Should an employee contribution to an HSA in California be included in W2 box 16 as taxable wages?

[DanielV01]

Unfortunately, yes, California requires the HSA contribution to be included in state income.  California does not currently follow the Federal treatment on the HSA, but there is legislation proposed to change this.  Please see this website that has more information:  http://www.benefitscafe.com/hsa/taxtreatment/

So, what you see in Box 16 of your W2 including the HSA contriubution as taxable income in California is correct.  You will want to enter that into TurboTax as reported on your W-2 to prevent any processing (and refund) delays for your California return.