It is correct that if your contributions were through your employer (code W in box 12 on your W-2), then the 2023 excess of $509 would have been added back to income on your 2023 return.
Any excess that is carried over to the next year (because it was not withdrawn by the due date of the 2023 return) is carried forward to the next year 2024. This is done so that the excess contribution can be used up in your 2024 return.
Your problem is that you no longer have HDHP coverage (CDHP is an industry term - the IRS refers to a High Deductible Health Plan (HDHP)) so unless you get HDHP coverage at some point in the future, that $509 will just keep rolling over.
This rollover can be stopped by taking that amount out of the HSA and telling TurboTax that it was not spent on medical expenses, note that this will be added to your Income along with a 20% penalty.
But since you no longer have any cash in your HSA, you no longer have anything to withdraw.
The only good news is that the penalty for the carryover is actually the lesser of the carryover or the value in your HSA at the end of the year. From your description, you no longer have any cash in your HSA. So TurboTax will continue to carry over this $509, create an 8889, create a 5329, and at the end penalize you nothing.
To my knowledge, the IRS has not addressed this issue of endless carryovers that you can't cure and for which you eventually will not pay any penalty. But this covers your 2025 return, at least.
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