Customer Trust Funds

12 Months Ended

Dec. 31, 2020

Investments Debt And Equity Securities [Abstract]

6. Customer Trust Funds

Overview

In connection with our U.S., Canadian, and Indian payroll and tax filing services, we collect funds for payment of payroll and taxes; temporarily hold such funds, in trust for the U.S. and Canadian funds, until payment is due; remit the funds to the clients’ employees and appropriate taxing authorities; file federal, state, and local tax returns; and handle related regulatory correspondence and amendments. The assets held are intended for the specific purpose of satisfying client fund obligations and therefore are not freely available for our general business use.

Our customer trust funds are held and invested with the primary objectives being to protect the principal balance and to ensure adequate liquidity to meet cash flow requirements. Accordingly, we maintain on average approximately 49% of customer trust funds in liquidity portfolios with maturities ranging from one to 120 days, consisting of high-quality bank deposits, money market mutual funds, commercial paper, or collateralized short-term investments; and we maintain on average approximately 51% of customer trust funds in fixed income portfolios with maturities ranging from 120 days to 10 years, consisting of U.S. Treasury and agency securities, Canada government and provincial securities, as well as highly rated asset-backed, mortgage-backed, municipal, corporate, and bank securities. To maintain sufficient liquidity in the trust to meet payment obligations, we also have financing arrangements and may pledge fixed income securities for short-term financing.

Financial Statement Presentation

Investment income from invested customer trust funds, also referred to as float revenue or float, is a component of our compensation for providing services under agreements with our customers. Investment income from invested customer trust funds included in revenue amounted to $52.3 million, $80.2 million, and $67.0 million for the years ended December 31, 2020, 2019, and 2018, respectively. Investment income includes interest income, realized gains and losses from sales of customer trust funds’ investments, and unrealized credit losses determined to be unrecoverable.

The amortized cost of customer trust funds as of December 31, 2020, and 2019, is comprised of the original cost of assets acquired. The amortized cost and fair values of investments of customer trust funds available for sale were as follows:

	December 31, 2020
	Amortized		Gross Unrealized					Fair
	Cost		Gain		Loss			Value
	(Dollars in millions)
Money market securities, investments carried at cost and other cash equivalents	$	2,027.1	$	—	$	—		$	2,027.1
Available for sale investments:
U.S. government and agency securities		494.0		21.6		(0.1	)		515.5
Canadian and provincial government securities		396.4		15.5		—			411.9
Corporate debt securities		548.5		19.4		—			567.9
Asset-backed securities		192.2		4.9		—			197.1
Mortgage-backed securities		9.9		0.2		—			10.1
Other securities		16.5		0.1		—			16.6
Total available for sale investments		1,657.5		61.7		(0.1	)		1,719.1
Invested customer trust funds		3,684.6	$	61.7	$	(0.1	)		3,746.2
Trust receivables		13.2							13.2
Total customer trust funds	$	3,697.8						$	3,759.4

	December 31, 2019
	Amortized		Gross Unrealized					Fair
	Cost		Gain		Loss			Value
	(Dollars in millions)
Money market securities, investments carried at cost and other cash equivalents	$	1,348.1	$	—	$	—		$	1,348.1
Available for sale investments:
U.S. government and agency securities		542.4		7.1		(0.3	)		549.2
Canadian and provincial government securities		406.7		5.4		(0.7	)		411.4
Corporate debt securities		562.2		9.0		(0.3	)		570.9
Asset-backed securities		270.0		1.7		(0.3	)		271.4
Mortgage-backed securities		19.8		0.2		(0.1	)		19.9
Other securities		4.0		—		—			4.0
Total available for sale investments		1,805.1		23.4		(1.7	)		1,826.8
Invested customer trust funds		3,153.2	$	23.4	$	(1.7	)		3,174.9
Trust receivables (a)		40.4							29.2
Total customer trust funds	$	3,193.6						$	3,204.1

(a)

The fair value of trust receivable as of December 31, 2019, includes a loss of $11.2 million related to unrecovered duplicate payments resulting from the September 26, 2019, isolated service incident. Ceridian was liable for these unrecovered duplicate payments and reimbursed the customer trust for the resulting losses in the first quarter of 2020. Please refer to Note 17, “Commitments and Contingencies,” for further discussion of the September 26, 2019, isolated service incident.

The following represents the gross unrealized losses and the related fair value of the investments of customer trust funds available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

	December 31, 2020
	Less than 12 months					12 months or more				Total
	Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value
	(Dollars in millions)
U.S. government and agency securities	$	(0.1	)	$	42.1	$	—	$	—	$	(0.1	)	$	42.1
Total available for sale investments	$	(0.1	)	$	42.1	$	—	$	—	$	(0.1	)	$	42.1

Management does not believe that any individual unrealized loss was unrecoverable as of December 31, 2020. The unrealized losses are primarily attributable to changes in interest rates and not to credit deterioration. We currently do not intend to sell or expect to be required to sell the securities before the time required to recover the amortized cost.

The amortized cost and fair value of investment securities available for sale at December 31, 2020, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or to prepay obligations with or without call or prepayment penalties.

	December 31, 2020
	Cost		Fair Value
	(Dollars in millions)
Due in one year or less	$	2,487.7	$	2,491.2
Due in one to three years		753.4		785.8
Due in three to five years		335.1		349.1
Due after five years		108.4		120.1
Invested customer trust funds	$	3,684.6	$	3,746.2