The answer simply put is that not all of your contributions are still pre-tax.
If I understood you correctly, TurboTax did calculate an excess HSA contribution. Since all of your contributions were through your employer, TurboTax presumed that the contributions had been removed from Wages in Box 1 on your W-2 before your W-2 was printed.
So, the excess has to be added back to Other Income, to undo the effect of removing the contributions from Wages. So your tax will go up because your income goes up.
Make sense?
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