There is nothing wrong with the Form 1099-R. Being "gross income" just means that it must be reported on your tax return even if it is not taxable.
"Social Security raises my medicare premium (IRMAA) based on income."
IRMAA is based on AGI which only includes taxable income. The fact that gross income is higher is irrelevant. Only the interest on the nonqualified annuity shown in box 2a of the Form 1099-R is adding to your AGI and affecting your IRMAA.
