The problem arises because the HSA custodian processed a return of a 2023 contribution before the due date of the 2023 tax return (code 2 on the 2024 Form 1099-SA). However, there was apparently no new contribution made for 2023 that was itself an excess contribution, so the HSA custodian erred in processing the distribution this way. As Opus 17 rightly points out, after October 15, 2023 the excess contribution made fore 2022 can only be corrected by either applying it as part of a future HSA contribution that you are eligible to make (after applying any new contributions made for that future year) or by obtaining an ordinary (code 1) distribution made taxable by not applying it to medical expenses.
