A long time ago (around mid 2014 and earlier), the ladders did not punish time outs at all. They simply counted as a loss and players would stay on the ladder. This had the drawback of inactive players cluttering up the ladder and giving people an easy way to climb up the ladder (just by challenging them and waiting for them to time out).
When the system changed to the current implementation (where a time out drops the player from the ladder, unless a rare bug occurs), I made a proposal regarding that situation:
Note: my initial post is not advocating for any sort of grace period for the player that timed out, although that did come up in the further discussion.
Another note: my first concern seems to have been addressed in a later patch: