — — — 21 — 21

Unrealized loss on marketable securities, net of tax — — — — ( 7 ) — ( 7 )

Net income — — — — — 138,237 138,237

3 unchanged sentences

Stock-based compensation expense — — 37,381 3,242 — — 40,623

Exercise of stock options — — ( 329 ) 569 — — 240

Other — — 1,739 1,330 — — 3,069

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Stock-based compensation expense — — 49,124 956 — — 50,080

Exercise of stock options — — ( 329 ) 569 — — 240

Other — — 2,126 1,443 — — 3,569

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Proceeds from dispositions — — 484

Property and equipment:

Purchases ( 32,907 ) ( 98,159 ) ( 56,307 )

Proceeds from dispositions 51 43 21

Property and equipment purchases ( 30,329 ) ( 32,856 ) ( 98,116 )

Net cash used in investing activities ( 32,122 ) ( 31,013 ) ( 98,621 )

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Net cash used in financing activities ( 141,150 ) ( 208,073 ) ( 53,583 )

Net increase in cash and cash equivalents 21,069 194,149 57,076

Cash, cash equivalents and restricted cash at beginning of year 786,699 592,550 535,474

Cash, cash equivalents and restricted cash at end of year $ 807,768 $ 786,699 $ 592,550

Net increase in cash, cash equivalents, restricted cash and funds held for clients 174,419 21,069 194,149

Cash, cash equivalents, restricted cash and funds held for clients at beginning of year 839,500 786,699 592,550

Cash, cash equivalents, restricted cash and funds held for clients at end of year $ 1,013,919 $ 807,768 $ 786,699

2022 Form 10-K

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(in thousands) 2022 2021 2020

Supplemental schedule of cash, cash equivalents and restricted cash

Cash and cash equivalents $ 554,846 $ 367,342 $ 326,773

Restricted cash 45,522 49,295 42,227

Deposits - workers’ compensation 186,331 175,913 166,474

Cash, cash equivalents and restricted cash beginning of year $ 786,699 $ 592,550 $ 535,474

Supplemental schedule of cash, cash equivalents and restricted cash

Cash and cash equivalents $ 575,812 $ 554,846 $ 367,342

Restricted cash 46,929 45,522 49,295

Deposits - workers’ compensation 185,027 186,331 175,913

Cash, cash equivalents and restricted cash end of year $ 807,768 $ 786,699 $ 592,550

Supplemental disclosures of cash flow information

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We were organized as a corporation in 1986 and have provided PEO services since inception.

Our most comprehensive HR services offerings are provided through our Workforce Optimization ® and Workforce Synchronization TM solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management and training and development services, along with our cloud-based human capital management platform, Insperity Premier TM .

In addition to our PEO HR Outsourcing solutions, we offer a comprehensive traditional payroll and human capital management solution, known as Workforce Acceleration.

We also offer a number of other business performance solutions, including 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 or services are offered separately or with our other solutions.

Our most comprehensive HR services offerings are provided through our Workforce Optimization ® and Workforce Synchronization TM solutions (together, our “PEO HR Outsourcing Solutions”), which encompass a broad range of human resources functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management and training and development services, along with our cloud-based human capital management platform, known as Insperity Premier TM .

In addition to our PEO HR Outsourcing Solutions, we offer a comprehensive traditional payroll and human capital management solution, known as our Workforce Acceleration TM solution.

We also offer a number of other business performance solutions, including Recruiting Services, Employment Screening, Retirement Services, and Insurance Services.

These other products and services generally are offered only with our other solutions.

We provide our PEO HR Outsourcing Solutions by entering into a co-employment relationship with our clients, under which Insperity and its clients each take responsibility for certain portions of the employer-employee relationship.

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and (5) to provide workers’ compensation insurance coverage.

In addition to our assumption of employer status for our WSEEs, our PEO HR Outsourcing solutions also include other human resources functions for our clients to support the effective and efficient use of personnel in their business operations.

To provide these functions, we maintain a significant staff of professionals trained in a wide variety of human resources functions, including employee training, employee recruiting, employee performance management, employee compensation and employer liability management.

In addition to our assumption of employer status for our WSEEs, our PEO HR Outsourcing Solutions also includes other human resources functions for our clients to support the effective and efficient use of personnel in their business operations.

