It seems like one factor in that scheme that would imply you're going to fire "underperformer"s is that 95% of people can't be classified that way. The names are symmetric; why not something more like 20% - 60% - 20%?
The other factor would be that there's an idea (which I can't speak to personally) that the only purpose of performance evaluations is to protect the company in case a fired employee sues to reinstate their job, which would mean that an "underperforming" grade was a necessary prereq to firing.
The overall flaw in this system is that it assumes that there are always people worth firing. But some companies - and let's think of smaller start ups as an example - try to hire really well, and there are some shops that are loaded with talented people. Stacking them and firing the 'worst' performers because of a metric is basically just cutting talent. My take is that if a company thinks they have 10% of people on staff worth firing every year, fix the hiring process - that's the problem.
The other factor would be that there's an idea (which I can't speak to personally) that the only purpose of performance evaluations is to protect the company in case a fired employee sues to reinstate their job, which would mean that an "underperforming" grade was a necessary prereq to firing.