I don't believe this is correct. It appears you must be retired or the distribution is taxed. I would love to be wrong.....please let me know if I am.
From https://revenue-pa.custhelp.com/app/answers/detail/a_id/1470/related/1
Code 7 Normal Distribution. This distribution from an eligible Pennsylvania retirement plan is not taxable if you met the plan requirements (the age and/or years of service required by the plan) for retirement, and retired after meeting those requirements.
