What changed in this filing

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Item 1A. Risk Factors

2026-02-11 compared with 2025-02-11 · 106 added, 94 removed, 243 unchanged (45% of the section changed)

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Economic Risks

Adverse economic conditions could negatively affect our industry, business, and results of operations.

Adverse economic conditions or changes in the employment levels could negatively affect our industry, business, and results of operations.

The small and medium-sized business market is sensitive to changes in economic activity levels as well as the credit markets.

As a result, the demand for the outsourced HR services we provide clients could be adversely impacted by weak economic conditions or difficulty obtaining credit.

As a result, the demand for the outsourced HR services we provide clients could be adversely impacted by weak economic conditions or difficulty obtaining credit at favorable rates or at all.

Current and prospective clients may respond to such conditions by reducing employment levels, compensation levels, employee benefit levels and outsourced HR services.

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Such developments could adversely impact our financial condition, results of operations, and future growth rates.

If we are unable to comply with or meet client expectations regarding certain COVID-19 relief programs, our business, financial condition, and results of operations could be materially adversely affected.

A number of governmental programs and incentives were created to assist businesses and individuals during the COVID-19 pandemic.

Certain of these programs and incentives have required us to make changes to our systems that manage leave, payroll and payroll-related tax calculation, invoicing and collection of service fees, COBRA participation, and client reporting.

For example, the CARES Act allowed companies to defer certain payroll taxes, which were reflected in the payrolls we processed for those clients.

Client companies are liable for repaying the deferred amounts to the IRS;

however, the IRS has not yet clarified how such deferred amounts will be properly applied to companies utilizing a PEO and, if and when issued, such guidance may require further revisions to our systems or processes.

In addition, further legislation may be enacted at the federal, state or local level that may require further changes to our processes and systems or that may expand the coverage afforded to WSEEs under our health and workers’ compensation insurance programs.

Further, PEO clients are dependent on their PEO to process Employee Retention Tax Credits (“ERC”) on a consolidated basis, including through amending previously filed payroll tax forms with the IRS.

In addition, our growth is impacted by the hiring and termination of employees by our existing clients.

Emerging technologies, including AI, may reduce the need for our clients to hire for certain roles or lead to automation of tasks previously performed by clients’ employees.

As a result, our clients may hire fewer employees or replace existing positions with AI-driven solutions, which would impact the growth of our worksite employees.

Such developments could adversely impact our business, financial condition, and results of operations.

If the claims that we made for employee retention tax credits under COVID relief programs are disallowed, our business, financial condition, and results of operations could be materially adversely affected.

In connection with certain COVID relief programs, PEO clients were dependent on their PEO to process employee retention tax credits (“ERC”) on a consolidated basis, including through amending previously filed payroll tax forms with the IRS.

The IRS has experienced significant backlogs in processing amended tax forms from employers seeking ERC refunds and we are currently awaiting IRS review of a number of ERC claims with respect to our PEO clients.

Currently, the deadline to submit any ERC claims for relevant periods in 2021 is April 2025.

A pending federal bill, The Tax Relief for American Families and Workers Act of 2024 (H.R.

7024), however, would retroactively accelerate the deadline for all claims to January 31, 2024.

While the deadline to submit any ERC claims for relevant periods in 2021 was April 2025, the OBBB that became law in July 2025 retroactively accelerated the deadline for all claims to January 31, 2024.

If any of the ERC claims that we made on behalf of our clients were denied or otherwise deemed insufficient, we may not be able to perfect our filings on a timely basis.

Further, eligibility for the ERC is dependent on certain operational information of our clients.

The lack of guidance from the IRS on the application of deferred payroll taxes discussed above may also impact the amount of ERC refunds received on behalf of our clients if those deferred payroll taxes are deducted from ERC funds received or delay our receipt of the ERC funds.

The lack of guidance from the IRS on the application of deferred payroll taxes under COVID relief programs may also impact the amount of ERC refunds received on behalf of our clients if those deferred payroll taxes are deducted from ERC funds received or delay our receipt of the ERC funds.

Further, if the IRS were to determine that any of our clients were not eligible for the ERC requested on their behalf or we do not perfect our filings on a timely basis, the IRS may conclude that we are responsible for those claims.

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If any those events were to occur, our clients may seek recourse against us or choose not to renew.

If we experience rejection of any COVID-19 relief program claims on behalf of clients, are unable to timely make system changes needed to comply with other regulations, incur substantial additional costs in doing so, or are otherwise adversely affected by these requirements, then we may face fines, penalties, other regulatory action, or litigation relating to such failure, and we may not have insurance coverage for all or some of these liabilities.

These events could further adversely impact our PEO state licenses or registrations, or our CPEO status, as well as our ability to attract and retain clients.

As a result of the foregoing, our business, results of operations and financial condition could be materially adversely affected.

2024 Form 10-K

Bank failures or other events affecting financial institutions could have a material adverse effect on our business, results of operations or financial condition, or have other adverse consequences.

