I use a similar fund (after reading Mary Hunt!). I've struggled with this notion as well (what to do when the cap is reached), but to be honest, I don't think I will ever reach those caps! The car is always needing some kind of maintenance, so I just figure out what I think it will cost us each year, and contribute that amount per month. It's just a continuous cycle, as we use it and build it back up. Same with clothes. I set aside $100/month for clothing (for a family of 5), and it builds up a little until someone needs clothes, and then it's depleted a little. As long as your estimate is close, it should never reach its cap! If I feel like I have over-allocated to a fund, I'll take some out and move it somewhere else, and then reduce my future contributions (but it's usually the other way around - I haven't allocated quite enough and have to find the money somewhere else). I don't know if it makes any difference but our Freedom Fund is basically a glorified envelope system. We use a zero-based budget, and EVERYTHING is accounted for and placed in the Freedom Fund. Even things like groceries, household, personal care, etc. We have it set up in Quicken, use our credit card for all purchases, and deduct from the appropriate category. EVERY purchase must be deducted from a category. It's like an electronic envelope system.
The only categories that I think we should maintain a minimum balance in are categories like home repair and car repair. Maybe keep a minimum balance that would cover the most major expense that could occur in that category, but then keep contributing above and beyond that to cover routine maintenance.
Also, regarding the Emergency Fund, I view that as a completely separate entity. The Emergency Fund is ONLY for loss of income. Everything else is anticipated and part of the Freedom Fund.