Correct, it's simply that this reporting on Form 5329 is extraneous. However, it does print when printing the tax return for filing, so I assume that it's included in the e-filing. It doesn't add to tax liability, though, so it's probably harmless. I'm sure many have filed this way over the years and have not had it cause any negative feedback from the IRS.
It's a bug, but I would consider it very low priority, particularly because the extraneous form can be deleted before filing and will not return unless the user edits the code-U Form 1099-R.
