When a matter is marked as closed - it shows that its closed in the time entry screen as shown below.

If you want to have 'CLOSED' matters removed from this dropdown list altogether, then you will need to suggest that direct to Actionstep via the feedback forum (on the help menu within Actionstep) as currently, that would be considered an enhancement change to the product because there is no settings available for this purpose

If the users were to continue to record time on the closed matter then you will be blocked from doing so with the red message that comes up like the following screenshot.