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and they are sending the properly labeled check payable to USAA FBO hubby acct#xxxxxxxxx to us tomorrow, to submit to USAA within 60 days with deposit instructions into his existing traditional IRA. Easy. Fast.

That statement is contradictory.

A transfer is typically done FBO and is not a taxable event and has no requirement that it be deposited within 60 days.

a rollover is typically not done FBO and it is a taxable event requiring deposit within 60 days.

YOU can't do a direct roll over at all. T Rowe Price requires a request form directly from USAA, signed by hubby, returned to USAA with a copy of his latest statement 1st page, and THEN USAA can send direct rollover instructions to T Rowe Price to transfer the funds on USAA letterhead. Heaven forbid T Rowe just write the check out to USAA FBO Hubby and skip 2 weeks of aggravation, NOOOOO.

This is the correct way to do it. Direct transfer from one custodian to another. This way, T Rowe is assured from USAA that the receiving account is titled and structured correctly. Again, this is a direct transfer not a direct rollover.

they send us a form that would only let us cash out his 401K complete with penalties

It is not uncommon for an institution to charge an account closing fee though it is uncommon on a 401k. Are you sure this was a 401k and not an IRA?

And the best part is the phone rep trying to make it sound like it's for my protection.

It is. The penalties for doing it wrong are significant. USAA could have easily assisted you by helping you complete a direct transfer request that USAA would then have submitted to the other companies to request the funds - no calls needed from you. I know because I complete the same forms on a frequent basis for my company.
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