D&C 76

Of those that will reside in the telestial kingdom, the Lord said -

"...behold, and lo, we saw the glory and the inhabitants of the telestial world, that they were as innumerable as the stars in the firmament of heaven, or as the sand upon the seashore;
110 And heard the voice of the Lord saying: These all shall bow the knee, and every tongue shall confess to him who sits upon the throne forever and ever;
111 For they shall be judged according to their works, and every man shall receive according to his own works, his own dominion, in the mansions which are prepared;
112 And they shall be servants of the Most High; but where God and Christ dwell they cannot come, worlds without end."  (Doctrine and Covenants | Section 76:109 - 112)

To me it sounds more like a reward of love than punishment allowing his own dominion and mansions.