Ongoing costs to a company that come from funding activities that, by definition, do not increase revenue. Perhaps the most prominent example of legacy costs is the funding of pension plans. Legacy costs often accrue when a company takes on too many responsibilities in times of strong performance or when it takes on an appropriate level of responsibility and then its priorities change. Critics of legacy costs contend that they make industry uncompetitive, while proponents, notably labor unions, argue they are part of an employer's moral obligation to its employees.
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The financial expense of supporting retiree benefits, including pensions, heath care, and insurance. Legacy cost is especially burdensome for mature companies with declining markets and a shrinking labor force.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.