PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.       4i 
ACTION ITEM 
Date of Meeting     April 28, 2015 
DATE:    April 22, 2015 
TO:      Ted Fick, Chief Executive Officer 
FROM:   Tammy Woodard, Assistant HRD Director  Total Rewards 
Christie Norbury, Benefits Manager 
SUBJECT:  Flexible Spending Account and Health Savings Account Plan Administrator
Procurement 
Amount of This Request:    $650,000        Source of Funds:  Operating Budget 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to execute a service
agreement for three years, four months, with seven possible one-year extensions to a maximum
duration of 10 years, 4 months, to provide Flexible Spending Account and Health Savings
Account administration services to the Port. The service agreement will have an estimated total
value of $650,000. 
SYNOPSIS 
The Port of Seattle has included a Flexible Spending Account (FSA) in its benefits package for
many years. This plan permits employees to use pre-tax funds to pay for dependent care or
health care costs.  In 2014 the Port implemented a qualified High Deductible Health Plan
(HDHP) with an associated Health Savings Account (HSA). The HSA also permits employees
to use pre-tax funds to pay for qualified health care costs. These plans are governed by Internal
Revenue Code regulations and require considerable recordkeeping. Due to the complexity of
administering these plans the Port contracts with a vendor to administer the plans. The current
contracts, one for the FSA administration and one for the HSA administration, expire at the end
of 2015.
BACKGROUND 
Port employees have both a dependent care FSA option to use pre-tax funds to pay for qualified
child or elder care costs and a health care FSA option to use pre-tax funds to pay for qualified
health care costs. Qualified dependent care costs include day care expenses, costs of summer
camps for school age children, in-home child care costs, and similar costs for adult dependents
who are unable to care for themselves. Qualified health care costs include deductibles,
coinsurance and copays for medical, dental and vision care. 

Template revised May 30, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
April 20, 2015 
Page 2 of 5 
Beginning in 2014 the Port added a Health Plan (HDHP) option to the benefits package. This
option includes a linked HSA that permits employees to save funds on a pre-tax basis to pay
qualified health care costs. Qualified health care costs that employees can use the HSA for are
very similar to those they can use their FSA for. The HSA and health care FSA have different
governing rules including maximum annual contributions and carry forward provisions. Only
employees enrolled in the HDHP are eligible to enroll in the HSA. E mployees eligible for all the
Port medical plans, including those provided by unions through collective bargaining
agreements, are eligible to enroll in both the health care and dependent care FSAs. 
Both the FSA and HSA plans require significant recordkeeping to ensure employees access only
funds they have available and that funds are used in ways consistent with regulations defining
qualified expenses. There are also priority rules that govern the use of health care FSA funds for
employees also enrolled in an HSA. The medical FSA has limited carry forward provisions
while the HSA has unlimited carry forward provisions. Additionally, employees enrolled in the
HSA have their funds deposited into a bank account established in coordination with the HSA
administration vendor, and employees can make decisions on how their funds are invested when
their account balance reaches a pre-determined level. The multiple and varied regulations that
direct how these plans are administered together with the details that must be taken into account
by a plan administrator makes using a well-qualified vendor as a plan administrator a wise
decision. 
The staff time, and thus cost, of ensuring all relevant details are addressed when procuring these
services is significant. There are many details that must be addressed to ensure efficient transfer
of data from the Port to the plan administrators and considerable staff time is required to ensure
systems are in place to appropriately deduct contributions to the FSA and HSA accounts,
transmit contributions and data to the vendor, and track contributions for compliance with annual
limits. Allocating these costs over a 10 year contract yields a lower cost per year than a five year
contact would.  With the three year initial contract term there will be sufficient time for
employees to become familiar with details of using their plan with a new vendor and streamline
Port processes. The ability to extend the contract, on a year to year basis, to 10 years gives the
Port the ability to allocate procurement and implementation costs over a fairly long period but
also permits the Port to end the contract sooner if a better agreement (more efficient
administration, lower cost, etc.) becomes a possibility. The additional four months included in
the contract duration covers the run out period associated with the FSA plans where employees
can incur qualified expenses through December 31 of one year and submit reimbursement claims
through March 31 of the following year before unused funds would be forfeited. 
