References must be declared using 'TYPE REF TO'

What causes this issue?

In the Class Builder references for types of attributes and parameters
are entered as follows:
Type assignment method = 'TYPE REF TO '
Type = class name.

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

System Response

How to fix this error?

Procedure for System Administrators

Error message extract from SAP system. Copyright SAP SE.