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Paychex readies its products for health care

Rochester Business Journal
July 5, 2013

As Paychex Inc. moves into fiscal 2014, company officials see changes to health care laws as great potential for growth.
Martin Mucci, Paychex president and CEO, said health care reform will be one of the company's most important initiatives in the new fiscal year. The legislation will have a far-reaching impact for businesses, something the Penfield-based payroll and human resources services company is ready to seize on, he said.
"We will see changes in the way businesses handle not only insurance but payroll reporting, administration, monitoring and employee benefit offerings," Mucci said on a conference call after the company reported its fourth-quarter 2013 results. "We're excited for the opportunity to assist our clients as they navigate the complexity of health care reform by providing them with information and support."
Paychex has added several products to help employers navigate health care reform. Mucci said the company's Employer Shared Responsibility Service makes it easier for business owners to determine if they must adhere to the legislation's employer shared responsibility provision.
The Paychex Benefit Account also gives employers flexible spending accounts, health savings accounts and health reimbursement arrangements on a single platform, Mucci added.
"We have also launched a new health care reform section on our website designed to provide answers, information and solutions that will help our clients and employers who need to take action on health care reform," Mucci said.
Paychex is coming off a fourth quarter in which it reported revenue of $585.3 million, slightly under analysts' expectations of $585.96 million. Net income for the fourth quarter was $123.5 million, or 34 cents a share, below analysts' predictions of 37 cents.
Since being hit hard by the recession, Paychex has seen 13 consecutive quarters of growth in checks per payroll, Mucci noted, though there was some moderation of this trend in its fiscal fourth quarter.
Paychex also saw its best year ever in terms of client retention, exceeding 81 percent of its beginning payroll client base. The company's investments into sales over the last few years paid off as it expanded territories and increased involvement in franchise and banking referral opportunities, including new relationships with Subway restaurants and Tim Hortons Inc. on the franchise side and RBS Citizens N.A. and Union Bank N.A. on the banking side.
For 2014, Paychex expects revenue to increase 3 to 4 percent.
Mucci said the company expects more growth and has more products in store to help clients navigate the changing health care landscape.
"We're really excited about the products we'll be rolling out this fall that not only help them take information and use it to determine whether they have to comply and how they comply and help them comply, but also help them get to an exchange," he said. "I think the response to health care reform that the team here has done is really extraordinary."
Health care reform could begin to have an effect on revenue and earnings starting in the second half of fiscal 2014, as clients begin to catch up to the changes, Mucci said.
Paul Thomas, an analyst with Goldman Sachs Group Inc., noted that the company appears to have opportunities with health care reform.
But because it is such a new area, it may be difficult to exactly when these health care initiatives become material to growth, said Efrain Rivera, Paychex's chief financial officer.

"We think we have the potential to be an important contributor in the future," he said.

7/5/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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