I was thinking either a) you get an alert a reaper 5 has ‘merged’ into your server, or b) you lose your flag when you merge (or resets to zero) Thoughts?

A is fine, B kinda sucks depending on how it's implemented.

The reason option B sucks, is if you go through the work to level up your emissary, you shouldn't just be able to lose it at seemingly random, that would be annoying and suck for the people who got downgraded back to 1.

With option B, the only exception I can think of is people who are deliberately portal hopping (using the tall tale method). Otherwise, if you are moved / merged into a new server then you should keep the grade 5.