Thank you for your answer and that was my initial thought, however, if you read item 1. and 2. of Article 18, it says that the pension is taxable in the contracting state that the individual is a resident in.  She is a resident of Italy now and so I believe that the pension is taxed in Italy and not taxed in the U.S.

1. Subject to the provisions of paragraph 2 of Article 19 (Government Service), pensions and other
similar remuneration beneficially derived by a resident of a Contracting State in consideration of past
employment shall be taxable only in that State.

2. Annuities beneficially derived by a resident of a Contracting State shall be taxable only in that
State. The term "annuities" as used in this paragraph means a stated sum paid periodically at stated times during life or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (in money or money's worth).