To provide these functions, we maintain a significant staff of professionals trained in a wide variety of HR functions, including employee training, employee recruiting, employee performance management, employee compensation and employer liability management.

These professionals interact and consult with clients on a daily basis to help identify each client’s service requirements and to ensure that we are providing appropriate and timely human capital management services.

Revenue and Direct Cost Recognition

We enter into contracts with our customers for human resources services based on a stated rate and price in the contract.

We enter into contracts with our customers for HR services based on a stated rate and price in the contract.

Our contracts generally establish pricing for a period of 12 months and are generally cancellable at any time by either party with 30-days’ notice.

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The term between invoicing and when our performance obligations are satisfied is not significant.

Payment terms are typically due concurrently with the invoicing of our PEO services.

Our payment terms typically require payment concurrently with the invoicing of our PEO services.

We do not have significant financing components or significant payment terms.

Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite in accordance with Accounting Standards Update (“ASU”) No.

2014-09, Revenue from Contracts with Customers (Topic 606) .

Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers .

Customers are invoiced concurrently with each periodic payroll of its WSEEs.

Revenues that have been recognized

Revenues that have been recognized but not invoiced represent unbilled accounts receivable included in accounts receivable, net on our Consolidated Balance Sheets.

2022 Form 10-K

Notes to the Consolidated Financial Statements

but not invoiced represent unbilled accounts receivable included in accounts receivable, net on our Consolidated Balance Sheets.

Pursuant to the “practical expedients” provided under ASU No 2014-09, we expense sales commissions when incurred because the terms of our contracts are cancellable by either party with a 30-day notice.

Pursuant to the “practical expedients” provided under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers , we expense sales commissions when incurred because the terms of our contracts are cancellable by either party with a 30-day notice.

These costs are recorded in commissions in our Consolidated Statements of Operations.

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The gross billings are invoiced concurrently with each periodic payroll of our WSEEs.

Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEEs perform their service at the client worksite.

Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of the markup, are recognized ratably over the payroll period as WSEEs perform their service at the client worksite.

In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our WSEEs, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin.

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Segment Reporting

We operate one reportable segment under Accounting Standards Codification (“ASC”) 280, Segment Reporting .

We operate one reportable segment under ASC 280, Segment Reporting .

Principles of Consolidation

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Use of Estimates

The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

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Furniture, fixtures and other 50,835 51,552

Construction in progress (1)

512,995 495,078

Property and equipment, gross 530,613 512,995

Accumulated depreciation and amortization ( 330,621 ) ( 302,272 )

Property and equipment, net $ 199,992 $ 210,723

____________________________________

(1) Construction in progress in 2020 was related to our corporate office expansion.

The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:

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Capitalized software development costs are amortized using the straight-line method over the estimated useful lives of the software, generally three years.

We recognized $ 10.9 million, $ 8.7 million and $ 7.8 million in amortization of capitalized computer software costs in 2021, 2020 and 2019, respectively.

We recognized $ 13.2 million, $ 10.9 million and $ 8.7 million in amortization of capitalized software development costs in 2022, 2021 and 2020, respectively.

Unamortized software development costs were $ 33.7 million and $ 35.4 million at December 31, 2022 and 2021, respectively.

We periodically evaluate our long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment.

ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when

ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable.

If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash

2022 Form 10-K

Notes to the Consolidated Financial Statements

the carrying amount of an asset is deemed to not be recoverable.

If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset.

flows to be generated from the applicable asset or asset group.

In addition, we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset.

Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset.

We determine if an arrangement is a lease at inception of a contract in accordance with ASU No.

2016-02, Leases (Topic 842) as well as the Financial Accounting Standards Board issued ASUs clarifying the lease guidance.

We determine if an arrangement is a lease at inception of a contract in accordance with ASC 842, Leases, as well as the Financial Accounting Standards Board issued Accounting Standards Updates clarifying the lease guidance.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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Based on the results of our analysis, no impairment loss was recognized in 2022, 2021 or 2020.

At December 31, 2021 and 2020, we had an aggregate carrying amount of goodwill acquired of $ 21.2 million, which has been reduced by cumulative impairment charges of $ 8.5 million.

