FULL PRODUCT VERSION :
java version "1.8.0_31"
Java(TM) SE Runtime Environment (build 1.8.0_31-b13)
Java HotSpot(TM) 64-Bit Server VM (build 25.31-b07, mixed mode)

ADDITIONAL OS VERSION INFORMATION :
Linux XXXXX 3.11.0-12-generic #19-Ubuntu SMP Wed Oct 9 16:20:46 UTC 2013 x86_64 x86_64 x86_64 GNU/Linux

A DESCRIPTION OF THE PROBLEM :
Compiling following program with javac Main.java:

import java.util.HashSet;
import java.util.Set;
import java.util.HashMap;
import java.util.Map;

public class Main {
   public static void main(String[] args) {
        Set<String> set = new HashSet<>();

        Map<String, String> map = set.stream().reduce(new HashMap<>(), Main::reduce/*(m, s) -> m*/, (r1, r2) -> null);
    }

    private static Map<String,String> reduce(Map<String,String> h, String s) {
        return h;
    }
}

produces following error:

An exception has occurred in the compiler (1.8.0_31). Please file a bug at the Java Developer Connection (http://java.sun.com/webapps/bugreport) after checking the Bug Parade for duplicates. Include your program and the following diagnostic in your report. Thank you.
java.lang.NullPointerException
        at com.sun.tools.javac.code.Types.isConvertible(Types.java:290)
        at com.sun.tools.javac.comp.Check.assertConvertible(Check.java:922)
        at com.sun.tools.javac.comp.Check.checkMethod(Check.java:876)
        at com.sun.tools.javac.comp.Attr.checkMethod(Attr.java:3838)
        at com.sun.tools.javac.comp.Attr.checkIdInternal(Attr.java:3615)
        at com.sun.tools.javac.comp.Attr.checkMethodIdInternal(Attr.java:3522)
        at com.sun.tools.javac.comp.Attr.checkMethodId(Attr.java:3501)
        at com.sun.tools.javac.comp.Attr.checkId(Attr.java:3488)
        at com.sun.tools.javac.comp.Attr.visitSelect(Attr.java:3370)
        at com.sun.tools.javac.tree.JCTree$JCFieldAccess.accept(JCTree.java:1897)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.visitApply(Attr.java:1843)
        at com.sun.tools.javac.tree.JCTree$JCMethodInvocation.accept(JCTree.java:1465)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribExpr(Attr.java:649)
        at com.sun.tools.javac.comp.Attr.visitVarDef(Attr.java:1093)
        at com.sun.tools.javac.tree.JCTree$JCVariableDecl.accept(JCTree.java:852)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribStat(Attr.java:676)
        at com.sun.tools.javac.comp.Attr.attribStats(Attr.java:692)
        at com.sun.tools.javac.comp.Attr.visitBlock(Attr.java:1142)
        at com.sun.tools.javac.tree.JCTree$JCBlock.accept(JCTree.java:909)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribStat(Attr.java:676)
        at com.sun.tools.javac.comp.Attr.visitMethodDef(Attr.java:1035)
        at com.sun.tools.javac.tree.JCTree$JCMethodDecl.accept(JCTree.java:778)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribStat(Attr.java:676)
        at com.sun.tools.javac.comp.Attr.attribClassBody(Attr.java:4342)
        at com.sun.tools.javac.comp.Attr.attribClass(Attr.java:4252)
        at com.sun.tools.javac.comp.Attr.attribClass(Attr.java:4181)
        at com.sun.tools.javac.comp.Attr.attrib(Attr.java:4156)
        at com.sun.tools.javac.main.JavaCompiler.attribute(JavaCompiler.java:1248)
        at com.sun.tools.javac.main.JavaCompiler.compile2(JavaCompiler.java:901)
        at com.sun.tools.javac.main.JavaCompiler.compile(JavaCompiler.java:860)
        at com.sun.tools.javac.main.Main.compile(Main.java:523)
        at com.sun.tools.javac.main.Main.compile(Main.java:381)
        at com.sun.tools.javac.main.Main.compile(Main.java:370)
        at com.sun.tools.javac.main.Main.compile(Main.java:361)
        at com.sun.tools.javac.Main.compile(Main.java:56)
        at com.sun.tools.javac.Main.main(Main.java:42)

Replacing Main::reduce method reference with the commented-out trivial lambda causes the program to compile without errors.

