They are correct. TSA has announced that it is "degrading" the selection for those who obtained it via a carrier's elite program and "enhancing" it for those with a KTN, either through the TSA program or GE.
Doesn't explain your particular situation, but as time marches on, if you are a FF, you will likely want to enroll in one of these programs (GE being the better deal if you have a passport and travel internationally even infrequently).