Latest Photoshop PSD file no longer imports in 4.26.1

So, the latest Photoshop CC arrived.
When saving as a PSD, the “maximize compatibility” dialog box is no longer shown. (I always used to make sure it was checked in the past.)
When I try to import a simple image with RGB/transparency and a single Alpha channel, I now get this message:

LogFactory: FactoryCreateFile: Texture with TextureFactory (0 0 ../../../../../../Users/jwatte/Documents/Unreal Projects/Shooter/Art/Weapons/Crosshairs.psd)
Format of this PSD is not supported. Only Grayscale and RGBColor PSD images are currently supported, in 8-bit or 16-bit.
Error: Texture import failed

Pretty sure this kind of asset used to work?
Is this some new incompatibility?

Here are the compatibility/file handling settings:

Hmm… deleting the alpha channel, worked, while keeping transparency in the main image. I could have sworn that used to work. Maybe that was with TGA or TIFF files?

Does anyone use PSD files in their art path? I’d expect this to not be uncommon.
Can anyone agree or disagree with what I noted?