Continuity for ABM users with Managed Apple Accounts and Google Workspace SSO is not working

Hi,

We are using ABM to manage our Apple devices and have Managed Apple Accounts that our users are using to sign into their Macs and iPads. Continuity services are enabled and working, but some users are getting a message: "Unable to Connect to 'iPad' The iCloud account does not use two-factor authentication":

We are using Google Workspace to manage the user, so they are signing in using SSO with Google and the Two Factor requirements we have set up for Google. So I don't understand why we would get that message, since there is no way to enable two factor on our Managed Apple Accounts.

Am I missing something in the setup for the user that would not allow continuity? I found this discussion where someone had the exact same issue (but with Microsoft SSO instead of Google), and the suggestion was to look in Apple Business Manager's settings. However, there's no option to configure or enable Continuity there. I am logged in with an Administrator account.

Any suggestions on how to fix this?

Thanks

[Edited by Moderator]