Percent Funded

Percent funded is the ratio of an association's actual reserve balance to its fully funded balance at a point in time, shown as a percentage.

It answers one question: of the money that should have been set aside by now for the wear already used up on the shared components, how much is actually in the bank? A reserve fund holding $400,000 against a fully funded balance of $800,000 is 50% funded.

Percent funded is a measure of strength, not a pass or fail mark. Common rules of thumb describe 0% to 30% as weak, 31% to 69% as fair and 70% or more as strong. These bands are conventions used across the industry, not a legal standard. A lower figure means a higher chance of a special assessment or deferred maintenance when a large project comes due.

The number can be above 100%. That simply means the fund holds more than the wear to date requires.

Percent funded changes whenever the balance, the component costs or the remaining lives change, so it is recalculated in every reserve study and update. Compare the figure over several years. The direction of travel tells a board more than any single reading.

Source: this definition follows the National Reserve Study Standards, published by Community Associations Institute (CAI), explained in our own words. State law can define the term differently for its own purposes.