PORT OF SEATTLE 
MEMORANDUM 

COMMISSION AGENDA             Item No.   5a 
Date of Meeting  June 7, 2011 

DATE:    May 30, 2011 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:    Tammy Woodard, Sr. Manager, Total Compensation 
David Leon, Benefits Manager 
SUBJECT:  Request for Additional Authorization on the Towers Watson Benefits Consulting
Contract No. P-00316429 
Amount of This Request: $320,000            Source of Funds: General Operating Funds 
Total Contract Authorization: $1,130,000 
ACTION REQUESTED:
Authorization for the Chief Executive Officer (CEO) to amend the benefits consulting contract with Towers
Watson for an additional $320,000, for a total authorization of $1,130,000, to be used over the term of the
contract, in two areas: 1) $60,000 for actuarial analysis included in the existing scope of work for the Port's
Other Post Employment Benefits ("OPEB") liability for retiree life insurance, and the Warehouse Pension
Trust; and 2) $260,000 for in-depth research, analysis and advising related to elements in the existing scope of
work. This may potentially include, but is not limited to, planning for changes associated with Health Care
Reform, enhancing the design and value of the Port's Wellness Initiative, additional benefit plan design
costing, or benefits communications strategy support, possibly related to a potential account-based health plan
offering. 
SYNOPSIS: 
The purpose of this memorandum is to request authorization to amend the Port's benefits consultant contract
with Towers Watson for an additional $320,000. The initial funding authorization, in January 2010 was
$810,000.
The first part of the resulting contract focused on the shift from fully-insured health plans to self-funded health
plans in 2010, and the associated savings that the transition would bring. The transition to self-funding
occurred on January 1, 2011, and a good deal of the work in part one of the contract related to the self-funding
transition has taken place.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
May 30, 2011 
Page 2 of 4 

The original funding authorization, however, did not fully account for work to be done under parts 2
and 3 of the contract, namely the costs of actuarial services needed for the Port's Other Post-
Employment Benefits (OPEB) liability for retiree life insurance and Warehouse Pension Trust; and
other costs associated with optimal plan administration, such as the costs of compliance and planning
related to the Patient Protection and Affordable Care Act ("PPACA"), which was passed in March
2010; or the full costs of consultant support for an enhanced wellness program and a possible accountbased
health plan offering. Authorization of additional funds will allow the Port to continue to achieve 
savings as part of the overall health care benefit cost containment effort. The additional consulting
support that will be available with the contract amendment would be appropriate regardless of whether
the Port-sponsored health plans were self-insured or fully insured, and the additional funding will not
diminish savings resulting from the conversion of the Port-sponsored plans to self-insured status. 
BACKGROUND: 
In January 2010 the Port issued a Request for Proposal (RFP) to select a Benefits Consultant to support
the conversion to self-insured health plans, provide consulting support to the new self-insured health
plans, serve as a broker for the insured benefit plans, and perform actuarial analysis work in support of
the Port's OPEB liability and the Warehouse Pension Trust. The Port had previously utilized a
Benefits Consultant to provide consulting and brokerage support to the fully insured benefit plans.
Prior to 2010, the benefits consulting fees were paid through commissions earned by the Consultant on
the Port's fully insured benefit plans. 
The 2010 RFP was the first RFP issued for benefits consulting services with the current procurement
and contracting processes. Historically, the Port had been able to utilize commissions received by the
consultant in excess of the agreed to annual fee to support in depth research, analysis, costing,
communication or consulting needs related to the Port's benefit plans. When requesting authorization
for the benefits consulting contract that resulted from the January 2010 RFP, we did not recognize that
we would have continuing needs for additional research, analysis, costing, communication and
consulting support. As such, we requested funding authorization for an amount we believed would
cover the on-going support to our benefits plans and the needed actuarial services. 
Towers Watson was selected through the competitive selection process as the Port's Benefits
Consultant. The contract with Towers Watson includes fees to assist the transition to self-insured
medical and dental plans, annual fees to support the on-going administration of the Port's self-insured
medical and dental plans, as well as fees to help administer the other benefit plans that remained fully
insured (i.e., Group Health medical coverage, life insurance, and disability insurance). The contract
that we negotiated with Towers Watson also included the actuarial support for the Warehouse Pension
Trust and the OPEB liability. The authorized amount of the contract, however, was not sufficient to
cover the transition to self-funding support, on-going benefits consulting support for the remaining
term of the contract, and actuarial support for the full potential term of the contract (five years) or any
additional work beyond the on-going support of the current programs. 
We are not certain what consulting support we will need, or want, to have Towers Watson consultants
perform through the end of the current contract. We may need to have analytical work performed to
assess implications of health care reform legislation. We may benefit from their support to develop
strategies related to our wellness program or overall benefits program. We may need their expertise as

