OK, you have gotten to #7, and you cannot withdraw the total excess. The balance is carried over to 2024.
You will no longer have a HDHP in 2024 (is that right?), so now you have a choice (assuming you will never go under HDHP coverage again).
1. Continue to carry over the amount year after year, paying 6% a year on the carryover, or
2. Letting the balance in the HSA decline to 0 because of medical payments and service changes, in which case, the penalty falls to zero (the penalty is actually 6% of the smaller of the balance at the end of the year or the amount carried over).
3. If you don't want to be bled to death (#2), you can make a distribution for the amount of the carry over, say that it is not for medical expenses, then when you enter the 1099-SA into TurboTax, the box 1 amount will be added to Other Income, and a 20% penalty will be added on top of that. But, at least, the carryover will be finally dispensed with.
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