Let's go back.
1. You can't contribute to an HSA if you have other non-qualified medical coverage. Medicare counts as non-qualified coverage, and most people enroll in Medicare at age 65. If you skip Medicare enrollment, then whenever you do enroll, it will be backdated 6 months, which will affect you contribution limits, assuming you were enrolled in qualifying coverage.
2. You did not enroll in qualifying coverage in 2022. Maybe your employer made a mistake, or maybe they have a policy that Medicare-eligible employees who refuse Medicare must take the PPO insurance instead of the HDHP. (As a point of law, if you are over 65, you are not allowed to decline Medicare unless you are enrolled in coverage from your employer that is equal to or better than Medicare. It may be that the HDHP your employer offers is not considered equal or better than Medicare, which forced you to enroll in the alternate insurance plan that is not HSA-qualified.)
3. Since you were not enrolled in a qualifying HDHP for 2022, any contributions you made are disallowed. This includes any contributions made for you by your employer (shown on your W-2 in box 12 with code W). plus any contributions you made yourself.
4. You were allowed to spend any remaining funds from the HSA, but you are not eligible to contribute new funds. You are also not allowed to make a qualified funding distribution from an IRA unless you are eligible to make new contributions.
5. The contributions you made in 2022 must be reported. If you fail to report them, you will get a letter and a tax assessment from the IRS. Because they are ineligible, they will not be tax deductible. (Will not reduce your tax.)
6. After reporting the contributions, Turbotax will tell you that you have excess contributions. You have two choices.
a. Leave the money in the account and pay a 6% penalty, calculated from the current HSA balance or the amount of ineligible contributions, whichever is less. So if you leave the money in the account you should be seeing a $36 penalty if your remaining account balance is $600. (Note that depending where you are in the Turbotax interview, you might not have entered the remaining balance yet. You need to fully run the HSA contribution and withdrawal sections of the interview.)
b. Withdraw the remaining balance as a "return of excess contribution" before April 15 to avoid the 6% penalty. The HSA bank will also be required to return any earnings on the money (interest, dividends) which will be taxable income that has to be reported on your 2022 return (even though it would technically be paid to you in 2023).
If you leave the money in the account, you could continue to spend it for medical expenses. If there are still funds in the account on 12/31/2023, you will pay another 6% penalty on your 2023 tax return, because that excess funds designation carries over.
7. Having a pension has nothing to do with eligibility to contribute to an HSA. It's the fact that you enrolled in non-qualifying medical insurance.
