Yeah, its the bottom of the shock itself hitting the axle tube, not the frame. The top of the rear shocks are just a rod that sticks up to the frame mount, most have the coil shock boots on them.
The relocation kit gives you a bracket that spaces the bottom of the shock out further towards the front, to let the body of the shock clear the axle tube.
On my Dana35, I just cut the shock tower off the axle tube and re-welded them a little higher to clear. And now that I have the Ford 8.8 back there I made custom lower mounts right on the spring plate to keep them up out of harms way with plenty of clearance.
'87 YJ, 4.2L built and bored, 8" of lift, 8.8 rear, AX15/NP 231J, Tom Woods drive shafts, Flat fenders, 12,000LB winch, Custom bumpers, Rattle can paint job. Never completed...