Accordingly, our goodwill balance at December 31, 2021 and 2020 was $ 12.7 million.

Health Insurance Costs

We provide group health insurance coverage to our WSEEs in our PEO HR Outsourcing solutions through a national network of carriers, including UnitedHealthcare (“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.

We provide group health insurance coverage under a single-employer plan that covers both our WSEEs in our PEO HR Outsourcing Solutions and our corporate employees and utilizes a national network of carriers, including UnitedHealthcare (“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.

Approximately 87 % of our costs related to health insurance coverage are provided under our policy with United.

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Accordingly, we record the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”) as benefits expense, which is a component of direct costs, in our Consolidated Statements of Operations.

The estimated incurred claims are based upon:

The estimated incurred but not reported claims are based upon:

(1) the level of claims processed during each quarter;

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If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Consolidated Balance Sheets.

On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums

2021 Form 10-K

Notes to the Consolidated Financial Statements

in our Consolidated Balance Sheets.

The terms of the arrangement require us to maintain an accumulated cash surplus in the plan of $ 9.0 million, which is reported as long-term prepaid insurance.

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As this amount is less than the agreed-upon $ 9.0 million surplus maintenance level, the $ 5.3 million difference is included in accrued health insurance costs, a current liability, in our Consolidated Balance Sheets.

The premiums, including the additional quarterly premiums, owed to United at December 31, 2021, were $ 12.6 million, which is also included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Our benefits costs incurred included an increase of $ 4.9 million in 2021, a reduction of $ 0.2 million in 2020 and an increase of $ 2.3 million in 2019 for changes in estimated run-off related to prior periods.

The premiums,

2022 Form 10-K

Notes to the Consolidated Financial Statements

including the additional quarterly premiums, owed to United at December 31, 2022, were $ 46.4 million, which is also included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Our benefits costs incurred included an increase of $ 12.1 million in 2022, an increase of $ 4.9 million in 2021, and a reduction of $ 0.2 million in 2020 for changes in estimated run-off related to prior periods.

Workers’ Compensation Costs

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Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S.

Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate was 0.6 % in both 2021 and 2020) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate was 2.9 % in 2022 and 0.6 % in 2021) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

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

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The current portion of accrued workers’ compensation costs on the Consolidated Balance Sheets at December 31, 2022 and 2021 includes $ 3.7 million and $ 3.6 million, respectively, of workers’ compensation administrative fees.

2021 Form 10-K

Notes to the Consolidated Financial Statements

The undiscounted accrued workers’ compensation costs were $ 250.5 million as of December 31, 2022 and $ 255.1 million as of December 31, 2021.

At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”).

The level of claim funds is primarily based upon anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier.

2022 Form 10-K

Notes to the Consolidated Financial Statements

of claim funds is primarily based upon anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier.

Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits, a long-term asset in our Consolidated Balance Sheets.

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At December 31, 2022, we have one stock-based employee compensation plan under which we may issue awards.

We account for this plan under the recognition and measurement principles of ASC 718, Compensation – Stock Compensation , which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.

We generally make annual grants of unrestricted stock under our stock-based incentive compensation plan to our non-employee directors, officers and other management but changed to restricted stock units for employees in 2020.

Restricted stock and restricted stock unit grants to officers and other employees generally vest over a period of three years from the date of grant.

Shares of restricted stock and restricted stock units are valued based on the fair value on date of grant and the associated expense, net of estimated forfeitures, is recognized over the requisite service period.

We account for this plan under the recognition and measurement principles of ASC 718, Compensation — Stock Compensation , which requires all share-based payments to employees to be recognized in the income statement based on their fair values.

We generally make annual grants of unrestricted stock under our stock-based incentive compensation plan to our non-employee directors, and grants of restricted stock units to our officers and certain other employees.

Restricted stock unit grants to officers and other employees generally vest over a period of three years from the date of grant.

Restricted stock units are valued based on the fair value on date of grant and the associated expense, net of estimated forfeitures, and are recognized over the requisite service period.

Stock grants issued to non-employee directors are 100 % vested on the grant date.

During 2020, we also granted performance-based restricted stock units to officers and other management, which vest or expire based on the achievement of various performance metrics.

