I would choose option 1 since you took the distribution this year and already have the 1099-SA. If you account for it next year using option 2, the 800 difference would be both taxable and subject to the 10% additional tax.
You should answer Yes to Excess contribution deducted from your wages? Since these were contributions made by the employer, they did not get added to your income. This will add the $800 to your taxable income, plus any earnings on the excess contribution.
