Paychex 2010 Annual Report Download - page 74

Note K — Employee Benefit Plans
401(k) plan: The Company maintains a contributory savings plan that qualifies under section 401(k) of the
Internal Revenue Code. The Paychex, Inc. 401(k) Incentive Retirement Plan (the “Plan”) allows all employees to
immediately participate in the salary deferral portion of the Plan, contributing up to a maximum of 50% of their
salary. Employees who have completed one year of service are eligible to receive a company matching contribution,
when such contribution is in effect. Prior to April 2009, the Company matched up to 100% of the first 3% of eligible
pay and up to 50% of the next 2% of eligible pay that an employee contributed to the Plan. Prior to September 2007,
the Company matched 50% of an employee’s voluntary contribution up to 6% of eligible pay. Effective April 3,
2009, the Company suspended the employer matching contribution and as of May 31, 2010, had not yet made a
decision related to its reinstatement.
The Plan is 100% participant-directed. Plan participants can fully diversify their portfolios by choosing from
any or all investment fund choices in the Plan. Transfers in and out of investment funds, including the Paychex, Inc.
Employee Stock Ownership Plan (ESOP) Stock Fund, are not restricted in any manner. The Company match
contribution, when in effect, follows the same fund elections as the employee compensation deferrals.
Company contributions to the Plan for fiscal 2009 and fiscal 2008 were $14.3 million and $15.1 million,
respectively.
Deferred compensation plans: The Company offers non-qualified and unfunded deferred compensation
plans to a select group of key employees, executive officers, and outside directors. Eligible employees are provided
with the opportunity to defer up to 50% of their annual base salary and bonus and outside directors to defer 100% of
their Board cash compensation. Gains and losses are credited based on the participant’s election of a variety of
investment choices. The Company does not match any participant deferral or guarantee its return. Distributions are
paid at one of the following dates selected by the participant: the participant’s termination date, the date the
participant retires from any active employment, or a designated specific date. In fiscal 2009, participants were
allowed to make a one-time election for a distribution under the Internal Revenue Service Section 409A transition
rules. The amounts accrued under these plans were $7.3 million and $6.2 million as of May 31, 2010 and May 31,
2009, respectively, and are reflected in other long-term liabilities in the accompanying Consolidated Balance
Sheets.
Note L — Commitments and Contingencies
Lines of credit: As of May 31, 2010, the Company had unused borrowing capacity available under four
uncommitted, secured, short-term lines of credit at market rates of interest with financial institutions as follows:
Financial institution Amount available Expiration date
JP Morgan Chase Bank, N.A. ........................... $350 million February 2011
Bank of America, N.A. ............................... $250 million February 2011
PNC Bank, National Association ......................... $150 million February 2011
Wells Fargo Bank, National Association ................... $150 million February 2011
The credit facilities are evidenced by promissory notes and are secured by separate pledge security agreements
by and between Paychex, Inc. and each of the financial institutions (the “Lenders”), pursuant to which the Company
has granted each of the Lenders a security interest in certain investment securities accounts. The collateral is
maintained in a pooled custody account pursuant to the terms of a control agreement and is to be administered under
an intercreditor agreement among the Lenders. Under certain circumstances, individual Lenders may require that
collateral be transferred from the pooled account into segregated accounts for the benefit of such individual
Lenders.
The primary uses of the lines of credit would be to meet short-term funding requirements related to deposit
account overdrafts and client fund obligations arising from electronic payment transactions on behalf of clients in
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PAYCHEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)