The short answer is that you should provide differentiated reading instruction for all your students so that everyone is making progress. A student who is not identified is not guaranteed to be successful and performing on grade level; it just means the regular classroom should provide the instruction the student needs to continue to make progress and be a successful reader. That success depends a lot (if not entirely) on appropriate classroom instruction.
The diagnostic and progress monitoring purposes for using PALS are to gather and use data to determine the best differentiated instruction for each student, and to check whether that instruction is making a difference in the student learning to read. A student’s Summed Score alone (whether below the benchmark or just a few points above, or well above) does not give enough diagnostic information to plan instruction. Look at all of the PALS data collected to identify each student’s current stages of reading and spelling development–information that should be used for grouping and planning instruction for all students.
In kindergarten, for instance, you may form small groups for all students according to their levels of Concept of Word development or instructional reading levels, and then focus on un-mastered skills (e.g., specific letters for alphabet recognition and letter sound knowledge). Students should not only have solid understandings of these subcomponents of reading, but also get plenty of supported experience with applying these skills in oral language activities and meaningful contexts (i.e., Concept of Word in text). The PALS Electronic Lesson Plans in the PALS Online System provide an example of how small group instruction should be tailored to meet the different needs of emergent, beginning, transitional, or intermediate/advanced readers. The underlying principle here is to use the data to inform your instruction.
Meeting students where they have needs will provide the best, most targeted and effective instruction possible, which will in turn provide the strongest growth toward yearly instructional goals.