Legal Settlements
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This section includes information about income received through legal settlements.
Policy
Effective 06/2026, dividend income, educational income, interest payments, and royalty income are no longer countable. See the Urgent Bulletin for additional information.
Payments from a legal settlement may be countable income in the month received or as a resource.
Legal settlement payments are received as one of the following:
●A one-time payment that is considered a resource.
●A recurring payment that is considered unearned income.
Countable income is used to determine an income budget. (See Income Budgeting for how FAA determines the income budget.) FAA needs to know about income that is both countable and not countable to determine whether a budgetary unit’s expenses are exceeding their income. (See Income Eligibility for more information about how FAA uses countable and not countable income.)
For NA, when any portion of the legal settlement payment is designated to pay for the budgetary unit’s expenses, all of the following apply:
●The amount of the settlement payment that covers the actual expenses should be treated as a reimbursement.
●The amount of the settlement payment that exceeds the actual expenses is counted as income. (See Reimbursements for more information.)
NOTE This does not include any expense considered a normal living expense as defined in Standard of Basic Needs(g).
For CA, legal settlements received in payments, less any attorney fees, are countable as income in the month received.
Legal settlement payments made by any of the following are exceptions to this policy and have their specific policies that need to be followed:
●Agent Orange
●Hemophilia Relief Fund Settlement
●Nazi Persecution
●Phen-Fen
●Radiation Exposure Compensation Act
●Spina Bifida and Covered Birth Defect
●USA Patriot Act of 2001
●Uniformed Services Former Spouse Protection Act
●Victims of Crime Act (VCA) Benefits
●Wartime Relocation of Civilians Law
●Filipino Veterans Equity Compensation Fund
Agent Orange
Payments from any fund established in connection with settling liability claims concerning Agent Orange death or disabilities are not countable.
(Public Law 101‑102)
NOTE Agent Orange payments to survivors of deceased veterans are considered a resource.
Hemophilia Relief Fund
Payments made to hemophiliacs infected with HIV, as a result of class action lawsuits, are not countable as income in the month received. Payment sources include, and are not limited to, all of the following:
●Susan Walker v Bayer Corporation.
●Ricky Ray Hemophilia Relief Fund.
●Any fund established by manufacturers of blood plasma.
●A release of all claims instead of being in a class action lawsuit. The release is required to be signed by all parties on or before the later of the following:
12/31/1997
270 calendar days after the release is first sent to the participant
NOTE Payments may be placed in an interest-bearing account, or another investment that produces income. When this occurs, the interest income received on the account may be countable as income.
Nazi Persecution
Payments received by victims of Nazi persecution are not countable. This includes German reparation payments. (Public Law 103‑286)
Phen-Fen
For NA, Phen-Fen class action lawsuit payments are countable.
For CA, Phen-Fen class action lawsuit payments, less any attorney fees, are countable as income in the month received.
However, payments made for Phen-Fen class action lawsuits to participants with medical conditions are not countable.
Radiation Exposure Compensation Act
Payments received under the Radiation Exposure Compensation Act are not countable. (Public Law 101‑426)
The purpose of the act is to compensate for injuries or deaths resulting from exposure to radiation due to any of the following:
●Nuclear testing
●Uranium mining
Spina Bifida and Covered Birth Defect
Spina Bifida and Covered Birth Defect payments are not countable. (Public Law 104‑204 and Public Law 106-419)
Spina Bifida and Covered Birth Defect payments are Veterans Administration (VA) benefits paid to a natural child of a veteran when any of the following occur:
●The veteran served active duty in the Republic of Vietnam.
●The child was born with a covered birth defect (Including Spina Bifida).
USA Patriot Act of 2001
USA Patriot Act of 2001 payments are not countable. (Public Law 107‑56)
These payments are compensation for a victim of an act of terrorism or mass violence inside or outside the U.S.
Uniformed Services Former Spouse Protection Act
The Uniformed Services Former Spouse Protection Act (USFPA) payments are countable and considered income of the participant court-ordered to receive the payment. (Public Law 97‑252)
The USFPA outlines that up to 50% of a participant's former spouse’s military retirement or pension funds may be diverted by court order for alimony, child support, or property settlement.
Victims of Crime Act (VCA) Benefits
Victims of Crime Act (VCA) benefit payments are not countable when received by a participant. VCA payments are considered compensation for a victim of crime. (Public Law 103-322)
Wartime Relocation of Civilians Law
Payments under the Wartime Relocation of Civilians Act to United States citizens of Japanese ancestry and resident Japanese noncitizens are not countable. This includes certain Aleutian and Pribilof Islanders from any of the following villages:
●Akutan
●Atka
●Attu
●Nikolski
●Saint George
●Saint Paul
●Unalaska
(Public Law 100‑383, Section 206, effective 08/01/88)
Filipino Veterans Equity Compensation Fund
Created by the American Recovery and Reinvestment Act of 2009, the Filipino Veterans Equity Fund is for Philippine military veterans who served during World War II and their spouses. Eligible persons receive a one-time payment of up to $15,000.
Payments received from the Filipino Veterans Equity Compensation Fund are not countable.
Verification
The participant has the primary responsibility for providing verification. (See Participant Responsibilities – Providing Verification for additional policy.)
For NA, income is required to be verified for all of the following before eligibility is determined:
●When reported on a new application, during the interview of a new application, or changes reported before the eligibility determination of a new application.
●For changes reported after an eligibility determination of a new application (e.g., a renewal application, mid approval contact, etc.) and any of the following apply:
The source of the income has changed.
The income is questionable(g) or unclear(g).
The reported income amount has changed by $51 or more.
The previous verification in the case file is more than 59 calendar days(g) old.
For CA, all income is required to be verified before determining eligibility.
Examples of verification that can be used for legal settlements include, and are not limited to, any of the following:
●Assistance payments records
●Benefit award letters from Social Security Administration (SSA), Statement of Earnings Veteran’s Affairs (VA), and other agencies
●Bank records
●Court records
●Current check reflecting gross income
●Federal or state tax forms
●Insurance policies
●Signed statement from the agency or payer providing the income
Legal Authorities
AAC R6-12-505
A.R.S 46-292-P01
7 CFR 273.9(c)(8)
7 U.S.C. 2014(d)
last revised 10/27/2025 effective 09/02/2025