This article investigates the reliability issues of silicon carbide (SiC) merged p-i-n Schottky (MPS) diodes. Aiming at the current imbalance issue in surge event and electric field crowding issue under avalanche shock for MPS diodes, plasma spreading layer (PSL) structure is proposed and its performance in alleviating such issues are studied via simulation and experiments. From the simulation, the PSL structure can provide an interconnection between P+ hexagonal islands and P+ rings, and allow bipolar current to spread from the wide P+ region to the other parts of the device during the surge pulse. Under avalanche shock, the PSL structure can relieve the electric field crowding at the corners of the P+ hexagonal island/ring. In both cases, it can relieve the current crowding issue and increase the effective energy dissipating area. It is demonstrated by the experimental results that adding PSL structure can improve both surge and avalanche reliability. Different configurations of PSL (i.e., P+ cross lines and P+ diagonal lines) are studied. The P+ cross-line configuration is proved to have ~20% improvement in surge capability, and the other one achieves ~11% improvement in avalanche capability. The PSL concept can also be applied to optimizing P well/P+ layers in SiC MOSFET for its robustness enhancement.