The Option 2 is likely suggested by several individuals because it is the one that will allow you to electronically file your tax return.
I have filed many tax returns using the second option and several have resulted in the IRS asking additional questions, but those questions have been easy to answer the vast majority of the time.
Option 1 "signals" the IRS that there should be a form out there (1099-R) that it can't see and that may also cause them to inquire. However, if you should get an inquiry from the IRS you would have the option then to fully explain the nature of your income to a human who can understand it and you shouldn't have a problem after that.
The problem with either of the options presented is that the first "read" of your tax return is nearly always by a computer with no human involvement at all. When that computer doesn't see what it expects, it is more likely to spit out an inquiry for more information and send the file over to a human.
All of that to say, either option has the potential to cause the IRS to reach out, but the odds are still fairly small. Because the computer does the first "read" it won't pick up on any attached explanation, either, so explanations sent with tax returns that aren't asked for or provided on a specific form (such as 8833) tend to get ignored and don't reduce the chance of an inquiry. Those explanations can help speed up resolution - sometimes - but most of the time they are simply ignored.
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