As you note, a policy for removing inactive moderators has existed for a long time. It goes as follows:
- The system notifies moderators who haven't performed any moderator activities for 4 months, by sending them an email informing them of this, and the inactivity policy: after 6 months of inactivity, they'll be removed. Removal is mostly due to the fact that mods have access to users' privileged information, so we wanna restrict who has access to these tools to people who actually use them; there's also the matter of diamonds not being supposed to just be a show of status, but rather a description of a role in the community (that is, moderators are supposed to actually moderate).
- At the 6 month mark, a new email is sent to the mod by the system, and the Community Management Team is also notified of the mod's inactivity.
- At this point, a Community Manager (these days, me) reaches out to this mod, and once again points out the removal-by-inactivity policy. The CM will allow for 1 week to get a response.
- If the moderator replies back saying they'll be picking up their moderation efforts, we're fine as is. If they reply back saying that "yes, indeed, I've been away and can't see a future where I'll have time to moderate" or somesuch, or don't reply at all, we'll proceed to work on finding a replacement...
- ...which means we'll reach out to the remaining mods on the team, and assess their moderation needs, so as to set up an election. We also take the chance to make sure no one else is gonna be stepping down in the near-ish future: elections are usually spread a minimum of 6 months apart, and since they're fairly heavy-weight, we might as well get the appropriate slot count on the first go, if possible.
- Then, finally, once that's all set up, and the election eventually runs its course, we remove the inactive moderator's diamond. We do this only here to minimize the "diamond shuffle," unless the moderator has expressed they'd rather get rid of their diamond sooner. We also defer to the departing mod to make their personalized farewells on their community's Meta.
So that is the process has it's been for years now, as you noted.
As you also note, though, this hasn't always been applied consistently: sometimes these'd fall through the cracks and CMs would forget following up on them; sometimes we've missed removing a diamond once an election is wrapped up; and sometimes the trigger for the email that the system is supposed to send to the CMs was broken for some reason...
Since some time in the first few months in 2019, though, we've been more consistent in taking care of these — we used to... well, no easy way to put it: let these requests pile up a bit. Awkward, I know: that's not the case any more, though! They're now usually handled on the very week they show up in front of me — still a lengthy process, as noted above, but at least the initial email to the inactive moderator is now sent as soon as we can, so the rest of the process starts moving.
Oh, and as for the last question: if moderators mark themselves as "away" using the vacation tool, the system still counts that time as "inactive" time; though depending on the circumstances, there may be a bit more flexibility there, if nothing else because it is more of a planned absence, than a "vanished off the site" situation. And I don't think I've stumbled upon a 6-month planned vacation yet...