As of last night, this issue has been updated. You will now see in the NJ section a statement that says NJ does not tax Code Q distributions. Although you entered it as a T, this is because the fund isn't committing to code Q which makes it nontaxable. Once you answer some of the questions in the federal section after entering your 1099-R, TurboTax is then saying yes you qualify and making the income nontaxable in NJ as well.
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