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