Both good questions. Your NY income is not taxed in PA, including the 401K contribution. However, PA will use the amount to determine their tax. They will determine how much tax you pay on all of your income (which, for this purpose, includes the 401K), and then assess the percentage of tax on how much was earned in PA. So if 80% of your income was earned in New York (401K is New York "Income"), PA figures out the tax on all of your income, and taxes 20%, based on how much you earned in PA.
If you were working in NY and living in PA, then your income would be double-taxed: taxed in both states. However, in your case, NY taxes NY income (although they determine the tax based off of all of your income also), and PA taxes PA income only.
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