We use a U.S.-based global systemically important bank (or G-SIB) for our PEO operations, including our cash balances associated with that portion of our business.

All of our cash deposits are held by Federal Deposit Insurance Corporation (“FDIC”) insured banks, which amounts exceed the FDIC insurance limits.

All of our cash deposits are held by Federal Deposit Insurance Corporation (“FDIC”) insured banks, which deposits may exceed the FDIC insurance limits.

Through various overnight “sweep account” programs, we also invest a significant portion of our cash balances in U.S.

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The failure of a bank or related brokerage firm that we use, or events involving limited liquidity, non-performance or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, or concerns or rumors about such events, may lead to disruptions in access to our cash balances, adversely impact our liquidity, including our ability to borrow under our credit facility, or limit our ability to process transactions related to our clients.

In the event of a failure of a bank or other financial institution that holds our cash deposits, there can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be recoverable or, even if ultimately recoverable, there may be significant delays in our ability to access those funds.

In the event of a failure of a bank or other financial institution that holds our cash deposits, there can be no assurance that our deposits in excess of

2025 Form 10-K

the FDIC or other comparable insurance limits will be recoverable or, even if ultimately recoverable, there may be significant delays in our ability to access those funds.

Furthermore, bank failures, non-performance, or other adverse developments that affect financial institutions could impair the ability of one or more of the banks participating in our credit facility from honoring their commitments.

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Several factors may limit the labor force available to us or increase our labor costs, including high employment levels, strong macroeconomic conditions, federal unemployment subsidies, and other governmental regulation.

As macroeconomic conditions improved from 2021 through 2024, the labor market tightened, resulting in increased employee turnover and skilled labor shortages.

For example, as macroeconomic conditions improved from 2021 through 2023, the labor market tightened, resulting in increased employee turnover and skilled labor shortages.

Increasing competition for highly skilled and talented workers may make it increasingly difficult and expensive for us to attract and retain a service team capable of supporting our clients or a sales team that is effective in selling our complex service offerings to clients.

An overall or prolonged labor shortage, increased turnover, or labor inflation could have a material adverse impact on our growth plans, client service delivery, results of operations and financial condition.

In addition, following the remote work environment that we implemented during the COVID-19 pandemic and a resulting shift in the expectations of our employees, many of our departments have now switched to a “hybrid” mode in which remote work is permitted one or more days per week.

These changes may impact productivity or have other material impacts on our operations.

Inflation may reduce our profitability.

Inflationary pressure could adversely impact our profitability.

Our operating costs have increased, and may continue to increase, due to the recent growth in inflation.

Our operating costs could increase, due to inflation.

We may not be able to fully offset these cost increases by raising prices for our services, particularly because our client agreements generally fix our pricing for a period of time, which could result in downward pressure on our profit margins.

Further, our clients may choose to reduce their business with us if we increase our pricing.

Please also read “ — Increases in health insurance costs or our inability to secure replacement health insurance coverage on competitive terms could have a material adverse effect on our business, financial condition or results of operations .”

Geographic market concentration makes our results of operations vulnerable to regional economic factors.

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Accordingly, unless we are successful in expanding in our current markets and into new markets, which we believe will take additional time, for the foreseeable future, a significant portion of our revenues may be subject to economic, statutory, and regulatory factors specific to New York, California, and Texas.

2024 Form 10-K

We are subject to covenants under our credit facility that may restrict our business and financing activities.

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• enter into new lines of business,

2025 Form 10-K

• make investments, and

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Accordingly, future pandemics may present, material uncertainty and risk with respect to our business, and may have a material adverse effect on our financial condition, results of operations, cash flows and business.

PEO HR Outsourcing Solutions Risks

PEO HR Solutions Risks

We assume liability for WSEE payroll, payroll taxes, benefits costs and workers’ compensation costs and are responsible for their payment regardless of the amount billed to or paid by our clients.

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• withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity

2024 Form 10-K

• providing benefits to WSEEs

• providing one or more benefits to WSEEs

• providing workers’ compensation coverage to WSEEs

Further, the increase in remote work, including by WSEEs, has complicated the calculation of payroll and unemployment taxes applicable to those individuals.

We are dependent on our PEO Outsourcing Solutions clients to properly report the locations in which WSEEs perform services.

We are dependent on our PEO HR Solutions clients to properly report the locations in which WSEEs perform services.

If a regulatory authority were to determine that we did not properly calculate or transmit these amounts, then we could be subject to fines, penalties, or other liabilities, which we may not be able to recover from our clients.

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If a client does not pay us, if the costs of services we provide to WSEEs exceed the fees a client pays us, or if we incur fines and penalties as a result of an adverse determination related to our payroll and unemployment tax calculations, our ultimate liability for WSEE payroll, payroll taxes, workers’ compensation and/or benefits costs, as well as any fines or penalties, could have a material adverse effect on our financial condition or results of operations.

