I wish conpanies offered this as a feature, in the sense I'm much more worried about someone SEing their way into my account rather than me losing access to all my MFA methods and backup codes or whatever.
Github has the same policy, and it deterred me from using MFA for a long time, and when I finally did, I added a large number of alternatives, including the not-so-secure SMS.
I think the fear of being temporarily unable to access your account is already a major reason why people don't use MFA. Turning the threat into a permanent loss will make people even more reluctant to do it.
Dealing with some of the backup methods (e.g. off-site copies of backup codes) is tedious, and I wouldn't be willing to do it for less important sites. If I had 2FA on Gitlab, I'd probably turn it off now. (Actually, just saw they don't have an option to add a phone number - I'd definitely turn it off.)
I may have misread the announcement, but it sounds like upgrading to a paid account recovers (npi) the ability to recover your account.
Or rather, at least as straightforward as the process is meant to be for existing paid-up customers, as per TFA.