Performance-based restricted stock units have a vesting schedule of one year.

The fair value of each performance-based restricted stock unit is the market price of our common stock on the date of grant.

The compensation expense for such awards is recognized on a straight line basis over the requisite service period.

Over the performance period, the number of shares expected to be issued is adjusted upward or downward based on the probability of achievement of the performance target.

Our Insperity Long-Term Incentive Program (the “LTIP”) provides for performance based long-term compensation awards in the form of performance units to certain employees based on the achievement of pre-established performance goals.

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Company-Sponsored 401(k) Retirement Plans

Under our 401(k) retirement plan for corporate employees (the “Corporate Plan”), we matched 100 % of eligible corporate employees’ contributions, ranging from 3 % to 6 % of the employees’ eligible compensation in 2021 and up to 6 % of the employees’ eligible compensation in 2020 and 2019.

Under our 401(k) retirement plan for corporate employees (the “Corporate Plan”), we matched 100 % of eligible corporate employees’ contributions, up to 6 % of the employees’ eligible compensation in 2022, ranging from 3 % to 6 % of the employees’ eligible compensation in 2021, and up to 6 % of the employees’ eligible compensation in 2020.

Matching contributions under the Corporate Plan are immediately vested.

During 2021, 2020 and 2019, we made matching contributions on behalf of corporate employees to the Corporate Plan of $ 8.2 million, $ 12.6 million and $ 11.4 million, respectively, and is included in salaries, wages and payroll taxes in our Consolidated Statements of Operations.

Under our separate 401(k) retirement plan for WSEEs (the “Worksite Employee Plan”), the match percentage for WSEEs

2021 Form 10-K

Notes to the Consolidated Financial Statements

ranges from 0 % to 6 %, as determined by each client company.

During 2022, 2021 and 2020, we made matching contributions on behalf of corporate employees to the Corporate Plan of $ 14.4 million, $ 8.2 million, and $ 12.6 million, respectively, and are included in salaries, wages and payroll taxes in our Consolidated Statements of Operations.

Under our separate 401(k) retirement plan for WSEEs (the “Worksite Employee Plan”), the match percentage for WSEEs ranges from 0 % to 6 %, as determined by each client company.

Matching contributions under the Worksite Employee Plan are immediately vested.

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Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse.

Please read Note 7, “Income Taxes,” for additional information.

2022 Form 10-K

Notes to the Consolidated Financial Statements

Note 7, “ Income Taxes ,” for additional information.

Other Balance Sheet Information

Cash, Cash Equivalents and Marketable Securities

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Investments holdings 56,963 33,068 90,031 88,951 31,791 120,742

Total financial assets 735,475 33,068 768,543 579,105 31,791 610,896

Cash in demand accounts 41,047 — 41,047 47,331 — 47,331

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Included in the cash balance as of December 31, 2022 and December 31, 2021, are $ 504.8 million and $ 424.8 million, respectively, in withholdings associated with federal and state income taxes, employment taxes and other payroll deductions, as well as $36.8 million and $20.1 million, respectively, in client prepayments.

2022 Form 10-K

Notes to the Consolidated Financial Statements

Cash, Cash Equivalents, Restricted Cash and Funds Held for Clients

The following table summarizes our cash, cash equivalents, restricted cash and funds held for clients as reported in our Consolidated Statements of Cash Flows:

Year ended December 31,

(in thousands) 2022 2021 2020

Supplemental schedule of cash, cash equivalents, restricted cash and funds held for clients

Cash and cash equivalents $ 575,812 $ 554,846 $ 367,342

Restricted cash 46,929 45,522 49,295

Other current assets - funds held for clients (1)

Deposits — workers’ compensation 185,027 186,331 175,913

Cash, cash equivalents, restricted cash and funds held for clients beginning of year $ 839,500 $ 786,699 $ 592,550

Supplemental schedule of cash, cash equivalents, restricted cash and funds held for clients

Cash and cash equivalents $ 732,828 $ 575,812 $ 554,846

Restricted cash 49,779 46,929 45,522

Other current assets - funds held for clients (1)

Deposits — workers’ compensation 196,370 185,027 186,331

Cash, cash equivalents, restricted cash end of year and funds held for clients $ 1,013,919 $ 807,768 $ 786,699

____________________________________

(1) Funds held for clients represent amounts held in trust for the benefit of our customers of Workforce Acceleration, our traditional payroll solution, that are restricted for the purpose of satisfying obligations to remit funds to client’s employees and various tax authorities.