2025 Form 10-K

Increases in health insurance costs or our inability to secure replacement health insurance coverage on competitive terms could have a material adverse effect on our business, financial condition or results of operations.

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Our primary health insurance contract expires on December 31, 2028, subject to cancellation by either party upon 180 days’ notice.

We believe that there are a limited number of health insurance providers with the national coverage necessary to support our approach to providing healthcare benefits.

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

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Although all of our carriers remain responsible to pay all covered claims, under our health insurance contract with United, we retain an obligation to United to fund the cost of the plan.

The profitability of our PEO HR Outsourcing Solutions is affected by the overall expenses associated with the cost of delivering our services, one of the largest of which is the cost of our health insurance.

The profitability of our PEO HR Solutions is affected by the overall expenses associated with the cost of delivering our services, one of the largest of which is the cost of our health insurance.

Our ability to accurately anticipate the expenses associated with the plans, including claims costs on a quarterly or annual basis, can impact our results of operations.

If the plans experience an unexpected increase in the number or severity of claims, our associated health insurance costs could increase beyond anticipated levels, as we experienced in 2021 and 2023.

These costs are further impacted by a number of factors, including coverage options elected by employees, macro-economic changes, proposed and enacted regulatory changes and wide-spread health-related outbreaks.

If the plans experience an unexpected increase in the number or severity of claims, our associated health insurance costs could increase beyond anticipated levels, as we have experienced in the past, most recently in 2025.

These costs are further impacted by a number of factors, including coverage options elected by employees, macro-economic changes, proposed and enacted regulatory changes, wide-spread health-related outbreaks, increased utilization of new pharmaceuticals, and the use of AI-based billing solutions by healthcare providers.

Contractual arrangements and competitive market conditions may limit or delay our ability to increase service fees to offset any associated potential increased costs associated with the plans, which could substantially impair our financial condition or results of operations.

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Health care reform could affect our health insurance plan and could lead to a significant disruption in our business.

Many of our clients select a PEO Outsourcing Solution pursuant to which we offer the health and welfare benefit plans sponsored by us to the WSEEs co-employed by those clients.

Many of our clients select a PEO HR Solution pursuant to which we offer the health and welfare benefit plans sponsored by us to the WSEEs co-employed by those clients.

The future impact and direction of healthcare reform, including future legislative or executive actions, is unknown and, if any such developments were to reduce our ability to make health care benefits available to WSEEs or were to make our offerings less attractive to our clients, then our business, financial condition, and results of operations may be materially adversely affected.

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Department of Health and Human Services (“HHS”) has not addressed or in some instances is unclear as to the application of certain aspects of federal health care reform laws in the PEO relationship or whether such provisions should be applied at the PEO or client level.

2024 Form 10-K

Various states have adopted or are considering reforms that may impact the requirements for or availability of PEO-sponsored health plans.

At this time, the insurance market reforms have not had a material adverse impact on our business operations, and if any future changes impact our ability to attract and retain clients, or our ability to increase service fees to offset any increased costs, then our business may be materially adversely affected.

Subsequent changes resulting from action that may be taken at the federal or state level may impact our benefit plans, business model and future results of operations, including repeal or repeal and replacement of current healthcare reform provisions as has been advocated by some in the new Presidential administration and Congressional leaders.

Subsequent changes resulting from action that may be taken at the federal or state level may impact our benefit plans, business model and future results of operations, including repeal or repeal and replacement of current healthcare reform provisions as has been advocated by some in the Presidential administration and Congressional leaders.

In future periods, changes may result in increased costs to us and could affect our ability to attract and retain clients.

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We are currently unable to determine whether potential future healthcare reform changes or other regulatory action, including at the state level, may adversely affect our business or market conditions.

2025 Form 10-K

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.

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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.

In addition, if Insperity were found not to be the employer sponsoring a single-employer plan under ERISA for purposes of its health benefits plan, we could be subject to additional requirements under state and federal laws that could restrict our ability to provide benefits to our WSEEs in the same manner that we do today, which could negatively impact our business.

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

Further, as a result of such finding, Insperity and our 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.

In addition, if Insperity were found not to be the employer sponsoring a single-employer plan under ERISA for purposes of our health benefits plan, we could be subject to additional requirements under state and federal laws that could restrict our ability to provide benefits to our WSEEs in the same manner that we do today, which could negatively impact our business.

In the case of any such events, we would endeavor to make available similar benefits at comparable costs in a manner that complied with applicable state laws.

However, if we were unable to promptly transition our benefit plans to a compliant structure with terms that were acceptable to our clients and at a comparable cost to us, then our business, financial condition, and results of operations could be materially adversely affected.

Increases in workers’ compensation costs or inability to secure replacement coverage on competitive terms could lead to a significant disruption and harm to our business.

Increases in workers’ compensation costs or our inability to secure replacement coverage on competitive terms could lead to a significant disruption and harm to our business.

Our workers’ compensation coverage has been provided through an arrangement with Chubb since 2007.

