"why wouldn't the PA-OH tax reciprocity rules apply?"
I believe reciprocity would apply. According to this PA tax website, reciprocity applies to "compensation that is subject to withholding":
https://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Pages/Gross-Compensation.as...
Since the wife's deferred PA compensation is subject to withholding, and is received by a resident of a reciprocal state, it seems to me that reciprocity would apply and that the income would be taxable only by the taxpayer's resident state of Ohio.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
