True or False: To meet the 401(a)(30) limit, excess deferrals automatically count towards the ADR.

The statement is true because, under Section 401(a)(30) of the Internal Revenue Code, any excess deferrals made by a participant in a 401(k) plan that exceed the annual contribution limit are automatically treated as excess contributions and are subject to specific corrective actions. When excess deferrals occur, they are counted towards the Annual Deferral Limit (ADR) for that plan year. This means that these excess amounts reduce the available contribution space for the participant for the current year, as excess deferrals are included in the calculation of limits applicable for that year.

Understanding how excess deferrals operate in relation to the ADR is essential for maintaining compliance with IRS regulations and for ensuring that participants aren't inadvertently exceeding the allowable contribution limits. This process plays a crucial role in the management of 401(k) plans, making it necessary for administrators to be aware of how and when excess deferrals impact the overall contributions made by participants.