Please include some more specific details about handling moderators who stepped down voluntarily and then wish to take up their positions again.
There was a recent case (which I do not wish to link to) wherein a moderator was semi-inactive for several years on two rather popular science sites. Apparently he would quietly handle a couple of flags or perform some other moderation-related activity which was completely invisible to the community (and did not leave any traces like comments in his recent activity page) every now and then. But there were absolutely no visible contributions from the last three years, and very few for several years before that. He played a huge role in setting up the site's policies when the sites were new, which is evident from the fact that he was the author of almost all canonical FAQ posts in about 2012. But a couple of years later, his participation suddenly shut down, and he did not mention any reason on meta or chat.
There was no evidence or reason to suspect that he was misusing his powers, and there was no reason to believe that he would return in the future and misuse the mod tools. Still, a high-rep contributor on one of the communities who had joined after the moderator had gone inactive said that he/she was somewhat concerned by the fact that someone with whom he/she had never interacted was a moderator. Concerns were raised regarding whether it is logical to have Moderator For Life positions, and some users claimed they would rather see a continuous stream of contributions or messages of some form from each moderator, just so that they can be reassured that no moderator's views had changed drastically from the position which got him/her elected.
A meta post was made asking whether the community would like this inactive-ish moderator to remain in his position. A month later, the moderator chimed in, explained how circumstances had changed in the real world and left him without the time to participate on SE, and resigned on both sites. This action was positively received and community members, moderators, and members of the SE community team thanked the moderator for his contributions.
I feel that in such cases, the community team needs to take a lot of care while re-instating the moderator. Over five years, the site's dynamics, rules, and values can change significantly, and the moderator needs to be made aware of that. While I do not believe that they should have to go through the whole process of re-election, I think that the moderator reinstatement process post should clearly state that the case of stepping down, particularly upon non-aggressive requests, is not considered trivial.