What makes this whole thing worse is the concept of "non-terminal" levels, i.e. levels that you're not allowed to stay at indefinitely, which means that you must either get promoted or fired.
I can understand not wanting to let people stay in a junior position forever, but I've seen this taken to a ridiculous extreme, where the ladder starts at a junior level, then goes through intermediate and senior to settle on staff engineer as the first "terminal" position.
Someone should explain to the people who dream up these policies that the Peter Principle is not something we should aim for.
It's even worse when you combine this with age. I'm nearing 47 years old now and have 26 years of professional experience, and I'm not just tired, but exhausted by the relentless push to make me go higher up on the ladder. Let me settle down where I'm at my most competent and let me build shit instead of going to interminable meetings to figure out what we want to build and who should be responsible for it. I'm old enough to remember the time when managers were at least expected to be more useful in that regard.
Yeah, the terminal level, whatever the title (they are just words) need to be the point at which you can handle moderately complex (multi-week) tasks with no supervision.
And honestly, this will depend on the environment and kind of work being done.