The process can vary from state to state, and since I don't know what state you are in, I will have to outline the two main ways in which this happens.

Try this way first:

After you have indicated the state in which you are residing in the My Info or Personal Info section, go to the 1099-R entry interview (do a Search for 1099-r (lower case) and jump to it). After you enter the information from the 1099-R, continue through the interview. Within a few screens, the odds are good that you will be asked the source of the 1099-R amount. You should notice references to your state, because TurboTax is asking on behalf of the state return what the source of the pension is, e.g., military, federal government, state government, etc.

If this screen comes up, check off military and then finish the 1099-R interview, after which you can go back to your state return and see if the military retirement pay has been excluded.

If that doesn't work, try this way:

Go to your state return, proceed through the interview. At some point if you were not asked on the 1099-R interview about the source of the pension funds, you may be asked in the state interview what the source of the pension was (actually, it may ask you this even if you have already answered in the 1099-R interview). Indicate the source of the pension funds and continue your state return.

If neither one of these options works for you, please make a new post here on AnswerXchange repeating your question and also telling us which state you are in.