Only SMS and Call notifications are designed to be replied from the watch by one of the predefined answers. You cannot answer any other type of notifications.
You can request a new feature through the form https://www.garmin.com/forms/ideas/
I was able until a few months ago. Then my VivoActive3 stopped offering me the choices. Only have Ignore and Block now
I then got a Venu (same as a VA4) this Christmas and it also behaves the same way :(
Gotta be something with my Microsoft account or phone. Anybody has an idea. It was really useful not having to take out th phone for MFA.
Do you have turned off 'App lock' on the Microsoft Authenticator?
https://www.ccp.com.au/microsoft-authenticator-turn-off-app-lock/
Turning this off made it work again on my watch.