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No, that's not quite what is happening.
The IRS requires you to file form 8889 with your 1040 if you have either contributions to or distributions from your HSA.
Your HSA administrator is correct that they don't have to send you a 1099-SA if there are no distributions.
However, the upgrade to Deluxe is because you have to add the form 8889 (which reports on the HSA's contributions and distributions). You had contributions because you have a code W in box 12 on your W-2.
Because the IRS requires the 8889 to be attached to form 1040, and because form 1040 is the most complex of the primary tax forms (1040, 1040A, and 1040EZ), TurboTax makes it part of Deluxe and higher versions.
