Which change was introduced by the Tax Reform Act of 1986?

The Tax Reform Act of 1986 significantly impacted retirement plans, particularly by introducing various provisions aimed at making qualified plans more equitable and reducing discrimination in favor of highly compensated employees. One key aspect of this act was the imposition of coverage tests for qualified plans. These tests require that plans provide benefits to a broad segment of a company's employees, not just to a select group. The idea was to ensure that retirement benefits are available to a larger pool of employees, thereby promoting fairness in the distribution of retirement benefits across different employee classifications.

The coverage tests include the general nondiscrimination rules, which assess whether a sufficient number of nonhighly compensated employees are participating in the retirement plan relative to highly compensated employees, ensuring that plans do not favor a select few. This change has had lasting implications for how employers design their retirement plans, aiming to encourage broader participation among all employees.

The other choices do not accurately reflect the changes initiated by the Tax Reform Act of 1986. While IRAs were indeed expanded during this time, they were not introduced specifically for all employees. The act did not expand retirement benefit limits but aimed to limit them in certain contexts for higher earners. Finally, the act did not remove employer responsibilities for pension funds; instead, it