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Box 14 on the Form 1099-R can only accept digits, not alphabetic characters. If the income from the Form 1099-R is excluded on your state tax return it will be covered by the TurboTax state program when you completed the state return.
You have to enter the Form 1099-R as received.
Box 14 on the 1099-R is for state tax withheld. The amount here is either what the pension administrator withheld (and subsequently sent to the state) or zero. "Exempt" in this box doesn't make any sense anyway.
If the distribution is non-taxable at the state level, you will be able to indicate this either in the screens that follow the 1099-R data entry on the federal return or in the state return when you get there.
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