Welfare programs are designed to help those with little-to-no income bridge the gap until they can once again support themselves and their families. The amount of assistance a person or family receives is based partially on income. A worker's compensation settlement could increase a household's income, and therefore the settlement may need to be reported.
TL;DR (Too Long; Didn't Read)
As a general rule, you should always report a compensation settlement to the welfare office in order to ensure that you do not violate the law.
What Is Welfare?
Welfare is a broad term used to describe several different programs that help low- or no-income citizens. Temporary Assistance to Needy Families, the Supplemental Nutrition Assistance Program and Medicaid are the three most common programs. Families in need might qualify for one or all of these programs, depending on their income levels and other needs. For example, a working couple with a child might not qualify for Temporary Assistance to Needy Families cash assistance but could qualify for the Supplemental Nutrition Assistance Program and Medicaid. When a household applies for benefits, they are required to list all their assets and income, and if approved, are told that if their income changes in any way, that change must be reported as soon as possible.
What Qualifies As Income?
To qualify for welfare programs there are income limits. For example, a household of three applying for the Supplemental Nutrition Assistance Program can have a maximum of $2,213 in gross income and a maximum $1,702 in net income to qualify for benefits. Gross income is the entire amount of income, while the net income is the total after allowed deductions are subtracted. Any money that is brought into the household is considered income, but not all income is treated the same. Income from a job is counted, but income from Temporary Assistance to Needy Families, Supplemental Security Income or other federal programs might not be counted at all, or only a fraction of the income is included.
Worker's compensation, or "worker's comp", is a payment made when a person is injured while working. Whether it will affect a household's welfare benefits depends on several factors, but regardless, the settlement must be reported.
Identifying Benefit Fraud
Not reporting changes in income is considered benefit fraud. In essence, by not reporting that you have additional income from a worker's comp settlement while you continue to receive benefits is illegal. Penalties can range from fines to legal action and the repayment of any benefits you received after the settlement. For example, if you receive a settlement that put you over the limit for the Supplemental Nutrition Assistance Program, but you still received benefits for three months after you received the settlement and you get caught, you could be fined for committing benefit fraud, ordered to complete community service and required to repay the cash value of the benefits you received. You could also be ineligible for any future assistance from the government.