Hi my client is getting charged the 10% withdrawal penalty and the full taxes.

Is this a glitch in the program?

I believe you are looking for form 8915E.  Unfortunately it isn't finalized yet.

8915E is for spreading the taxability out over 3 years. Whether the 8915E will waive penalty as well, or we need the 5329 involved for this, Im not sure, since we dont have an 8915E available yet to see how it works.

8915E will allow you to spread the tax and is necessary to claim the "other" option on form 5329.