I think it is better due to scarcity to save them for people who have a long way to rank up rather than for those who are at the top already and get merits easily.
I think it is better to award them to posts you find interesting, without considering the author.
I would do that if I had unlimited smerits and, in fact, that was what I was doing before.
The problem with that is that I find interesting posts soon, and I run out. So, when I find more interesting posts, I dont have merits to send. With limited smerits, I consider awarding posts written by a Legendary member a waste. With Hero members is not so much of a waste, but they get them easily.