The rules for HSA distributions largely mirror those for IRA distributions. When an IRA is escheated to the state, the IRA custodian is required to report the distribution on Form 1099-R. One would think that the rule for HSAs would be essentially the same with the HSA custodian being required to report the distribution on Form 1099-SA.
Normally you would prepare Form 8889 Part II to report this as a distribution. To do this in TurboTax you would have to enter a Form 1099-SA as if you had received one. With no tax withholding, the form itself that you entered won't be included in your e-filing, the information will only be used to populate Form 8889 Part II.
In the case of escheatment of an IRA one can self-certify under IRS Rev. Proc. 2020-46 that the distribution would qualify for a waiver of the 60-day rollover deadline. One would think that an HSA distribution made under similar circumstances would also qualify for self-certification to be able to complete a late rollover.
