When clicking on a file with extension .asc, an encrypted file, the file is
opened in an editor. Previously this file was decrypted, after asking for the
password, so I tried to restore that behavior. I removed the association of
*.asc to plain text. That did not help. So I finally did an edit on the details
of the KGPG application in the list of applications to process this file. In
the command I changed %U in %F and tried to save. I got an error message that
$HOME/.local/share/applications/kde4/kgpg.desktop could not be saved. After
"mkdir $HOME/.local/share/applications/kde4" I was able to do so. 

This is the bug.

I also made a file association for *.lokalize. That one is stored in
$HOME/.local/share/applications/ . So apparently there are two standard
locations for storing locally defined .desktop files.