; FAQ 833: PPA/ARP Shortfall Payment Calculation using Segment Rates

 FAQ 833: PPA/ARP Shortfall Payment Calculation using Segment Rates Problem: How are the PPA 7-year and ARP21 15-year amortization payments for the funding shortfall calculated? Solution: For the PPA 7-year shortfall amortization method, review the Example 1 below. For the APR21 15-Year shortfall amortization, review the Example 2 below. Both examples assume there are no prior amortization payments to consider. EXAMPLE 1 - PPA 7-year amortization methodThe PPA funding shortfall amortization payment is calculated using the first two PPA Minimum funding tiered rates.EX: Funding rates are 5%, 5.5%, 6%Funding Shortfall = 123,226Funding factor calculation:1/(1.05)^0 = 1.0000001/(1.05)^1 = 0.9523811/(1.05)^2 = 0.9070291/(1.05)^3 = 0.8638381/(1.05)^4 = 0.8227021/(1.055)^5 = 0.7651341/(1.055)^6 = 0.725246Sum of 7 factors = 6.036331123,226/6.036331 = 20,414.06 amortization payment for PPA 7-year paymentEXAMPLE 2 - ARP21 15-year amortization methodThe ARP21 funding shortfall amortization payment is calculated using the first two PPA Minimum tiered rates.EX: Funding rates are 5%, 5.5%, 6%Funding Shortfall = 123,226Funding factor calculation:1/(1.05)^0 = 1.0000001/(1.05)^1 = 0.9523811/(1.05)^2 = 0.9070291/(1.05)^3 = 0.8638381/(1.05)^4 = 0.8227021/(1.055)^5 = 0.7651341/(1.055)^6 = 0.7252461/(1.055)^7 = 0.6874371/(1.055)^8 = 0.6515991/(1.055)^9 = 0.6176291/(1.055)^10 = 0.5854311/(1.055)^11 = 0.5549111/(1.055)^12 = 0.5259821/(1.055)^13 = 0.4985611/(1.055)^14 = 0.472569Sum of 15 factors = 10.63045123,226/10.63045 = 11,591.80 amortization payment for ARP21 15-year payment