Yes, that is to be expected. The reduction in taxable income is the result of the employer excluding the code D amount (and the 414(h) amount) from box 1 of the W-2, not from any deduction taken on your tax return. Also, there is no penalty for an excess contribution to remove. Had you actually made an excess contribution that went uncorrected you would have to explicity add the excess amount as miscellaneous income.
