California does not allow excluding HSA contributions from income, so if the HSA contribution was excluded from the box 1 amount, the California wages should be $6,900 higher than box 1. The difference of $3,450 implies that your HSA contribution was only $3,450, the contribution limit for self-only HDHP coverage, not $6,900 for family HDHP coverage. I assume that you had family HDHP coverage. Although California might question it, the discrepancy in the box 16 amount doesn't really affect your California tax return because the box 16 amount is included on your California tax return for informational purposes only. The addition of your HSA contribution to federal income is done separately on your California tax return.
Please confirm that your HDHP coverage was family HDHP coverage, not self-only coverage.
The $6,900 should have been included in box 1 of the W-2 and the contribution is to be treated on the shareholder's individual tax return as a personal HSA contribution, If the contribution was made under a cafeteria plan under the S corp, the code W amount is probably correct, otherwise the $6,900 should probably have been shown as a box 14 item rather than in box 12.
See Q&A-3 of IRS Notice 2005-8: https://www.irs.gov/pub/irs-drop/n-05-08.pdf
It seems that the $6,900 was not properly included in box 1 of the W-2. Since the HSA contribution was not included in box 1 of your W-2, if you don't get a corrected W-2 you would have to report the contribution as if you were a less-than-2% shareholder by simply entering the W-2 as is and have it reported on Form 8889 as an employer contribution for which you receive no deduction on the individual tax return. If the contribution had been included in box 1 of the W-2 you would need to enter the W-2 as is (including the code W entry), indicate that you made a personal $6,900 contribution (in addition to TurboTax separately recognizing the code W amount), indicate to TurboTax that your employer told you about other contributions, then enter negative $6,900 as an amount not reported on the W-2. This caused the code W amount to be moved from an employer contribution on Form 8889 line 9 to a personal contribution on Form 8889 line 1 so that the $6,900 would appear on Schedule 1 line 25. If the HSA contribution was included in box 1 but was not reported with code W in box 12 you would simply report the HSA contribution as a personal contribution and receive the deduction on Schedule 1 line 25.
