why did my employer put an 8 in box 7 of my 1099R?

[fxprogljr]

I'm asking because my employer says this is because the amount on this 1099R is an adjustment to my pension. But doing so causes the amount to show up as WAGES AND SALARY on my 1040. That makes it carry to my state form as WAGES AND SALARY and my pension is not taxable in my state. How can I avoid this?

[MayaD]

Which state return are you filing?

Per IRS: Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess can be corrected. The excess is distributed to you by the plan (along with any income earned on the excess).

If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099R should have the code "8," "B," "P," or "E" in box 7.

For more information please check macuser_22 response.

Pub 575