SSE-S3 - is free and uses AWS owned CMKs (CMK = Customer Master Key). The encryption key is owned and managed by AWS, and is shared among many accounts. Its rotation is automatic with time that varies as shown in the table here. The time is not explicitly defined.

SSE-KMS - has two flavors:

AWS managed CMK. This is free CMK generated only for your account. You can only view it policies and audit usage, but not manage it. Rotation is automatic - once per 1095 days (3 years),

Customer managed CMK. This uses your own key that you create and can manage. Rotation is not enabled by default. But if you enable it, it will be automatically rotated every 1 year. This variant can also use an imported key material by you. If you create such key with an imported material, there is no automated rotation. Only manual rotation.

SSE-C - customer provided key. The encryption key is fully managed by you outside of AWS. AWS will not rotate it.

This solution meets the requirements of moving data to an Amazon S3 bucket, encrypting the data when it is stored in the S3 bucket, and automatically rotating the encryption key every year with the least operational overhead. AWS Key Management Service (AWS KMS) is a service that enables you to create and manage encryption keys for your data. A customer managed key is a symmetric encryption key that you create and manage in AWS KMS. You can enable automatic key rotation for a customer managed key, which means that AWS KMS generates new cryptographic material for the key every year. You can set the S3 bucket’s default encryption behavior to use the customer managed KMS key, which means that any object that is uploaded to the bucket without specifying an encryption method will be encrypted with that key.

Option A is incorrect because using server-side encryption with Amazon S3 managed encryption keys (SSE-S3) does not allow you to control or manage the encryption keys. SSE-S3 uses a unique key for each object, and encrypts that key with a master key that is regularly rotated by S3. However, you cannot enable or disable key rotation for SSE-S3 keys, or specify the rotation interval. Option C is incorrect because manually rotating the KMS key every year can increase the operational overhead and complexity, and it may not meet the requirement of rotating the key every year if you forget or delay the rotationprocess. Option D is incorrect because encrypting the data with customer key material before moving the data to the S3 bucket can increase the operational overhead and complexity, and it may not provide consistent encryption for all objects in the bucket. Creating a KMS key without key material and importing the customer key material into the KMS key can enable you to use your own source of random bits to generate your KMS keys, but it does not support automatic key rotation.