Did you enter your 1099R in the right place in your federal return? Information flows from your federal return to the state return. If you entered it in the wrong place for federal that is what is causing the issue---because PA does not tax retirement income.
Check your federal:
To enter your retirement income, Go to Federal> Wages and Income>Retirement Plans and Social Security>IRA 401 k) Pension Plan Withdrawals to enter your 1099R.
....Also, you need to note, that when you first put it into the 1099-R form in the Federal section, the $$ will be added to PA income.
BUT
When you get to thee PA Q&A there will be a follow-up question about where it came from.....and that's where the $$ are removed from PA income...if it's eligible to be removed.
Just get ALL of your Federal section filled in first, and deal with PA later.
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Here's and old picture of what they asked in the PA section...I don't know what choices they are displaying this year: