U.S. public-sector employers have promised over $1 trillion in retiree health and other post-employment benefits (OPEBs). We show that states with greater OPEB liabilities and lower funding ratios have higher municipal bond yields. The impact of OPEB liabilities on bond yields is comparable in size to that of pension liabilities but depends on distinct factors including the risk of rising health costs, plan risk-sharing mechanisms, and the employers’ ability to re-negotiate the plans with employees. Our results highlight how the size, funding level, and contracting environment of OPEB plans shape the risk-return profile of municipal bond investments.