Just like a regular mutual fund on your 1040 return, all earnings in a mutual fund (no matter what type) are considered taxable for California purposes. even if reinvested within the HSA
So you will need to report all of those on your California return.
Yes, most HSA custodians are seemingly unaware that two populous states (CA and NJ) require that you report earnings from your HSA. When people have questions about how they would even know what their earnings are - since they are not normally reported on your statements - then I ask them to ask for a customer service rep who knows about those two states.
Yes, Fidelity, like all the other HSA custodians, assumes that all HSAs are nontaxable.
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