You need to understand that this merit thing will become old with time and people will kind of get used to it like other features. Not recording very old merits means that the admin does not give much importance to it.
I know that this has some demerits also like it will hide the unreported merit abuse cases but we have follow the decision of admin (whose decisions had done only good to the forum so far).
That's not really the case at all. There's other features on the forum that can 'bookmark' a merited post like the watch list feature. You could also bookmark it personally via browser or by copying it in a text file. It just seems unnecessary data to keep for the long term, especially when members have sent out a few thousand merits. I'm sure theymos had plans to release a data dump on the full merit transactions just like he has with other things.
Honestly I don't see it as that big of a deal that merits get removed every 120 days. Yeah, it might be nice to know the merited posts, but only a select few would actually browse them, and take a look. The majority of forum users won't care for it.