"The only thing I can think is that there is an upper limit."

Yes, there is an upper limit. You should read the entire info:

https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

That way, you can understand what applies to each client.

Since they took distributions, if they qualify as coronavirus disaster distributions, you might want to suggest they spread the taxable income over three years. That is part of the 8915-E instructions.