Statistically its not a good practice. Can it be done, yes it does but an alternate approach would be to collapse your levels.
Example Collapse D with say A or B or C and create a new level indicator called E.
Example - If there are four categories like Black, Yellow, Green and Blue and you want to drop Blue, my suggestion is collapse the categories and probably create Yellow &Blue, Green and Black as new 3 categories.
This way you are not losing data or information while you take a call with your functional knowledge on which level you can collapse.
Secondly the savings are probably on the levels of freedom only.