(2) Beginning in the third quarter of 2022, we adjusted the presentation of our Consolidated Statements of Cash Flows to include changes in funds held for clients as a financing activity and to include funds held for clients in both the beginning and ending period amounts in our totals of cash, cash equivalents, restricted cash and funds held for clients.

Prior period amounts have not been adjusted to this presentation as the amounts are immaterial to our consolidated financial statements.

Previously, the changes in funds held for clients and the related client fund liabilities were presented within operating activities in our Consolidated Statements of Cash Flows.

Funds held for clients are held in a trust separate from our company funds and we do not use these funds held for clients for any corporate activity.

Please read Note 1.

“ Accounting Policies , ” for a discussion of our accounting policies for deposits — workers’ compensation and restricted cash.

Fair Value Measurements

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Municipal bonds 3,365 — 3,365 26,009 — 26,009

Total $ 610,896 $ 584,887 $ 26,009 $ 585,742 $ 561,744 $ 23,998

Total financial assets $ 768,543 $ 765,178 $ 3,365 $ 610,896 $ 584,887 $ 26,009

Please read Note 2.

“ Other Balance Sheet Information ,” for additional information.

The municipal bond securities valued as Level 2 investments are primarily pre-refunded municipal bonds that are secured by escrow funds containing U.S.

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Accounts receivable, net $ 622,764 $ 513,306

Our accounts receivable is primarily composed of trade receivables and unbilled receivables.

Our trade receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $ 1.0 million in both December 31, 2021 and 2020.

We establish an allowance for doubtful accounts based on management’s assessment of the collectability of specific accounts and by making a general provision for other potentially uncollectible amounts.

2022 Form 10-K

Notes to the Consolidated Financial Statements

Our accounts receivable is primarily composed of trade receivables and unbilled receivables.

Our trade receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts of $ 1.0 million as of December 31, 2022 and 2021.

We make an accrual at the end of each accounting period for our obligations associated with the earned but unpaid wages of our WSEEs and for the accrued gross billings associated with such wages.

These accruals are included in accrued WSEE payroll cost and unbilled accounts receivable;

These accruals are included in accrued worksite employee payroll cost and unbilled accounts receivable;

however, these amounts are presented net in the Consolidated Statements of Operations.

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Deposits and prepaid health insurance $ 213,270 $ 201,927

The contractual arrangement with United for health insurance coverage requires us to maintain an accumulated cash surplus in the plan of $ 9.0 million, which is reported as deposits and prepaid health insurance.

Please read Note 1, “ Accounting Policies ,” for a discussion of our accounting policies for health insurance costs and workers’ compensation costs.

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We have a $ 650 million revolving credit facility (the “Facility”) which is available for working capital and general corporate purposes, including acquisitions, stock repurchases and issuances of letters of credit.

Borrowings may be increased to $ 550 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (as amended, the “Credit Agreement”).

Borrowings may be further increased to $ 700 million based on the terms and subject to the conditions set forth in the agreement relating to the Facility (as amended, the “Credit Agreement”).

Our obligations under the Facility are secured by 65 % of the stock of our captive insurance subsidiary and are guaranteed by all of our domestic subsidiaries other than certain excluded subsidiaries.

In addition, as of December 31, 2022, we had an outstanding $ 1.0 million letter of credit issued under the Facility.

As of December 31, 2021, our outstanding balance on the Facility was $ 369.4 million and is due when the Facility matures on September 13, 2024 .

Borrowings under the Facility bear interest at an annual rate equal to an alternate base rate or LIBOR , at our option, plus an applicable margin.

Depending on our leverage ratio, the applicable margin varies (1) in the case of LIBOR loans, from 1.50 % to 2.25 % and (2) in the case of alternate base rate loans, from 0.00 % to 0.50 %.

The alternate base rate is the highest of (1) the prime rate most recently published in The Wall Street Journal, (2) the federal funds rate plus 0.50 % and (3) the 30-day LIBOR rate plus 2.00 %.

