Normally, in your situation, the distributions from a 401(k) plan would not be taxable in Pennsylvania. However, this is not a simple 401(k) - it is the hybrid between a 401(k) plan and an ESOP.
The Pennsylvania website that I referred to above has this statement: "However, certain federally qualified deferred compensation plans constitute taxable “severance pay” ... "
I think you are going to have to contact the plan administrator for the KSOP and ask them if they are a taxable or nontaxable KSOP for Pennsylvania purposes (I noticed that the program behaved differently depending on which it was). IN the worst case, you may have them contact the Department of Revenue for the state.
Sorry, since non-taxable retirement income is not defined by statute, I don't have the crystal ball necessary to see which one it is.
Good luck with this.
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