DEFINITION of 'Legacy Costs'

The costs involved with a company paying increased healthcare fees and other benefit-related costs for its current employees and retired pensioners. It is believed that escalating legacy costs can be a very large contributing factor towards limiting a company's competitiveness.

BREAKING DOWN 'Legacy Costs'

Typically, it is the larger, older and more established companies that have problems with spiraling legacy costs, because they have the most pension and healthcare liabilities. In the face of these costs, many companies are taking measures to lower legacy costs as much as possible. One example of this can be seen by the trend of companies changing their employee retirement plans from defined-benefit plans to defined-contribution plans.

RELATED TERMS
  1. Corporate Pension Plan

    A formal arrangement between a company and its employees - or ...
  2. Public-Private Investment Program ...

    A program designed as a result of the implementation of the trouble ...
  3. Pension Adjustment Reversal - PAR

    A numerical calculation in certain Canadian pension plans that ...
  4. Past Service

    Service to an employer that is recognized for the defined benefit ...
  5. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  6. Defined-Contribution Plan

    A retirement plan in which a certain amount or percentage of ...
Related Articles
  1. Investing

    Legacy Looks to New Partnership for Capital (LGCY)

    Legacy Reserves is entering into a new master limited partnership in order to raise cash, but the move comes with big risk.
  2. Insights

    Legacy a 'Strong Buy' after Robust 3Q (LGCY)

    Legacy Reserves was upgraded by multiple analysts after a strong third quarter and an upbeat CEO call to investors.
  3. Retirement

    Pension Plans: Pain Or Pleasure?

    Employees have a love/hate relationship with this retirement option.
  4. Retirement

    A Primer On Defined-Benefit Pension Plans

    Most of us will rely on a pension plan in the future, so it's best to know the details of the various plans before signing up.
  5. Retirement

    Chipping Away At The Pension Freeze Trend

    Learn five steps that'll put your retirement back into your own hands.
  6. Financial Advisor

    How to Advise Clients with Frozen Pensions

    Financial advisors are on the front line in advising clients impacted by a frozen pension. Here's what they need to consider.
  7. Retirement

    Florida's Surprisingly Flexible State Retirement System

    Retired Florida employees can choose a 401(k)-style investment plan or a traditional pension.
  8. Retirement

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.
  9. Retirement

    America's Frozen Pension Dilemma

    Unfortunately, there are several factors that have eroded the presence of pension plans in America, and workers need to be prepared to replace that expected income for their retirement years. ...
  10. Retirement

    7 Signs Your Pension Fund Is In Trouble

    Even if you're lucky enough to have a pension plan, you can't assume it'll pay out.
RELATED FAQS
  1. Who bears the investment risk in 401(k) plans?

    Who actually bears the investment risk in a pension plan depends on the type of pension plan that is employed. In a broad ... Read Answer >>
  2. What are qualified retirement plan types?

    Understand the different types of qualified retirement plans and what they mean in terms of employee and employer contribution ... Read Answer >>
Hot Definitions
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  2. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  3. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  4. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center