We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25 %.

As of December 31, 2022, our outstanding balance on the Facility was $ 369.4 million and is due when the Facility matures on June 30, 2027 .

Borrowings under the Facility bear interest at an annual rate equal to an alternate base rate or Adjusted Term SOFR for term SOFR loans, in either case plus an applicable margin.

Adjusted Term SOFR is a forward-looking term rate based on the secured overnight financing rate plus a spread adjustment, which ranges from 0.10% to 0.25% depending on the interest period and type of loan.

Depending on our leverage ratio, the applicable margin varies (1) in the case of SOFR loans, from 1.50 % to 2.25 % and (2) in the case of alternate base rate loans, from 0.00 % to 0.50 %.

The alternate base rate is the highest of (1) the prime rate most recently published in The Wall Street Journal;

(2) the federal funds rate plus

2022 Form 10-K

Notes to the Consolidated Financial Statements

and (3) the Adjusted Term SOFR rate plus 2.00 %.

We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25 % per year.

The average interest rate during 2022 was 3.5 %.

Interest expense and unused commitment fees are recorded in other income (expense).

Following early opt-in by us or our lenders or such other time as LIBOR rates have permanently or indefinitely ceased to be published by the regulatory supervisory authority of LIBOR, then LIBOR will be replaced by a rate per annum equal to the secured overnight financing rate published by the Federal Reserve Bank of New York or such other benchmark as determined in accordance with the Credit Agreement.

The Facility contains both affirmative and negative covenants that we believe are customary for arrangements of this nature.

Covenants include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire our capital stock, acquire the capital stock or assets of another business,

2021 Form 10-K

Notes to the Consolidated Financial Statements

make investments and pay dividends.

In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio.

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We recognize interest and penalties related to uncertain tax positions in income tax expense.

As of December 31, 2021, 2020 and 2019, we made no provisions for interest or penalties related to uncertain tax positions.

As of December 31, 2022, 2021 and 2020, we have no uncertain tax positions, and as a result, have made no provisions for interest or penalties related to uncertain tax positions.

The tax years 2019 through 2021 remain open to examination by the Internal Revenue Service of the United States.

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In addition, 99,001 shares were withheld during 2022 to satisfy minimum tax withholding obligations for the vesting of long-term incentive, restricted stock awards and restricted stock units, which are not subject to the Repurchase Program.

In 2021, the Board authorized an increase of 1 million shares that may be repurchased under the Repurchase Program.

During 2021, we repurchased 424,509 shares under the Repurchase Program and 291,129 shares were withheld to satisfy minimum tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

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Stockholder approval of amendments to the 2012 Incentive Plan is necessary only when required by applicable law or stock exchange rules.

Assuming all outstanding awards are paid at max, at December 31, 2021, 1,511,140 shares of common stock were available for future grants under the 2012 Incentive Plan.

Assuming all outstanding performance-based awards are paid at maximum achievement of pre-established performance goals, at December 31, 2022, 942,973 shares of common stock were available for future grants under the 2012 Incentive Plan.

We also maintain the Insperity, Inc.

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We granted performance units under the LTIP to our named executive officers and certain other officers in 2020, 2021 and 2022.

Beginning with stock-based awards granted in 2020, employees who attain a minimum age of 62 and have provided 15 years or more of continuous service may continue to vest in awards following a qualifying retirement as defined under the 2012 Incentive Plan award agreement, as though he or she were still an employee, provided the grant date of the award is six months or more before the employee’s last day of employment.

For a termination following a qualifying retirement, time-vested awards will continue to vest in the normal course.

For a termination following a qualifying retirement, performance-based awards with completed or in-process performance periods are adjusted for achievement of the performance criteria, prorated through the date of termination and paid in the normal course, while performance-based awards for performance periods that have not started are forfeited.

Stock-based compensation expense related to time-vested and performance-based awards is accelerated over the requisite service period for employees who meet the requirements for continued vesting.

Employees who attain a minimum age of 62 and have provided 15 years or more of continuous service may continue to vest in awards following a qualifying retirement as defined under the 2012 Incentive Plan award agreement, as though he or she were still an employee, provided the grant date of the award is six months or more before the employee’s last day of employment, the employee provides the Company with six months advance notice of retirement, the employee continues to work full-time during such six (6) month period, and the employee signs a waiver and release of claims.

