Permissions with subfolders

I am having issues assigning permissions to sub folders. Let say I have a library set up with one main folder with subfolders

HR DOCS

2016

              January

2015

              February

In this case I have a group assigned permissions to all folders. I want to add a second group and give it just permissions on the February folder. But when I assign permissions and the February level it assigns them at the HR DOCS level. Am I missing some step?

I have tried with both a domain group and a SharePoint group

thanks

stuart