Under our current arrangement with Chubb for claims incurred on or before September 30, 2019, we have a financial responsibility to

2024 Form 10-K

Chubb for the first $1 million layer of claims per occurrence and for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed the first $1 million.

Under our current arrangement with Chubb for claims incurred on or before September 30, 2019, we have a financial responsibility to Chubb for the first $1 million layer of claims per occurrence and for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed the first $1 million.

Effective for claims incurred on or after October 1, 2019, our financial responsibility increased as we have financial responsibility to Chubb for the first $1.5 million layer of claims per occurrence and for claims over $1.5 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5 million.

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Workers’ compensation costs are a significant portion of our direct costs and contractual arrangements and competitive market conditions may limit or delay our ability to increase service fees to offset any associated potential increased costs.

If we were to experience an unexpected large increase in the number or severity of claims, our workers’ compensation costs could increase, which could have a material adverse effect on our results of operations or financial condition.

If we were to experience an unexpected large increase in the number or severity of claims, our workers’ compensation

2025 Form 10-K

costs could increase, which could have a material adverse effect on our results of operations or financial condition.

Further, if the overall pricing of our services includes cost assumptions based on inaccurate forecasts of our workers’ compensation costs, our profitability or our ability to attract and retain clients may be adversely impacted.

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

Our ability to adjust and collect service fees for increases in unemployment tax rates may be limited.

Our ability to adjust and collect service fees for increases in unemployment or other tax rates may be limited.

We record our SUI expense based on taxable wages and tax rates assigned by each state.

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Some states have the ability under law to increase SUI rates retroactively to cover deficiencies in the unemployment fund.

In addition, FUTA may be retroactively increased in certain states in the event the state fails to timely repay federal unemployment loans, as we recently experienced with California and New York in 2024.

Generally, our contractual agreements allow us to incorporate such statutory increases into our service fees upon the effective date of the rate change.

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As a result, such increases could have a material adverse effect on our financial condition or results of operations.

Many of our contracts for our PEO HR Outsourcing Solutions may be canceled on short notice.

Many of our contracts for our PEO HR Solutions may be canceled on short notice.

Our inability to renew client contracts or attract new clients could materially and adversely affect our financial condition or results of operations.

Our standard CSA can generally be canceled by us or the client with 30 days’ notice.

Accordingly, the short-term nature of the CSA makes us vulnerable to potential cancellations by existing PEO HR Outsourcing solution clients, which could materially and adversely affect our financial condition or results of operations.

Accordingly, the short-term nature of the CSA makes us vulnerable to potential cancellations by existing PEO HR Solutions clients, which could materially and adversely affect our financial condition or results of operations.

Our middle market sector, which we generally define as those companies with employees ranging from approximately 150 to 5,000 WSEEs, represented 26% of our average paid WSEEs, and clients with an average number of WSEEs that exceed 1,000 WSEEs represented 2% during 2025 .

Our new HR Scale solution targets larger clients and could increase the number of clients with over 1,000 WSEEs.

In the event we have large clients that terminate or an increase in terminating clients from our middle market client base, the financial impact of such an event could be significant.

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Our loss of insurance coverage, the failure of our insurance carriers or increased insurance costs or deductibles could have a material adverse effect on us.

As part of our PEO HR Outsourcing Solutions, in addition to our health insurance carriers, we contract with other

2024 Form 10-K

insurance carriers to provide workers’ compensation insurance and employment practices liability insurance.

As part of our PEO HR Solutions, in addition to our health insurance carriers, we contract with other insurance carriers to provide workers’ compensation insurance and employment practices liability insurance.

In addition, we obtain insurance coverage for various commercial risks in our business such as property insurance, errors and omissions insurance, cyber liability insurance, general liability insurance, fiduciary liability insurance and ERISA bond coverage, automobile liability insurance, and directors’ and officers’ liability insurance.

The failure of any insurance carrier, such as occurred in 2001 with respect to a previous workers’ compensation insurance provider, providing such coverage could leave us exposed to uninsured risk and could have a material adverse effect on our business and results of operations.

The failure of any insurance carrier with respect to a previous workers’ compensation insurance provider, providing such coverage could leave us exposed to uninsured risk and could have a material adverse effect on our business and results of operations.

In addition, in the event that our primary health carriers in any key market make material changes to their network of health care providers or facilities, such as the discontinuation of prominent hospital networks in key markets on occasion by a carrier in connection with their ongoing negotiations with those networks, then our ability to attract and retain clients in that market may be adversely affected, which could have a material adverse effect on our business and results of operations.

Further, we have experienced an increase in insurance premiums for our corporate policies as well as an increase in the deductible amounts for which we retain liability and a decrease in coverage limits.

If these premiums or deductible amounts continue to increase, or coverage limits continue to decrease we would have increased exposure with respect to costs and insurance claims, which could have a material adverse effect on our business and results of operations.

If these premiums or deductible amounts continue to increase, or

2025 Form 10-K

coverage limits continue to decrease we would have increased exposure with respect to costs and insurance claims, which could have a material adverse effect on our business and results of operations.