In addition, in order to avoid forfeiting any outstanding award, a retired employee must refrain from providing any services, including but not limited to, as an employee, director, advisor, or independent contractor to a business engaged in providing any services offered by the Company and its subsidiaries and affiliates at the time of the employee’s retirement, including but not limited to PEO services, payroll services, retirement services or insurances services.

For a termination

2022 Form 10-K

Notes to the Consolidated Financial Statements

following a qualifying retirement, time-vested awards will continue to vest in the normal course.

Stock-based compensation expense related to time-vested and performance-based awards is accelerated over the requisite service period for employees who meet the requirements for continued vesting.

Stock-based compensation expense and other disclosures for stock-based awards follows:

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However, for some RSUs currently outstanding, compensation expense is accelerated over the shortened requisite service period for employees who meet the requirements for continued vesting.

Following is a summary of time-based RSAs and time-based RSUs award activity for 2021:

The following is a summary of time-based RSAs and time-based RSUs award activity for 2022:

(in thousands)

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Over the performance period, the number of shares expected to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets.

For market-based awards, performance units vest at the end of a three-year period assuming continued employment and achievement of market-based performance goals.

The fair value of market-based performance awards was determined through the use of the Monte Carlo simulation method.

The compensation expense for the LTIP awards is recognized on a straight-line basis over the vesting terms.

For market-based awards, performance units vest at the end of a three-year period assuming continued employment and achievement of market-based

2022 Form 10-K

Notes to the Consolidated Financial Statements

performance goals.

The fair value of market-based performance awards was determined through the use of the Monte Carlo simulation method.

The compensation expense for the LTIP awards is recognized on a straight-line basis over the vesting terms.

The following is a summary of LTIP award activity, at 100% of targeted amount, for 2022:

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Grant Date Fair

Unvested at December 31, 2020 270 $ 89.40

Non-vested — December 31, 2021 238 $ 93.78

Granted 85 94.43

Vested ( 98 ) 81.51

Canceled ( 51 ) 139.71

Unvested at December 31, 2021 238 $ 9,378.00

The determination of achievement results and corresponding vesting of the 2018 LTIP awards occurred in February 2021 resulting in the recipients receiving approximately 174,000 shares of common stock with a fair value $ 15.8 million.

Non-vested — December 31, 2022 272 $ 85.37

As of December 31, 2022, we estimate that approximately 126,000 , 111,000 and 111,000 shares will vest with $ 0.1 million, $ 2.1 million and $ 4.9 million in unamortized compensation expense related to the 2020, 2021 and 2022 LTIP grants, respectively.

Performance-Based Restricted Stock Units

During 2020, we granted performance-based RSUs (“pRSU”) under the 2012 Incentive Plan to our named executive officers and certain other management.

The pRSUs were performance-based short-term compensation awards in the form of performance units to certain employees based on the achievement of pre-established performance goals.

Each pRSU represented the right to receive common shares at a future date based on our performance against specified targets.

The ultimate number of shares issued and the related compensation cost recognized was based on a comparison of the final performance metrics to the specified targets, which ranged from 0% to 300% of the targeted amounts.

The pRSUs had a vesting schedule of less than one year and compensation expense was recognized based on the number of common shares expected to be issued and the market price per common share on the date of grant.

Over the performance period, the number of shares expected to be issued was adjusted upward or downward based upon the probability of achievement of the performance targets.

The determination of achievement results and corresponding vesting of the pRSU awards occurred in February 2021 resulting in the recipients receiving approximately 385,000 shares of common stock with a fair value $ 34.4 million.

No pRSUs were outstanding as of December 31, 2021.

Employee Stock Purchase Plan

Our employee stock purchase plan (the “ESPP”) enables employees to purchase shares of Insperity stock at a 5% discount from the stock price at the end of the offering period.

The ESPP is a non-compensatory plan under generally accepted accounting principles of stock-based compensation.

The ESPP is a non-compensatory plan under GAAP for stock-based compensation.

As a result, no compensation expense is recognized in conjunction with this plan.

