(Reuters) - Kentucky's financially struggling pension system will move forward with an expanded governing board after a judge late on Monday temporarily ruled in favor of a reorganization ordered by Governor Matt Bevin.

But Franklin Circuit Court Judge Phillip Shepherd also ruled the governor erred in removing Thomas Elliott from the board, where he had served as its chairman.

Elliott, along with Kentucky Attorney General Andy Beshear, sued Bevin, asking the judge to temporarily block the governor's executive orders related to the pension system, pending a final decision by the court. No date was given for when a final ruling would be made.

The judge said that while Beshear raised "important and legitimate questions about the validity of the governor's reorganization of the board," the executive orders caused "no irreparable harm."


Shepherd said the governor added members with financial and investment expertise to the board, noting such a move "is sorely needed in light of the financial challenges facing the system."

Kentucky and Illinois have the worst-funded pension systems among the 50 states.

"For now, until the case is finished, this board will remain in place and will be making decisions," Bill Thielen, the Kentucky Retirement Systems' executive director, said on Tuesday.

Thielen, who is retiring on Sept. 1, said the board is expected to name someone to replace him on an interim basis at its meeting on Wednesday.

The Republican governor called on the Democratic attorney general to "drop his politically-motivated lawsuits and stop his efforts to fight transparency and protect the status quo."

But Beshear was not budging.

"Our goal is to quickly move this case to a final decision at the trial court level and ultimately to the Supreme Court of Kentucky," he said in a statement.

(Reporting By Karen Pierog; Editing by Alan Crosby, Bernard Orr)