I don't doubt these payments are entitlements arisen from Israeli national insurance but what you described doesn't sound right for payments with respect to newborn.

In any case, assuming your client is a tax resident of Israel, these shouldn't qualify for Article 21 of the US-Israel DTA and would, therefore, be subject to normal US tax rules.

I didn't look up "Topic 54" but if you are referring to how social security benefits may be excluded in part from taxation, you would be mistaken; you can't treat these payments the same way because §86 applies only to benefits received under title II of the Social Security Act and tier 1 railroad retirement benefits.

Your client may, however, claim FTC for Israeli taxes paid (or accrued).