Which limitation was placed on retirement benefits by the Tax Reform Act of 1986?

The correct answer relates to the Tax Reform Act of 1986, which introduced significant changes to retirement plan regulations. One key aspect was the adjustment of maximum contribution limits and the regulations surrounding early payouts. The Act aimed to curb excessive tax-deferral opportunities and ensure that benefits and contributions remained within reasonable limits.

Specifically, it established restrictions on the contributions that could be made to certain types of retirement accounts, directly addressing the issue of early payouts. The intention was to prevent individuals from withdrawing their funds prematurely while still benefiting from tax advantages, ultimately promoting long-term saving behaviors and financial security in retirement.

In contrast, the other options do not accurately reflect the limitations set by the Tax Reform Act of 1986. For instance, the notion that benefits must commence at age 65 is not a requirement of this Act. Additionally, the Act did not eliminate IRA deductions for all participants; rather, it adjusted the phase-out of deductions based on income levels. Finally, the Act did not establish minimum benefits for all plans, as such provisions are generally more focused on specified plans like defined benefit plans, rather than being a broad mandate from this legislation.