You can use Advanced Search and search for "rust" in the OOTP 16 and 15 General Discussion forms. You will come up with several threads that discuss this topic.
In one of them, I found this definitive answer from the game designer. It is from 2010 but unless he decided to make a change (and "Why would he?" comes to mind), I would guess that this still applies:
Quote:
Originally Posted by Markus Heinsohn
Rust is olny applied in two cases: 1) Coming back from a longer injury (14+ days, the longer the more rust) and 2) entering Spring Training.
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http://www.ootpdevelopments.com/boar...80-post15.html
EDIT: Your question seemed to be about veterans. Presumably they have already reached their fullest potential. However, bear in mind that
young players need playing time to develop into
their potential. This is not about "rust" but it is something else to think about when you ask "Would it be better for them to be demoted to a level at which they would get more game experience?"