I think the person that you spoke to that indicated that the $166.66 could be treated as if it had been contributed to the HSA is completely wrong. Since it never actually made it to HSA account and was presumably not reflected on the Form 5498-SA (yet to be verified) and not included the code-W amount in box 12 of your W-2, I can't see how the $166.66 can possibly be treated as a HSA contribution, even though it was withheld from your pay with the intent that it be contributed to your HSA. However, it doesn't matter since you already paid taxes on this money with your 2016 tax return and it's too late to do anything about that. Because you paid taxes on it, it's not HSA money and you can use it for whatever you like.
