IRS PUB 969 also allows you to deduct the excess contribution in a later year. This means that you made an excess contribution in a prior year, did not take the tax deduction then, left it in your account, and later use that amount as a valid contribution in a later year. You thus receive the tax deduction for that year.
PUB 969 states:
You may be able to deduct excess contribution for previous years that are still in your HSA. The excess contribution amount you can deduct for the current year is the lessor of 1) Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year and 2) the total excess contributions in your HSA at the beginning of the year.
https://www.irs.gov/pub/irs-pdf/p969.pdf page 8
if you undercontribute $400 for a subsequent year that eats up the exeess. it no longer exists so there is no longer a penalty.