Approximately 36,000 , 36,000 and 57,000 shares were issued from treasury under the ESPP during fiscal years 2022, 2021 and 2020, respectively.

Net Income Per Share

We utilize the two-class method to compute net income per share.

The two-class method allocates a portion of net income to participating securities, which includes unvested awards of share-based payments with non-forfeitable rights to receive dividends.

Net income allocated to unvested share-based payments is excluded from net income allocated to common shares.

Any undistributed losses resulting from dividends exceeding net income are not allocated to participating securities.

Basic net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period.

Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of time-vested and performance-based RSUs and outstanding stock options.

Earnings Per Share

From 2009 through 2021, we used the two-class method to compute basic earnings per share (“Basic EPS”) and diluted earnings per share ("Diluted EPS").

Under the accounting guidance for the calculation of earnings per share for share-based payment awards with rights to dividends or dividend equivalents, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of Basic EPS and Diluted EPS using the two-class method.

In 2022, our share-based payment awards with non-forfeitable rights to dividends became fully vested.

As a result, we are no longer required to use the two-class method and, at December 31, 2022, we used the treasury stock method to calculate earnings per share.

Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period.

Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period, plus the dilutive effect of time-vested and performance-based RSUs.

2022 Form 10-K

Notes to the Consolidated Financial Statements

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

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

Year Ended December 31,

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During 2022, cash paid for amounts included in the measurement of operating lease liabilities was $ 22.2 million.

2021 Form 10-K

Notes to the Consolidated Financial Statements

The following table presents the lease balances within our Consolidated Balance Sheets, weighted average lease term and weighted average discount rates related to our operating leases:

(dollars in thousands) Classification in Consolidated Balance Sheets December 31, 2022

Operating lease ROU assets Right-of-use leased assets $ 62,830

Lease liabilities:

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Deferred rent 6,898

Operating lease ROU assets $ 62,830

Operating lease ROU assets Right-of-use leased assets $ 56,532

Weighted average remaining lease term (years) 4

Weighted average discount rate 3.6 %

2022 Form 10-K

Notes to the Consolidated Financial Statements

The following presents the maturity of our operating leases liabilities as of December 31, 2022:

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Present value of lease liabilities $ 75,533

As of December 31, 2021, we have additional operating leases that have not yet commenced of $ 1.6 million with lease terms of 5 years .

As of December 31, 2022, we have additional operating leases that have not yet commenced of $ 11.4 million with lease terms between one and seven years .

Commitments and Contingencies

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These arrangements primarily consist of advertising commitments and service contracts.

At December 31, 2021, future purchase and service obligations greater than $100,000 and one year were as follows (in thousands):

At December 31, 2022, future purchase and service obligations greater than $100,000 and one year were as follows:

(in thousands)

2023 $ 29,353

Total obligations $ 66,875

Securities Class Action Lawsuit

In July 2020, a federal securities class action was filed against us and certain of our officers in the United States District Court for the Southern District of New York.

The name of the case is Building Trades Pension Fund of Western Pennsylvania v.

Insperity, Inc.

1:20-cv-05635-NRB.

On October 23, 2020, the court issued an order

2021 Form 10-K

Notes to the Consolidated Financial Statements

appointing Oakland County Employees’ Retirement System and Oakland County Voluntary Employees’ Beneficiary Association Trust as lead plaintiff (“Lead Plaintiff”).

On December 22, 2020, the Lead Plaintiff filed its consolidated complaint alleging that we made materially false and misleading statements regarding our business and operations in violation of the federal securities laws and seeking unspecified damages, attorneys’ fees, costs, equitable/injunctive relief, and such other relief that may be deemed proper.

On April 26, 2021, the defendants moved to dismiss the consolidated complaint with prejudice.

The Lead Plaintiff filed its opposition to the motion to dismiss on June 10, 2021, and the defendants filed their reply in support of the motion to dismiss on July 12, 2021.

We believe the allegations in the action are without merit, and we intend to vigorously defend this litigation.

As a result of uncertainty regarding the outcome of this matter, no provision has been made in the accompanying Consolidated Financial Statements.

Other Litigation

We are a defendant in various other lawsuits and claims arising in the normal course of business.

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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 9A. Controls and Procedures