True or False: The 401(a)(17) limit is not considered when calculating employee ADR.

The 401(a)(17) limit refers to the annual compensation limit that is set by the IRS for qualified retirement plans, including 401(k) plans. This limit can affect the amount of contributions made to the plan, particularly in relation to employees' average deferral percentages (ADRs).

When calculating an employee's ADR, it's essential to consider all eligible compensation. Since the 401(a)(17) limit establishes a cap on how much of an employee's earnings can be considered for these calculations, it is indeed relevant. Thus, when determining contributions and compliance with nondiscrimination tests, the limit must be factored in for all employees, including both Highly Compensated Employees (HCEs) and Non-Highly Compensated Employees (NHCEs).

Because the question posits that the 401(a)(17) limit is not considered when calculating employee ADR, answering "False" is appropriate. This indicates that the limit is indeed a relevant factor in the calculation. Understanding this concept is crucial for compliance and effective plan management in 401(k) administration.