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Yes, unlimited your account and it will update your years of service badge.
Limited User Accounts
https://support.steampowered.com/kb_article.php?ref=3330-IAGK-7663
http://steamcommunity.com/discussions/forum/1/617329505860738922/#c364039531218245905
Spend or add what's left on the account/to the wallet.
However, if you actually purchase the funds, or buy products/games from that account, and that covers the $5 USD, that removes the recent purchase restriction on that other account also, if you plan to use the market with it.
So that takes care of two birds with one stone.
Limited accounts can earn badges, but does not get XP from them.
If it does, his Years of Service badge would update. According to his statement, it's not.
http://steamcommunity.com/profiles/76561197996029764/badges/1
They are saying they can craft badges by getting cards, but don't get the XP from them. The year of service badge has no bearing on their statement.
I just did it with my account and it worked
https://help.steampowered.com/en/faqs/view/71D3-35C2-AD96-AA3A
in case the old links get deactivated or break.