The 0.05 addition was intended to represent the flare on the face of the monitor from ambient illumination that was typical of CRT type displays, this flare value is recited in Annex D of the sRGB standard for Typical Viewing Conditions
I discuss the history in this GitHub thread
Unfortunately, adding the flare value to both sides of the formula doesn't actually correct the problem with using a simple contrast ratio in terms of its lack of perceptual uniformity, so that algorithm really only works when the background is very light or white.
Ratios are not the best way to model human perception of text contrast at suprathreshold levels on a self illuminated display. For an example of a contrast method that uses a more comprehensive model of contrast perception, see apcacontrast.com (disclosure, I am the creator of the APCA algorithm).