I think the situation is fixed.  The Federal correctly taxes1/3rd and has no penalty.  On Hawaii you have to be sure to add back the full amount as it is all taxable to Hawaii.  I forget if the program makes the subtraction of the 1/3rd retirement income automatically or if it makes the additional adjustment for the full amount of the retirement automatically.  You just make sure those are taken care of when you make your pdf files for additions and for subtractions.