"Is this supposed to happen?"
Yes, any distribution from a retirement account is considered to be income. However, being nontaxable income in this case, it has no effect on your tax return other than to appear on Form 1040 line 16a to indicate that you reported the income as nontaxable. It has absolutely no effect anywhere on your tax return other than simply appearing on line 16a. You can verify this by temporarily deleting the Form 1099-R or by temporarily changing the 1099-R form's box 1 amount to zero.