A determination that a client is liable for employment taxes not paid by a PEO may discourage clients from contracting with us in the future.

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Our CSA establishes the contractual division of responsibilities between Insperity and our clients for various human capital management matters, including compliance with and liability under various governmental regulations.

Also, we maintain an employment practices liability insurance policy for our clients.

Because we act as a co-employer, we may be subject to liability for violations of various employment, payroll, discrimination, privacy and biometric consent, and workplace safety laws despite these contractual provisions, even if we do not participate in such violations.

AI-based technologies may also facilitate the ability of WSEEs, either on their own or with the assistance of counsel, to bring claims, which could impact the cost of the employment practices liability insurance that we provide or result in increased costs to us if we are also named in any such claims.

Although the CSA generally requires the client to indemnify us for certain liabilities attributable to the client’s conduct and for the deductible under our employment practices liability insurance policy that we maintain on their behalf, we may not be able to collect on such a contractual indemnification claim and thus may be responsible for satisfying such liabilities to the extent that such liabilities are not covered or insured against under our insurance policies.

These amounts could be significant and could result in increased insurance premiums for us, any of which could impact our business, financial condition or results of operations.

2025 Form 10-K

Because we act as a co-employer, we may be subject to liability for violations of various employment, payroll, discrimination, and workplace safety laws despite these contractual provisions, even if we do not participate in such violations.

Although the CSA generally requires the client to indemnify us for certain liabilities attributable to the client’s conduct, we may not be able to collect on such a contractual indemnification claim and thus may be responsible for satisfying such liabilities to the extent that such liabilities are not covered or insured against under our insurance policies.

In addition, WSEEs may be deemed to be our agents, which may subject us to liability for the actions of such WSEEs.

Changes in federal, state and local regulation or our inability to obtain licenses under new regulatory frameworks could have a material adverse effect on our results of operations or financial condition.

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However, many of these current laws (such as the Act, ERISA, and some state insurance codes and employment tax laws) do not specifically address the obligations and responsibilities of non-traditional employers such as PEOs, and the definition of “employer” under these laws is not uniform despite the SBEA having provided clarification under federal employment tax laws for CPEOs.

Some governmental programs and incentives designed to assist businesses and employees require us to make changes to our processes and systems in order to comply as an employer or to enable our clients and our WSEEs to benefit from these programs.

For example, during the COVID pandemic, the CARES Act allowed companies to defer certain payroll taxes, which were reflected in the payrolls we processed for those clients and required us to make certain changes, without clear regulatory guidance.

If we are unable to meet these requirements or make these changes, we could be subject to governmental fines or penalties or we may not meet client expectations, any of which could have a material adverse effect on our business, financial condition or results of operations.

In addition, many of the states in which we operate have not addressed the PEO relationship for purposes of compliance with applicable state laws governing the employer/employee relationship or PEO health insurance plans.

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2025 Form 10-K

Competition and other developments in the HR services industry may impact our growth and/or profitability.

Competition and other developments in the HR services industry, including the impact of AI, may impact our growth and/or profitability.

The human resources services industry, including the PEO industry, is highly fragmented.

Many PEOs have limited operations and fewer than 2,500 WSEEs, but there are several industry participants that are comparable to our size or larger.

We also encounter competition from “fee for service” companies such as payroll processing firms, insurance companies, human resources consultants and human resources technology solutions as well as cloud-based self-service bundled human resources offerings.

We also encounter competition from “fee for service” companies such as payroll processing firms, insurance companies, human resources consultants and human resources technology solutions as well as web-based self-service bundled human resources offerings.

Our competitors include the PEO divisions of large business services companies, such as Automatic Data Processing, Inc.

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

In many cases, these competitors offer a reduced service PEO offering at a lower price than our PEO HR Outsourcing Solutions.

In many cases, these competitors offer a reduced service PEO offering at a lower price than our PEO HR Solutions.

We expect that as the PEO industry grows and its regulatory framework becomes better established, well organized competition with greater resources than we have may enter the PEO market, possibly including large “fee for service” companies currently providing a more limited range of services.

In addition, competitors may be able to offer or develop new technology-based lower service models that may require us to make substantial investments in order to effectively compete.

We offer a lower priced reduced service level PEO offering referred to as Workforce Synchronization in response to certain middle market client needs and the evolving PEO marketplace.

As of December 2024 , approximately 15% of our WSEEs were co-employed by Workforce Synchronization clients.

In the event we were to experience a significant increase in the number of clients using the Workforce Synchronization offering or increased pricing pressures in the PEO marketplace without corresponding reductions in operating costs, our operating margins may decline, which could have a material adverse impact on our financial condition or results of operations.

Further, AI may accelerate the ability of new competitors to enter the market with a lower cost or different business model, or may reduce the need of our clients and target market for the types of services that our PEO HR Solutions provide.

