Should be removed, and new elections held to fill in that role, or selecting the runner-up in the most recent election (similar to Arqade) to fill in that role.
Take the user waiwai933
His profile clearly reads:
I am now on indefinite leave of absence due to time commitments in the real world. Any moderation issues should be directed to other moderators or the SE team.
What's the purpose of having a moderator who would rather have other moderation issues directed at other moderators as a moderator? In this case, isn't it in everyone's best interest to have another user fill in that role as moderator?
This is my main point. Instead of having moderators who are doing nothing in their role, effectively wasting a moderator spot, what's the issue with having a runner-up from a previous election fill in that gap? So say, phenry was the runner-up in the most recent election, and considering he's provided some top notch contributions and is active on this site, what's the big deal with putting him in place of the other moderators? Better to have a moderator that does something than no moderator at all, and I'm sure these users would greatly benefit from having access to tools only available to a select few.