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California adjustments state tax form due to box 12 w

I understand that under the federal program, the box 12 w amount is deducted from the gross pay once the HSA interview is done, but in the california program, it says that since CA doesn't allow the amount from employers to be deducted from the gross, how does that get adjusted since the reported amount in box 12 w is the combination of employer contributions and employee contributions thru payroll deductions?
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Level 13

California adjustments state tax form due to box 12 w

This is a terminology issue.

In fact, the IRS considers the sum of the employer contribution and your contribution by means of a payroll deduction program to be the "employer contribution".

This is because both of these amounts are removed from Wages in boxes 1, 3, and 5 on your W-2. So California adds the total amount back to state income.

So the program is working as the IRS and the state require.

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