We offer a lower priced reduced service level PEO offering referred to as HR 360 Select Edition in response to certain middle market client needs and the evolving PEO marketplace.

As of December 2025 , approximately 16% of our WSEEs were co-employed by HR 360 Select Edition clients.

In the event we were to experience a significant increase in the number of clients using the HR 360 Select Edition offering or increased pricing pressures in the PEO marketplace without corresponding reductions in operating costs, our operating margins may decline, which could have a material adverse impact on our financial condition or results of operations.

Technology Risks

Evolving regulations, market trends and client expectations require us to constantly enhance and expand our service and technology offerings.

The HR services industry is experiencing rapid technological advances to meet client expectations and expanding regulations.

As new regulations are adopted, we must modify our systems to address these changes in the law, such as our recent efforts to implement the assistance provided to businesses and employees under the Covid Relief Programs and Secure 2.0 Act of 2022.

The HR services industry is experiencing rapid technological advances, including as a result of AI, to meet client expectations and expanding regulations.

As new regulations are adopted, we must modify our systems to address these changes in the law, such as our efforts to implement the assistance provided to businesses and employees under the Covid relief programs, Secure 2.0 Act of 2022, and the OBBB.

In order to make these types of modifications, we may be required to reallocate resources, potentially resulting in delays to planned competitive improvements to our systems.

If we do not successfully or timely deploy these types of modifications, we may be unable to comply with regulations, which could subject us to penalties, damage our reputation or result in decreased sales.

Further, in order to effectively compete in this environment, we must identify and predict trends, and adapt our technology and service offerings accordingly.

In addition, as a larger portion of our client base falls within the middle market segment, we must also develop different technology and services to meet the more complex needs and demands of this key group.

These efforts require us to devote substantial resources to develop new functionality, or to integrate third-party solutions, into our offerings.

Further, in order to effectively compete in this environment, we must identify and predict trends, and adapt our technology and service offerings accordingly, including by leveraging AI in our solutions.

In addition, if a larger portion of our client base falls within the middle market segment, we must also develop different technology and services to meet the more complex needs and demands of this key group, including by developing our new HR Scale solution that is based on our proprietary Workday-based client tenant.

(Please see “— We may not fully realize the anticipated benefits of our strategic partnership and joint solution with Workday, which could have a material adverse impact on our financial condition or results of operations .

” below for a further discussion.) These efforts may require us to devote substantial resources to develop new functionality, or to integrate third-party solutions, into our offerings.

If we fail to respond successfully to these developments or we make investments in enhancements that are not accepted by the market, then the demand for our solutions and services may diminish.

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We must manage all of these systems, and are dependent on third parties to manage the systems that we obtain from them, including any upgrades, replacements or enhancements, to ensure that they continue to support our services.

For example, in connection with our strategic partnership with Workday, Inc.

(“Workday”), we are currently working to develop a joint solution with Workday that requires integrations with third parties and with our proprietary systems for our PEO HR Outsourcing Solutions.

We also continue to monitor and make changes to our proprietary system for our PEO HR Outsourcing Solutions for compliance and modernization.

For example, in connection with our HR Scale offering, we developed a joint solution that utilizes a proprietary instance of Workday’s HCM solution that is integrated with

2025 Form 10-K

third parties and with our proprietary systems for our PEO HR Solutions.

We also continue to monitor and make changes to our proprietary system for our PEO HR Solutions for compliance and modernization.

Any delays or failures resulting from network outages;

planned upgrades, enhancements, or replacements of software, hardware, or other systems, including in connection with our project with Workday or any updated for compliance and modernization of systems;

planned upgrades, enhancements, or replacements of software, hardware, or other systems, including in connection with our HR Scale offering or any updated for compliance and modernization of systems;

or other data processing disruptions, even for a brief period of time, could result in our inability to timely process transactions.

The speed with which we, or third-party vendors, are able to address significant cybersecurity incidents may be influenced by the cooperation of certain government agencies.

2024 Form 10-K

incur significant costs in the future to protect against damage or disruptions that could be caused by cybersecurity incidents.

We may also incur significant costs in the future to protect against damage or disruptions that could be caused by cybersecurity incidents or to address privacy violations.

If such failures cause us to not meet client service expectations or to breach our obligations to our clients, we may lose existing clients, have difficulty attracting new clients, incur regulatory penalties or liability to our clients, or suffer other financial losses, which may have a material adverse effect on our business and financial condition.

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In connection with our offerings, we collect, use, transmit and store large amounts of personal and business information about our WSEEs, employees paid under our traditional payroll solution, and clients, including payroll information, personal and business financial data, social security numbers, bank account numbers, tax information and other sensitive personal and business information.

Attacks on information technology systems continue to grow in frequency and sophistication (including the use of emerging artificial intelligence technologies), and we and our third-party vendors are targeted by unauthorized parties using malicious tactics, code and viruses.

