This summary provides a quick overview of the five different types of funding plans. If you need assistance in selecting the best type of plan for your business, please feel free to contact us at 404.601.4050 or info@zumbrunnen.com.

  • Current Funding Plan
    • The current reserve fund balance, along with the historical or current planned annual reserve contributions, are provided by the Client
    • The Current Funding Plan is presented to show adequacy of the current funding or any projected budget shortfalls

  • Fully Funded Plan – Component Method
    • The goal of a Fully Funded plan is to fund 99+% of the accumulated depreciation
    • Developed by HUD in the early 1980s
    • Funding of each item is amortized over the item’s remaining life
    • For those properties more than one year old, a Fully Funded Plan will result in higher initial contributions and a more conservative reserve balance than the Baseline and Threshold Funding Plans outlined below

  • Baseline Funding Plan
    • The goal of Baseline Funding Plan is to identify the minimum annual contribution requirements so the reserve balance does not drop below zero dollars during the specified Reserve Term
    • The Baseline Funding Plan forecasts a minimum funding level for the Reserve Term years only; major expenses beyond the Reserve Term may not be adequately funded

  • Threshold Funding Plan
    • The Threshold Funding Plan is the Baseline Funding Plan with funding amounts increased by a minimum threshold amount (contingency)
    • The minimum threshold amount is calculated by taking the threshold percentage (3-5%) of the total one-time replacement cost of all capital items

  • Modified Funding Plan
    • A Modified Funding Plan can be provided when the statutes, covenants, or Client directives vary from any of the above plans

For additional information, please refer to our white paper titled “Manage Maintenance Risk by Funding Replacement Reserves” found at http://www.leadingage.org/Article.aspx?id=3262.

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