REGRESSION. Last worked in version 8u5

ADDITIONAL REGRESSION INFORMATION:
The same error appears when compiling with 1.8.0_25:
java version "1.8.0_25"
Java(TM) SE Runtime Environment (build 1.8.0_25-b17)
Java HotSpot(TM) 64-Bit Server VM (build 25.25-b02, mixed mode)

but compilation succeeds without erros on 1.8.0_05:
java version "1.8.0_05"
Java(TM) SE Runtime Environment (build 1.8.0_05-b13)
Java HotSpot(TM) 64-Bit Server VM (build 25.5-b02, mixed mode)

STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
Run:

javac Main.java

with Main.java contents as provided in the report.

EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
Program should compile without javac throwing any exceptions
ACTUAL -
javac aborts throwing the following exception:

An exception has occurred in the compiler (1.8.0_31). Please file a bug at the Java Developer Connection (http://java.sun.com/webapps/bugreport) after checking the Bug Parade for duplicates. Include your program and the following diagnostic in your report. Thank you.
java.lang.NullPointerException
        at com.sun.tools.javac.code.Types.isConvertible(Types.java:290)
        at com.sun.tools.javac.comp.Check.assertConvertible(Check.java:922)
        at com.sun.tools.javac.comp.Check.checkMethod(Check.java:876)
        at com.sun.tools.javac.comp.Attr.checkMethod(Attr.java:3838)
        at com.sun.tools.javac.comp.Attr.checkIdInternal(Attr.java:3615)
        at com.sun.tools.javac.comp.Attr.checkMethodIdInternal(Attr.java:3522)
        at com.sun.tools.javac.comp.Attr.checkMethodId(Attr.java:3501)
        at com.sun.tools.javac.comp.Attr.checkId(Attr.java:3488)
        at com.sun.tools.javac.comp.Attr.visitSelect(Attr.java:3370)
        at com.sun.tools.javac.tree.JCTree$JCFieldAccess.accept(JCTree.java:1897)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.visitApply(Attr.java:1843)
        at com.sun.tools.javac.tree.JCTree$JCMethodInvocation.accept(JCTree.java:1465)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribExpr(Attr.java:649)
        at com.sun.tools.javac.comp.Attr.visitVarDef(Attr.java:1093)
        at com.sun.tools.javac.tree.JCTree$JCVariableDecl.accept(JCTree.java:852)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribStat(Attr.java:676)
        at com.sun.tools.javac.comp.Attr.attribStats(Attr.java:692)
        at com.sun.tools.javac.comp.Attr.visitBlock(Attr.java:1142)
        at com.sun.tools.javac.tree.JCTree$JCBlock.accept(JCTree.java:909)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribStat(Attr.java:676)
        at com.sun.tools.javac.comp.Attr.visitMethodDef(Attr.java:1035)
        at com.sun.tools.javac.tree.JCTree$JCMethodDecl.accept(JCTree.java:778)
        at com.sun.tools.javac.comp.Attr.attribTree(Attr.java:607)
        at com.sun.tools.javac.comp.Attr.attribStat(Attr.java:676)
        at com.sun.tools.javac.comp.Attr.attribClassBody(Attr.java:4342)
        at com.sun.tools.javac.comp.Attr.attribClass(Attr.java:4252)
        at com.sun.tools.javac.comp.Attr.attribClass(Attr.java:4181)
        at com.sun.tools.javac.comp.Attr.attrib(Attr.java:4156)
        at com.sun.tools.javac.main.JavaCompiler.attribute(JavaCompiler.java:1248)
        at com.sun.tools.javac.main.JavaCompiler.compile2(JavaCompiler.java:901)
        at com.sun.tools.javac.main.JavaCompiler.compile(JavaCompiler.java:860)
        at com.sun.tools.javac.main.Main.compile(Main.java:523)
        at com.sun.tools.javac.main.Main.compile(Main.java:381)
        at com.sun.tools.javac.main.Main.compile(Main.java:370)
        at com.sun.tools.javac.main.Main.compile(Main.java:361)
        at com.sun.tools.javac.Main.compile(Main.java:56)
        at com.sun.tools.javac.Main.main(Main.java:42)


REPRODUCIBILITY :
This bug can be reproduced always.

---------- BEGIN SOURCE ----------
import java.util.HashSet;
import java.util.Set;
import java.util.HashMap;
import java.util.Map;

public class Main {
   public static void main(String[] args) {
        Set<String> set = new HashSet<>();

        Map<String, String> map = set.stream().reduce(new HashMap<>(), Main::reduce/*(m, s) -> m*/, (r1, r2) -> null);
    }

    private static Map<String,String> reduce(Map<String,String> h, String s) {
        return h;
    }
}

---------- END SOURCE ----------

CUSTOMER SUBMITTED WORKAROUND :
Performing the reduction using imperative code instead of stream() and reduce()