Attacks on information technology systems continue to grow in frequency and sophistication (including the use of emerging artificial intelligence (“AI”) technologies), and we and our third-party vendors are targeted by unauthorized parties using malicious tactics, code and viruses.

Hardware or applications we develop or procure from third-party vendors may contain defects in design or other problems that could unexpectedly compromise the confidentiality, integrity or availability of data or our systems.

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If any person, including any corporate employee or WSEE, misappropriates or misuses such funds, documents or data, we may have liability for damages, and our reputation could be substantially harmed and we may have other liabilities that could have a material adverse effect on our business.

We also use a variety of tools to assist with our targeted digital marketing efforts, which is one of our principal means of identifying and engaging with prospective clients.

Evolving and expanding privacy laws may limit our ability to attract new clients and our violation of these laws could subject us to litigation, fines and penalties, which could be substantial.

Further, we increasingly rely on third-party hosted solutions as part of our operations.

We have limited ability to ensure that these parties are maintaining adequate cybersecurity safeguards or that they are using our data, which could include personal information of WSEEs, in accordance with our contract and their privacy policy.

In the event of a misappropriation of private WSEE information in possession of the third parties, we may be liable to the WSEEs and subject to governmental fines and penalties, any of which could be material, and we may be limited in our ability to seek indemnity or reimbursement from the third party.

Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service attack, ransomware attack, corruption of data, theft of private or other sensitive information, or similar malicious act by a party (including our corporate employees or WSEEs), or inadvertent acts or omissions by our vendors or clients, our own corporate employees or WSEEs, could result in the loss, disclosure or misuse of confidential or proprietary information, and could have a material adverse effect on our business operations or that of our clients, result in liability or regulatory sanction, or cause a loss of confidence in our ability to serve clients.

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Accordingly, the impact of a data security incident could have a material adverse effect on our business, results of operations and financial condition.

Failure to comply with privacy, data protection and cybersecurity laws and regulations could have a material adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.

2025 Form 10-K

Failure to comply with privacy, data protection, biometric, AI, and cybersecurity laws and regulations could have a material adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.

We are subject to various laws, rules and regulations relating to the collection, use, transmission and security and privacy of personal and business information.

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Other states have adopted or are currently contemplating additional privacy requirements.

Generally, these laws do not address the coemployment relationship, which requires us to make determinations as to the requirements applicable to our

2024 Form 10-K

WSEEs and our PEO Outsourcing Solutions clients.

Some states have also adopted laws regarding the use of biometric data, which laws may be applicable to us or our clients that use timeclocks or other HR technology with biometric scanners.

Also, in recent years, legislation that creates obligations with respect to the development and/or use of AI has been adopted or is under consideration in the U.S.

at both the federal and state level.

As a result, current or future laws (including product liability regimes), regulatory or self-regulatory requirements or ethical considerations, including our own published, guiding ethical principles regarding AI and machine learning, could restrict or impose burdensome and costly requirements on our ability to leverage data and/or these technologies in innovative ways.

Generally, these laws do not address the co-employment relationship, which requires us to make determinations as to the requirements applicable to our WSEEs and our PEO HR Solutions clients.

The future enactment of similar laws, rules or regulations, or an adverse determination as to the applicability of these laws, rules, or regulations to us, could have a material adverse impact on us through increased costs or restrictions on our businesses and noncompliance could result in regulatory penalties and significant liability.

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We lease hosting facilities for our data centers at two separate facilities with one facility acting as our primary data center.

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

These facilities host our internally-developed business applications, telecommunications equipment, information security infrastructure, and network equipment.

If our data centers experience any interruptions or outages, and our business continuity plan is delayed or fails, then our operations may be materially impacted, which could result in our failure to meet our obligations to our clients, WSEEs, tax authorities, and/or other vendors, which could damage our reputation, subject us to liability, and have a material adverse effect on our business and financial condition.

In addition, some of our systems and services rely upon third-party technology.

Examples include, the human capital management system on which our Workforce Acceleration solution is based, the data analytics solution on which our Insperity People Analytics solution is based, and the payroll tax calculation and reporting tools that provide the rates used to calculate payroll taxes for our PEO HR Outsourcing Solutions, among others.

In addition, the joint solution that we are developing with Workday will be based on Workday’s human capital management solution.

In addition, many of our systems and services rely upon third-party technology.

For example, Insperity HR Scale that is under development with Workday utilizes Workday’s HCM.

Other examples include the human capital management system on which our HR Core solution is based, the data analytics solution on which our Insperity People Analytics solution is based, and the payroll tax calculation and reporting tools that provide the rates used to calculate payroll taxes for our PEO HR Solutions, among others.

Any failure by these service providers to deliver their services in a timely manner and in compliance with applicable laws could result in material interruptions to our operations;

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and result in a loss of clients.

2025 Form 10-K

Other Operational Risks

We may not fully realize the anticipated benefits of our strategic partnership and plans to develop a joint solution with Workday, which could have a material adverse impact on our financial condition or results of operations.

We have announced a strategic partnership and are developing a joint solution with Workday.

