This is apparently only a problem in the CD/download version of TurboTax. TurboTax has a similar problem with ESOP dividend distributions reported with code U. You can just delete Form 5329 in forms mode of TurboTax and as long as you do not revisit the related Form 1099-R in step-by-step mode, the entry on line L of TurboTax's Distributions Not Subject to Additional Tax Smart Worksheet will not reappear.
However, in the case of code D, this problem does not happen if code D is combined with code 7 to explicitly indicate that it's not an early distribution, which is permissible. Code D is generally considered to be a secondary code to indicate the nonqualified nature of the insurance product, so payers will generally combine code D with code 1, 2, 3, 4, 7 or C. On the other hand, combining code U with any other code is not permitted.
