Paychex 2012 Annual Report Download - page 23

have the ability to choose from a group of pre-defined fund selections or to customize their investment options
within their plan. Selling efforts for these services are focused primarily on our existing payroll client base, as the
processed payroll information allows for data integration necessary to provide these services efficiently. We are
one of the largest 401(k) recordkeepers for small businesses in the U.S. For fiscal 2012 and fiscal 2011, we
earned an average fee between twenty and twenty-five basis points from the external fund managers based on the
total asset value of client employee 401(k) funds. In May 2011, we acquired ePlan Services, Inc., a provider of
recordkeeping and administrative solutions to the defined contribution marketplace. This acquisition allows us to
expand our retirement services to financial advisors. As of May 31, 2012, retirement services were utilized by
approximately 59,000 clients and the asset value of client employee 401(k) funds externally managed totaled
approximately $15.7 billion.
Insurance services: Our licensed insurance agency, Paychex Insurance Agency, Inc. (“PIA”), provides
insurance through a variety of carriers. Insurance offerings include property and casualty coverage such as
workers’ compensation; business-owner policies; commercial auto; and health and benefits coverage, including
health, dental, vision, and life. Our insurance services simplify the insurance process to make it easy to find plans
with the features and affordability to meet the client’s needs. With access to numerous top national and regional
carriers, our professional insurance agents enjoy a wide selection of plans from which to best match the insurance
needs of small businesses. Clients also have the option to integrate with Paychex payroll processing for easy,
accurate plan administration. PIA has a website, www.paychexinsurance.com, with information and interactive
tools to help educate visitors on insurance and aid in making business insurance decisions. As of May 31, 2012,
approximately 107,000 clients have appointed PIA as their agent for servicing their business insurance needs.
eServices: We offer online human resource administration software products for employee benefits
management and administration and time and attendance solutions. Paychex HR Online offers powerful tools for
managing employee benefits, personnel information, and human resource compliance and reporting. Time and
Labor Online helps minimize the time spent compiling time sheet information. It allows the employer to handle
multiple payroll scenarios and results in improved productivity, accuracy, and reliability in the payroll process.
Other human resource services and products: We offer the outsourcing of plan administration under
section 125 of the Internal Revenue Code, allowing employees to use pre-tax dollars to pay for certain health
insurance benefits and health and dependent care expenses not covered by insurance. All required
implementation, administration, compliance, claims processing and reimbursement, and coverage tests are
provided with these services. We offer state unemployment insurance services, which provide clients with
prompt processing for all claims, appeals, determinations, change statements, and requests for separation
documents. Other Human Resource Services products include employee handbooks, management manuals, and
personnel and required regulatory forms. These products are designed to simplify clients’ office processes and
enhance their employee benefits programs.
Sales and Marketing
We market our services primarily through our direct sales force based in the metropolitan markets we serve,
with sales representatives specializing within our portfolio of services. Our sales representatives are also
supported by marketing, advertising, public relations, trade shows, and telemarketing programs. In recent years,
we have increased our emphasis on the selling of ancillary services and products to both new clients and our
existing client base.
In addition to our direct selling and marketing efforts, we utilize relationships with existing clients, certified
public accountants (“CPAs”), and banks for new client referrals. Approximately 60% of our new core payroll
clients (excluding business acquisitions) come from these referral sources. To further enhance our strong
relationship with CPAs, we have partnered with the American Institute of Certified Public Accountants
(“AICPA”) since 2003 and through September 2016 as the preferred payroll provider for its AICPA Business
Solutions Partner Program.
Our website at www.paychex.com, which includes online payroll sales presentations and service and
product information, is a cost-efficient tool that serves as a source of leads and new sales while complementing
the efforts of our direct sales force. This online tool allows us to market to clients in other areas. In addition, our
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