Stepped Funding

Annual contributions to the reserve account are kept constant for a series of successive fiscal years (the "tread") and then an incremental adjustment (the "riser") is made before once maintaining a constant contribution. This process repeats itself over the term of the  funding model.

For example:
  • Our reserve contribution is $95,000 each year for the next 3 years then it will increase by 5% for the following 3 years
  • Our reserve contribution is $95,000 this year and will increase by 2% every 2nd year thereafter.
This form of stepped funding is essentially similar to a linear funding model that smooths the steps.
A form of lumpy funding.

See also:
Compare with: