Defined benefit pension and health care plans are important for firm leverage around the world. While consolidating off-balance sheet post-retirement plans increases effective leverage by 32%, firms reduce their level of regular debt by only 22 cents for every dollar of projected benefit obligation, yielding overall 23% higher total leverage of plan sponsors compared with similar firms without post-retirement plans. The most important driver of substitution rates between regular debt and post-retirement obligations is rule of law, followed by labor market freedom and taxes. In contrast, pension guarantee funds and priority of unfunded pension obligations are less important for substitution rates.