A code W Form 1099-R reports amounts that are explicitly excludable from income under Section 72(e)(11) of the tax code.   Section 72(e)(11) of the tax code also treats the distribution from the annuity as a nontaxable distribution of basis (to the extent of the basis in the annuity).

If you enter a zero in box 2a, my screen shows that its not counted as taxable income.