FINANCIAL IMPLICATIONS 
Budget/Authorization Summary 
Administration costs for the FSA and HSA accounts are billed on a monthly basis per enrolled
employee.  The total estimated agreement value of $650,000 includes an estimate for one-time 
implementation costs, as well as the monthly per enrolled employee charges for an estimated
number of employees that increases over the term of the agreement. Also included are other
administrative costs like non-discrimination testing and plan document updating costs.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
April 20, 2015 
Page 3 of 5 

Budget Status and Source of Funds 
The FSA and HSA administration costs are budgeted annually as part of the Port's overall
benefits costs and allocated to individual department budgets.
STRATEGIES AND OBJECTIVES 
Offering a total rewards package that supports  retention and attraction of the employees
necessary to complete the Port's work supports the Century Agenda as well as operational
strategies and objectives.  FSA and HSA plans support employees being informed about their
health care costs and this is aligned with the overarching Total Rewards Philosophy principle of 
sustainability  "total rewards must be managed in a fiscally responsible way that is sustainable
over time."
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1)  Discontinue offering FSA and HSA plans 
Pros: 
A procurement process would not be necessary. 
Cons: 
The FSA and HSA plans are a valuable component of our total rewards package,
and work in partnership with our medical and dental plans to help employees
manage their health care costs. These plans also provide a tax advantage to
participating employees. 
Employees would view this as a reduction in their benefits package, and
enrollment in the more cost-effective HDHP could be jeopardized. 
This is not the recommended alternative. 
Alternative 2)  Administer the FSA and HSA plans in house 
Pros: 
The port would not be paying vendor fees for these services. 
Cons: 
Outsourcing this work allows HRD to concentrate on our core businesses, and at
the same time have highly skilled subject matter experts administer these heavily
regulated programs. Performing this work in house would require a considerable
amount of time and education of Port staff to become sufficiently knowledgeable
about these programs.  Additionally, regulations governing these plans are
updated regularly so on-going staff training would be necessary to continue
administering plans in house.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
April 20, 2015 
Page 4 of 5 
The Port would need to develop or purchase a record keeping system to administer
these programs that would include a method for employees to submit claims, tools to
permit Port staff to adjudicate the claims, and a process for making claims payments..
The system would also need to be able to track and report account balances for
employees. 
This is not the recommended alternative. 
Alternative 3)  Contract with a plan administration vendor to administer the FSA and
HSA plans for a maximum period of five years, four months.
Pros: 
This alternative would allow for us to offer the FSA/HSA plans and to have the
plans outsourced to a company that has expertise in the administration of these
plans. 
Cons: 
This alternate is not ideal due to length of time required to establish interfaces
with vendors, update Port business processes to integrate with vendor processes,
and establish communication methods between the Port and the vendor.
Employee productivity could also be adversely impacted by employees needing to
learn new reimbursement processes. Having a longer period of time between
possible vendor changes reduces the frequency of these transition impacts on the
Port. 
This alternative is potentially more costly to the Port. If a procurement results in
a new vendor being selected the internal cost of changing established interfaces is
incurred more frequently than with a longer term contract. 
This is not the recommended alternative. 
Alternative 4)  Contract with a plan administration vendor to administer the FSA and
HSA plans for a maximum period of 3 years, 4 months with the option to extend this
contract 7 times for a one year extension to a maximum of 10 years, 4 months.
Pros: 
This alternative will permit a longer period of time with one vendor. This option
would  minimize the disruption to employees associated with learning new
processes in working with the HSA and FSA vendor and minimize the staff time
required to assist employees in becoming familiar with new vendor processes. 
Allows us to allocate the staff time required to conduct the procurement process
and implement different requirements of a new vendor over a longer, yet realistic,
period.
Allows us to review and assess the vendor's performance and gives us the option
to not renew the contract if the performance is not what was expected, but will
allow us to stay with a firm that is performing the task to our satisfaction. 
Will allow us to amortize the internal costs of implementation over a longer
period of time.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
April 20, 2015 
Page 5 of 5 
Cons: 
May not allow the Port to reassess costs of services provided by other vendors in
the market to assess that we are getting the best deal if we remain in the contract
for the entire length of the contract. 
This is the recommended alternative. 
ATTACHMENTS TO THIS REQUEST 
None. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None.