The correct answer is A. AWS Step Functions allows you to handle errors and automate retry policies directly within your state machine definition. By adding a Retry field to the Lambda function state's definition in the Step Functions state machine, you can specify the error types (like timeout errors) for which retries should occur. You can also configure the maximum number of retry attempts, the interval between retries, backoff rate, and other parameters. This approach ensures automatic retries in the case of timeout errors, enhancing the reliability of the serverless workflow.