This will only remove the ambient occlusion on the grass with the grass layer method if you paint the grass with the foliage tool it will still do a bit ambient occlusion on the grass
Again I recently hit this same issue and replied in another thread but just in case anyone is still looking for a solution what worked for me was changing the Material shading model to “Two Sided Foliage”. It does not matter if your grass needs alpha masked opacity or if it needs to be Two Sided as long as the shading model is set to the foliage type it seems to have the expectation that distance field AO should not treat this like it would any other default lit opaque or masked thing. Have you tried that out?