A Reserve Funding Plan should be adopted by the board following the review and analysis of the association’s most recent Reserve Study (§5550). The Reserve Funding Plan details how the association plans to pay for the repair and replacement of all major components indicated in the Reserve Disclosure. The following is a list of requirements outlined in the new Davis-Stirling Act, effective January 1, 2014.
Requirements:
- The summary must include a schedule of the date and amount of any change in regular or special assessments that are necessary to sufficiently fund the reserve funding plan.
- The association must provide a general statement addressing the procedures used for the calculation and establishment of reserves dedicated to repairing, replacing, or adding major components. The statement shall include, but need not be limited to, reserve calculations made using the formula described in §5570(b)(4), and may not assume more than a 2% rate of return on cash reserves above the discount rate published by the Federal Reserve Bank of San Francisco at the time the calculation was made. For more information, please visit the Federal Reserve Bank of San Francisco by clicking the link.
- The Reserve Funding Plan Summary must be distributed with the Budget Report to all members of the association 30-90 days before the start of the association’s fiscal year.
- If the board determines that an assessment increase is necessary to fund the reserve funding plan, any increase shall be approved in a separate action of the board that is consistent with the procedure described in §5605.
Learn more about the Reserve Study.