Baseline, Threshold and Full Funding: HOA Reserve Plans Explained

A funding plan answers one question: how much should we save each year? The answer depends on the goal. Two boards with identical roofs can land on different numbers because they want different levels of cushion.

The three goals

Baseline funding has no room for error. The 2016 edition of the national standards calls it “the funding goal with the greatest risk.” A 2025 explanation of the standards says it’s “increasingly rare for reserve providers to recommend” it.

Threshold funding picks a floor. The same explanation gives two examples: “Our goal is to have our reserve balance never fall below $100,000” and “Our goal is to never drop below 50 percent funded.” It can be weaker or stronger than full funding, depending on the floor, and it can even be set above 100% funded. The floor should have a reason behind it.

Full funding aims for a balance that matches the wear so far. It’s usually the most conservative of the three, and the most expensive up front.

What “percent funded” means

Percent funded compares what you have with what the wear so far suggests you should have. That edition measures the “fully funded balance” as current cost times effective age, divided by useful life.

Take one roof that costs $100,000, lasts 25 years and has 15 years left. Its effective age is 10 years, so 40% of its life is used. The fully funded amount is $40,000. If the association has $20,000 set aside for it, that’s 50% funded. A real calculation adds this up across every component.

Percent funded is a snapshot. It helps show direction over time, but it doesn’t show when the money runs out. A cash flow chart shows that, which is why we lead with years of runway.

Where associations stand

One large study firm’s April 2026 report sorts its client data into three bands:

The firm calls these “directional benchmarks rather than a statistically representative sample.” They’re its clients, not all associations.

How to compare plans

Ask for these for each plan you’re considering:

1. The yearly contribution, and the cost per unit per month
2. The lowest year-end balance and the year it happens
3. How much the plan raises contributions each year
4. What happens if the biggest project costs 20% more

The last one is often the most useful. A plan that looks fine on paper may have little room for a high bid.

Does the law or a lender pick for you?

Sometimes. Some states set funding rules, and lenders can too. Fannie Mae’s rules, for example, don’t allow baseline funding for its reserve study exception, and California’s AB 2050, as we read it on an unofficial copy, sets a minimum from 2032. Check with your manager or attorney.

Where you have a choice, the board decides. A study can recommend a plan, but the decision belongs to the board, subject to any state minimum.

To see how your contribution changes your runway, try the calculator.