Monthly retirement benefits from PSERS are exempt from PA state income tax. Turbo tax is taxing this amount

To have your retirement not taxed in the product, you need to go all the way through the state interview section.  

Walk through each question until you come to the question that asks "What kind of Retirement income do you have from Pennsylvania"  You will need to select, I'm eligible plans eligible. This will make the income nontaxable in TurboTax.

See screenshot