The distribution code in box 7 is "2". This indicates an early distribution, exception applies. "Exception" refers to this distribution not being subject to the 10% early distribution penalty. However, the pension administrator still indicated that it was an early distribution.
I checked the 2019 Mississippi instructions - and they reported the same thing, that distributions that pensions that are taxable as early distributions do not qualify for the exemption from Mississippi income tax. In a similar way, in my test, TurboTax 2019 also taxed this distribution in Mississippi.
Let me suggest this.
When you went through the 1099-R interview and went through the Simplified Method calculations, did you check off that you were over the retirement age for the plan (I assume that you are)? That would override the distribution code of "2" and indicate that this is not an early distribution.
If you would do this, then Mississippi would not tax the 1099-R distributions.
@dukes909
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