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
May 30, 2011 
Page 3 of 4 

we develop communication materials to support possibly changing benefit plans in the future. We may
also need to have additional actuarial work performed in support of the Warehouse Pension Trust.
Because future needs are not known, we need to have funding available through this contract to permit
needed work to be performed. 
SCOPE OF WORK: 
The scope of work for this authorization is substantially the same as the existing scope of work for the
benefits consultant contract. Minor changes would be made to allow for more in-depth work
associated with PPACA planning, wellness program improvements, and planning for potential offering
of an account-based health plan. This work will further the Port's goals of overall health benefits cost
containment by supporting the efforts already underway to encourage employees to lead healthy
lifestyles, incentivizing employees to be smart consumers of healthcare, and incentivizing providers to
deliver appropriate, evidence-based quality healthcare. 
FINANCIAL IMPLICATIONS: 
The authorized amount of the current contract is $810,000, and the maximum term is five years (two
years with three one-year extensions). If this authorization request is approved, and all requested funds
are allocated to potential work under the contract, the maximum contract value will increase to
$1,130,000. This is an increase of about 40%.
This cost increase, however, is consistent with the goal of containing health care costs by transitioning
to a self-funded plan, by  for example  helping the Port avoid significant tax burdens imposed by
PPACA, stabilizing or reducing employee health risk factors, and reducing overutilization of costly
health care services. The consulting support that will be available if the contract amendment is
authorized would benefit the Port-sponsored health plans whether they were self-insured or fully
insured. The additional research, analysis, or costing that the Port's consultant may perform will not
be factored into the annual cost of the Port's medical or dental plans and will therefore not diminish the
savings that result from the 2011 conversion to self-insured status. 
ALTERNATIVES CONSIDERED/RECOMMENDED ACTION: 
1) Authorize additional funds for $320,000 to amend the existing contract with Towers Watson. This
is the recommended alternative. 
2) Authorize funds for benefits consulting work in separate contracts from the Towers Watson
contract. Although pursuing separate contracts for one or more of these services may provide some of
the value of authorizing the additional funds for the existing contract, there is likely to be a higher
fixed start-up cost for a new consultant, and higher marginal costs associated with the need to have two
different consultants coordinate their services. Even if Towers were to be the winning bidder of a
separate contract, the procurement and administration process of another contract would add
unnecessary costs and inefficiencies. This is not the recommended course of action.
3) Authorize no further funding for the benefits consulting agreement. The current agreement does
not contain sufficient funds to perform necessary actuarial work; nor does it provide any funding for

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
May 30, 2011 
Page 4 of 4 

in-depth research and analysis to implement anything other than the basic switch to self-funding. This
alternative would essentially "leave money on the table" by not capitalizing on the full advantage of
having a self-funded plan  the ability to coordinate plan design components and wellness program
elements to incentivize healthy lifestyles, smart healthcare consumerism and delivery of quality care,
ultimately generating more significant reductions in health care costs. This is not the recommended
course of action. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: 
January 12, 2010: The Commission authorized the CEO to enter into a two year contract with a
benefits consulting firm, with the option to renew annually thereafter for three more years, for a total
authorized amount of $810,000.