State tax filing
It will likely show as income for PA until you fully complete every scrap of information in the Federal section.
Then....When you start in on the PA section, you'll be presented with selecting the source of those retirement $$....that's where you need to select where it came from...and after that.....if it's qualified to not be taxed, the PA taxable income will be reduced.
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State tax filing
The retirement distribution code you have entered for each Form 1099-R is correct. The distribution code for a normal distribution is 7, in Box 7.
Once you get to your PA return you do have to answer the question as noted in the screen image from @StreamTrain. However, the selection should be: "I'm eligible, plan's eligible (No PA tax)".
This will eliminate taxing the retirement on the PA return. See image below. 
