Retirement income is generally not taxable in Pennsylvania if the retiree met the again and years of service requirement.
Pennsylvania does not allow an IRA deduction so an IRA distribution would not be taxable in PA if your father always lived and worked in PA. Withdrawals are generally not taxable after a taxpayer reaches retirement age and retires. If the IRA came in from another state that allowed an IRA deduction, then some or all of it would be taxable.
Code 7D likely means the entire amount is not taxable.
An annuity outside an employer-sponsored program or a commonly recognized retirement program would be partially taxable. The IRA rollover amount was previously taxed and would be your basis of retirement income.
See How do I know if the amount on my 1099R (1099-R) is taxable on my PA Personal Income Tax Return?
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