Wouldn’t it be wonderful if you could discharge your debts by paying 50 cents on the dollar? You’d have something in common with General Motors in its bargain with the United Auto Workers union.

The GM-UAW deal adapts an old vehicle, the VEBA (voluntary employee benefit association), in a radically voguish way. Traditional VEBAs, dating to 1928 and used by tens of thousands of US companies, are tax-advantaged vehicles that companies use to manage and fund employee benefits. The new twist, in the GM-UAW deal and others, makes the VEBA a vehicle that unions use to manage and fund those benefits.

GM will transfer to the VEBA $29.9 billion of assets (including a $4.37 billion note convertible into GM stock whose exercise would make the VEBA a 16% shareholder of GM); extinguish from its balance sheet $46.7 billion in liabilities for post-retirement health benefits; and forego further obligations for such benefits. The union assumes all duties from there, including managing and funding the trust and administering benefits—perhaps with some official GM oversight or input.

This new vogue in VEBAs shows the dire straits of some companies burdened by enormous financial legacy costs, due, in part, to bad old accounting rules and curious health care policies.

Until 1993, US accounting rules (GAAP) did not require companies to book a balance sheet liability for promises to employees to pay post-retirement health benefits. The results were bountiful—but often worthless—corporate promises to provide these benefits, contributing to the bankruptcy of some companies. Under the 1993 rule, huge balance sheet liabilities sprouted. This (along with increased costs and other factors) tended to curtail company promises (and reduced the number of companies with 200+ employees who provide such benefits from 66% before the change to 33% today).

Even so, 14 years later, enormous benefit liabilities appear on balance sheets of dozens of US companies, especially manufacturing companies with unionized work forces. For many, the obligation exceeds $1 billion and 5% of total assets (at GM, the figure is nearly $70 billion). These costs impair US competitiveness with foreign companies where national health services foot the bill.

The new vogue in VEBAs may be appealing, but is not free from risk. Two risks are manifest in the GM-UAW deal. First, GM’s initial funding may be insufficient to satisfy the VEBA’s long-term obligations. Second, GM officials may exercise influence over the VEBA. Either way, the risk is that the obligation will remain with GM and not be transferred to the VEBA, as a matter of law or accounting, whatever balance sheet treatment GM adopts now. If so, investors may regret the deal; workers may get two bites at the apple. But there may be no other solution.

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