INSPERITY INC

Cash, Cash Equivalents and Marketable Securities

The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments:

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at December 31, 2024 and December 31, 2023 included $830 million and $510 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $91 million and $28 million, respectively, in client prepayments. At December 31, 2024 included in our $830 million of funds associated with federal and state income tax withholdings was $440 million of funds we received in late December 2024 from the Internal Revenue Service related to employee retention tax credits claimed by our PEO clients under the COVID relief programs, that are expected to be distributed to clients in early 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents, Restricted Cash, Funds Held for Clients, and Deposits – Workers’ Compensation

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

(1)Funds held for clients represent amounts held on behalf of our Traditional Payroll Solution customers that are restricted for the purpose of satisfying obligations to remit funds to clients’ employees and various tax authorities.

Please read Note 1. “Accounting Policies,” for a discussion of our accounting policies for deposits — workers’ compensation and restricted cash.

Payroll Taxes and Other Payroll Deductions Payable

As a co-employer, we generally assume responsibility for the withholding and remittance of federal and state payroll taxes and other payroll deductions with respect to wages and salaries paid to our WSEEs. As of December 31, 2024 and December 31, 2023, payroll taxes and other payroll deductions payable were $901 million and $566 million, respectively. The balance at December 31, 2024 includes $440 million of funds we received in late December 2024 from the Internal Revenue Service related to employee retention tax credits claimed by our PEO clients under the COVID relief programs, that are expected to be distributed to clients in early 2025.

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

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

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

•Level 3 - significant unobservable inputs

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Instruments Measured and Recognized at Fair Value

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

Please read Note 2. “Other Balance Sheet Information,” for additional information.

During 2024, we transferred $158 million of claim funds previously held with Chubb to a trust account and those funds were subsequently invested in money market funds. Both before and after the transfer, these funds were included in restricted cash and deposits - workers’ compensation on our Consolidated Balance Sheet.

Our valuation techniques used to measure fair value for these securities during the period consisted primarily of third-party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs.

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

As of December 31, 2024, the contractual maturities of all marketable securities in our portfolio were less than one year.

Fair Value of Other Financial Instruments

The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, deposits and accounts payable approximate their fair values due to the short-term maturities of these instruments.

As of December 31, 2024, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy. Please read Note 6, “Long-Term Debt,” for additional information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable, net consisted of the following:

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 million as of both December 31, 2024 and 2023. 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.

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 worksite employee payroll cost and unbilled accounts receivable; however, these amounts are presented net in the Consolidated Statements of Income. We generally require clients to pay invoices for service fees no later than the same day as the applicable payroll date. As such, we generally do not require collateral. Client prepayments directly attributable to accrued worksite employee payroll costs and unbilled revenues have been netted as we have the legal right of offset for these amounts. Unbilled accounts receivable consisted of the following:

Deposits and prepaid health insurance consisted of the following:

The contractual arrangement with United for health insurance coverage requires us to maintain an accumulated cash surplus in the plan of $9 million, which is reported as deposits and prepaid health insurance in our Consolidated Balance Sheets. Please read Note 1,“Accounting Policies,” for a discussion of our accounting policies forhealth insurance costs andworkers’ compensation costs.