Pitot/Static/Transponder Problem

The encoder gives an uncorrected altitude. You altimeter is
corrected when you set it for barometric pressure at the beginning of
flight. ATC receives the signal from the encoder/transponder and
corrects it for the local pressure. If you are some distance from
their station, there could easily be a 0.2" Hg pressure differential
that would result in a 200' differential (one inch Hg per 1000' of
altitude).
So even if you are using the altimeter setting they give you, I
wouldn't expect perfect correlation if there's a pressure gradient
beteen you and them.

Dan