I'm pretty sure that plastic sleeve is not supposed to be down around the bendix gear. When you turn the key, the bendix gear slides out and engages the flywheel. I believe that plastic sleeve is supposed to remain up inside. It looks like the flywheel has engaged the plastic. The entire bendix gear needs to engage the flywheel, and it appears that at least half of the bendix is covered by that plastic.
This is what it should look like:
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This is your picture. You can see the end or edge of the bendix gear where the plastic bushing is chewed, that's how much it slid down over the gear. That bushing has covered almost half of the bendix.
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