What determines when base troops are discarded?

I'm at max capacity. I'm still using the fulton to bring back anyone that I think is useful 'expecting' the system to replace the crappy guys with the nice new shiny ones. For example if I had many D's and I was maxed and I picked up a C then I'd like for a D to be kicked over the edge of the platform and for the C to take his place.

However, is this what actually happens? Anyone tested to find out?