For more information on how the levels have changed, go to Changes and Updates.
Here is an excerpt from a document dated from 2020, that explains how you can support your child's reading at home. This image focuses on the first two levels, but the entire document can be viewed here.
There are numerous red flags in this document, including:
Guidance to say "look at the picture"
Guidance to not to worry about word substitutions or "words that don't match the text"
Explicit guidance to not "sound out the word"
ARC Core (and the IRLA) are a Leveling System, so it is appropriate to compare it to other leveling systems, such as Reading Recovery and Fountas & Pinnell.
This image is not longer available on their website, but can still be found on the internet archive, from 2020:
There are additional materials available to help understand the levels in more detail. This carousel includes two additional sources, including the Training Wheels Series.
The Training Wheels website has since been removed, but some information about the series still persists, including: