I had the same issue and did some dogging around the forums. It turns out that this feature is not what most believe it is - it's not a proximity sensor.
When it is enabled it simply calculates that if the phone is jostled around and the s-pen is not inserted that you are picking up the phone and leaving the stylus behind.
Try picking up your phone and shaking it a little without the s-pen inserted and it should trigger it if the alert is enabled.
Sent from my SCH-R950 using Android Central Forums
that does not make mine go off....i have to walk away quite a ways before it goes off...