Simulation Distance Does Not Effect Entities In The Game.
Steps to Reproduce:
Create A World With 6 Simulation Distance
Summon Any Entity (Preferably An Armor Stand)
Go Around 6 Chunks Away From The Armor Stand
Use The /testfor @e[type=Armor_Stand]
Observed Results:
Armor Stand Is Still Detected.
Expected Results:
Armor Stand Should Be Unloaded.
Notes
The World File I Was Testing On You Can Download Here:
In your test world, the armor stands are within simulation distance of a player when the player stands in the chunk with the command block. Counting out the chunks for simulation distance does not include the chunk the player is in. If you step into the grass chunk just past the command block, save & quit, reload the world, and then run the testfor command, you will not find the armor stands.
In addition to that, just because an entity can be targeted by commands does not mean it is being simulated.