When using a 32bit tga with an alpha channel that has hard edges the compression method (DXT5) will create artifacts in the RGB channels that normally aren't there whit DXT1 compression(no alpha).
You can check "compress without alpha to see the difference
I believe this is due to DXT compression having a hard time dealing with small areas of high contrast. Reducing the contrast of the alpha channel by setting the Min Alpha value to 0.1 significantly improved the artifacts.
Areas along the alpha mask have noticeable artifacts (see screenshots for comparison)
The compression method gives a similar result as DXT1 (without alpha)
There's no existing public thread on this issue, so head over toAnswerHub just mention UE-42093 in the post.