Thank you so much for your detailed response. I was trying to search for an answer when I saw this discussion and thought it's the same as my situation. It made me think the over-contribution due to failing last-month rule is subject to this year's penalty (10%+income tax) plus future years' (ongoing 6%+income tax). It's a relief to know at least I don't need to make non-qualified withdraw or empty out my HSA account to avoid future penalties. So many tax details when trying to save a little bit of money on medical expenses with HSA.
