Judges are not merely for the purpose of dispensing punishments, one tenet of being a judge is to restore order.
A biblical judge (Hebrew: shôphatîm or shoftim שופטים) is "a ruler or a military leader, as well as someone who presided over legal hearings."
"Legal hearings" could include sentencing punishment but also establishing one's innocence, and thereby attempting to reestablish the order to that of before an offense was commited.
And for Paul, we are more of partners with GOD recreating and redeeming the world. Of course He started that work and even is working through us as we become vessels of redemption in our own lives, but the passage is referencing how believers will be called upon to help restore order to this broken world, we will be vessels of reestablishing SHALOM.
NT scholar Craig Keener says:
in many Jewish traditions, the righteous would judge the nations; this judging could also imply judging the angels who were believed to rule the nations.
Colossians 1:19-20 ESV says...
19For in him all the fullness of God was pleased to dwell, 20and
through him God was pleased to reconcile to himself all things,
whether on earth or in heaven, by making peace through the blood of
"Whether on earth or in heaven," seems to infer that there were things that needed reconciliation not only on earth, but also in heaven. That may be Paul's referencing how there may have been defective angels who needed reconciliation for their rebellion. However, we don't know much more about what Paul thinks of that because he doesn't make many mentions of such things.
Perhaps that is a roundabout way of saying that believers will be charged with the joy of reestablishing justice in heaven also!
Aside from that, the passage means exactly what you think it does!
For a good commentary on this see 1 + 2 Corinthians by Craig Keener.