True or False: An employee's ADR is always the same when compared to their elective deferral amount divided by their regular compensation.

The statement is false because an employee's Actual Deferral Rate (ADR) is not always the same as their elective deferral amount divided by their regular compensation. The ADR is a measure that reflects the percentage of an employee's compensation that is actually deferred into the 401(k) plan. This rate can vary based on several factors.

For instance, the elective deferral amount might only take into account certain contributions, such as pre-tax contributions, while the ADR encompasses all factors, including any losses in compensation or additional contributions made by the employer, such as matching contributions. Moreover, if there are changes in the employee's compensation during the year (like bonuses or salary changes), this can affect the calculation of both the ADR and the deferral amount.

Thus, while the elective deferral amount offers a specific insight into what an employee contributes, the ADR provides a broader context that incorporates the overall financial landscape. It is this distinction that leads to the conclusion that the statement is false.