When and how do I apply the American Rescue Plan Act of 2021 (ARPA) provisions to shortfall amortization bases? When and how do I apply the American Rescue Plan Act of 2021 (ARPA) provisions to shortfall amortization bases?

When and how do I apply the American Rescue Plan Act of 2021 (ARPA) provisions to shortfall amortization bases?

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For the first plan year in which ARPA shortfall provisions are applied, all prior shortfall amortization bases are eliminated and any current shortfall is amortized over 15 years. New shortfall bases in subsequent years are also amortized over 15 years. ARPA shortfall provisions first apply to the first plan year beginning after December 31, 2021. However, a plan sponsor may elect to have this rule apply starting in any plan year beginning after December 31, 2018.

In the ftwilliam DB Compliance module, find the ARPA setting under DB Compliance Tasks > Plan Costs > Amortization Bases > Shortfall bases - Apply ARPA. Set as follows:

  • ‘Yes, first year’ – Use this in the first year of applying ARPA (no later than years beginning after December 31, 2021). This will eliminate all prior shortfall bases, if any, and establish a new base in the current year if a shortfall exists, and amortize the shortfall over 15 years.
  • ‘Yes’ – Use this in all future years after applying ARPA for the first time, or if it is a new plan.
  • ‘No’ – Use this if you are electing not to apply ARPA in the current year, although this cannot be used for any years beginning after December 31, 2021. Not applying ARPA allows you to retain the prior shortfall bases and continue amortizing new shortfalls over 7 years. This should not be used after the first plan year in which ARPA is applied.

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