Company: NSP
Filing Date: 2025-02-11
Form Type: 10-K
Source: 0001000753-25-000008
Chunk: 61

Company: INSPERITY, INC.
Filing Date: 2025-02-11
Form: 10-K
Item: Item 7
Chunk 61
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 compensation costs by $32 million and $33 million, respectively, for changes in estimated losses related to prior reporting periods. 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 4.3% in both 2024 and 2023) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Income.

Our claim trends could be greater than or less than our prior estimates, in which case we would revise our claims estimates and record an adjustment to workers’ compensation costs in the period such determination is made. If we were to experience any significant changes in actuarial assumptions, our loss development rates could increase (or decrease), which would result in an increase (or decrease) in workers’ compensation costs and a resulting decrease (or increase) in net income reported in our Consolidated Statements of Income.

The following table illustrates the sensitivity of changes in the loss development rate on our estimate of workers’ compensation costs totaling $75 million in 2024:

Change in Loss Development RateChange in Workers’ Compensation Costs (in millions)Change inNet Income (in millions)(5.0)%$(4)$3 (2.5)%(2)1 2.5%2 (1)5.0%4 (3)

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. 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. In 2024, we received $39 million for the return of excess claim funds related to the workers’ compensation program, which decreased deposits – workers’ compensation. As of December 31, 2024, we had restricted cash of $69 million and deposits – workers’ compensation of $178 million. We have estimated and accrued $204 million in incurred workers’ compensation claim costs as of December 31, 2024. Our estimate of incurred claim costs expected to be paid within one year is recorded as accrued workers