N.J. Stat. § 54A:6-24
Gross income shall not include the value of an employee's qualified option under a cafeteria plan if the employee does not elect to receive cash and the value of the option is excludable from federal taxable income.
As used in this section:
"Cafeteria plan" means an employee benefit plan that meets the requirements of section 125 of the federal Internal Revenue Code of 1986, 26 U.S.C. s. 125;
"Qualified option" means an option to receive cash in lieu of a qualified employer-provided benefit which option may only be exercised if the employee derives a substantially similar benefit from a source other than the employer;
"Qualified employer-provided benefit" means a benefit the value of which is excludable from federal taxable income under a cafeteria plan but which is not a benefit provided pursuant to a salary reduction agreement; and
"Salary reduction agreement" means an agreement between an employer and an employee under which the employee individually chooses to reduce the employee's compensation, or to forgo increases in compensation, and to have the amount provided, as an employer-provided benefit, by the employer to the employee; including but not limited to the agreements commonly known as flexible spending accounts and premium conversion options.
N.J.S. § 54A:6-24