The joint solution would involve, among other things, the offering of our PEO services using Workday’s human capital management solution, as well as joint marketing and sales efforts.

The joint solution also requires integration with other third-party vendors and with our proprietary system for our PEO HR Outsourcing Solutions.

The success of the strategic partnership and joint solution will depend on many factors, and we may not realize all, or any, of the anticipated benefits.

We have devoted substantial resources and incurred significant costs to develop the joint solution, and expect to continue to devote substantial resources and to incur significant costs.

The strategic partnership and plans to develop a joint solution involve numerous risks, including that we may be unable to complete the development and implementation of the joint solution, or that development and implementation of the joint solution may be more difficult, time-consuming, or costly than expected, including due to difficulties with integrations with third party vendors.

We may not fully realize the anticipated benefits of our strategic partnership and joint solution with Workday, which could have a material adverse impact on our financial condition or results of operations.

We have announced a strategic partnership and are developing a joint solution with Workday known as Insperity HR Scale.

In 2025, we announced that we had entered into agreements with clients for our HR Scale solution, our joint solution with Workday, commencing in the first quarter of 2026.

Insperity HR Scale involves, among other things, the offering of our PEO services using Workday’s human capital management solution, as well as joint marketing and sales efforts.

The joint solution also requires integration with other third-party vendors and with our proprietary system for our PEO HR Solutions.

The success of the strategic partnership and Insperity HR Scale will depend on many factors, and we may not realize all, or any, of the anticipated benefits.

We have devoted substantial resources and incurred significant costs to develop Insperity HR Scale, and expect to continue to devote additional substantial resources and to spend additional significant amounts.

The strategic partnership and development of Insperity HR Scale involve numerous risks, including that we may be unable to complete the implementation of Insperity HR Scale, or that implementation of Insperity HR Scale may be more difficult, time-consuming, or costly than expected, including due to difficulties with integrations with third party vendors.

We may also not receive the expected sales, marketing, and other benefits from the strategic partnership.

The full benefit of the strategic partnership requires the cooperation of the two companies on sales, marketing, and technology matters, as well as our ability to successfully integrate and implement the Workday-based solution with our other processes and systems in a manner that allows us to maintain compliance as a professional employer organization and incorporate appropriate financial and management systems and controls.

In addition, we may fail to effectively market or sell the joint solution, or there may be less demand than anticipated for the joint solution.

The initiatives related to the strategic partnership, including the development of the joint solution, may divert the attention of our technology, service, compliance, marketing, sales, management, and other teams away from our existing business solutions, which could result in the loss of existing or prospective clients or fines, penalties, or other liabilities if our existing business solutions and compliance are disrupted.

We may also have conflicts or disagreements with Workday, which could disrupt the strategic partnership, could impact the development of the joint solution, and could lead to termination of the strategic partnership.

2024 Form 10-K

The occurrence of one or more of these events could result in our failure to achieve anticipated growth or revenues, or require us to devote additional resources to the strategic partnership or the development of the joint solution, or to lose the investments made relating to the development of the joint solution, any of which could result in a material adverse effect on our business, financial condition, and results of operations, as well as reputational damage that could negatively impact our sales and retention efforts.

The full benefit of the strategic partnership requires the cooperation of the two companies on sales, marketing, and technology matters, as well as our ability to successfully integrate and implement Insperity HR Scale with our other processes and systems in a manner that allows us to maintain compliance as a professional employer organization and incorporate appropriate financial and management systems and controls.

In addition, we may fail to effectively market or sell Insperity HR Scale, or there may be less demand than anticipated for Insperity HR Scale.

The strategic partnership and implementation of Insperity HR Scale, may divert the attention of our technology, service, compliance, marketing, sales, management, and other teams away from our existing business solutions, which could result in the loss of existing or prospective clients or fines, penalties, or other liabilities if our existing business solutions and compliance are disrupted.

We may also have conflicts or disagreements with Workday, which could disrupt the strategic partnership, could impact the development of Insperity HR Scale, and could lead to termination of the strategic partnership.

The occurrence of one or more of these events could result in our failure to achieve anticipated growth or revenues, or require us to devote additional resources to the strategic partnership or to Insperity HR Scale, or to lose the investments made relating to the development of Insperity HR Scale, any of which could result in a material adverse effect on our business, financial condition, and results of operations, as well as reputational damage that could negatively impact our sales and retention efforts.

Failure to integrate or realize the expected return on future product offerings, including through acquisitions, strategic partnerships, and investments, could have a material adverse impact on our financial condition or results of operations.

We have adopted a strategy to market and sell additional solutions within and outside of our PEO HR Outsourcing Solutions.

We have adopted a strategy to market and sell additional solutions within and outside of our PEO HR Solutions.

As part of this strategy, periodically we make strategic long-term decisions to partner with (including as a reseller arrangement), invest in and/or acquire new companies, business units or assets in order to offer new or enhanced solutions.

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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 1A. Risk Factors