Customer service looked over my file, confirmed the proper amount was accounted for in 1099-R that I created (FYI also said to use Code 8 in Box 7, not Code P), therefore OK to reduce 401k contribution listed on W-2 by amount on the 1099-R so that the error is no longer generated.
Said this problem usually does't occur in previous versions, and also that Turbo Tax Premium handles this situation better.
