I've never seen a coach demand a higher level after his level is full, but I've seen plenty of times where ML coaches will drop down to AAA if all the ML spots are filled before the end of coach hiring.
So I guess the answer is that it will happen if/when all teams have filled that coaching spot at that level, though it's a gamble, as it has to happen before the last cycle. By waiting until the last cycle to do this, you may get lucky and have some pretty good coaches (for RL, that is) drop down, but you may be stuck with the RL scraps.