In a scenario where you have:
1) An encrypted pool.
2) No passphrase on the pool.
3) A failed disk.
It appears impossible to replace the failed disk. The documentation at https://www.ixsystems.com/documentation/freenas/11.3-BETA1/storage.html#replacing-a-failed-disk clearly states that you must set a passphrase and back up the encryption key *before* replacing a failed disk with encryption. However, if encryption is set and a disk has failed, attempting to set a passphrase results in an error that the passphrase could not be set on the failed disk.
It's possible that you can 'replace' the offlined disk even after this error message appears, but I was not able to check. In any case, the error message needs improved to clearly call out if it's possible to proceed even though the passphrase was not set on the offline disk. If it's not possible to proceed, the documentation at https://www.ixsystems.com/documentation/freenas/11.3-BETA1/storage.html#encryption-operations needs to specify a passphrase should be set *before* a disk fails.