You shouldn't assume that every feature is stagnant and never changes. Just because you could do something on your S3 doesn't necessarily mean that it will work the same way on your S5. If Google wanted to change how a feature worked, they certainly could.
Nevertheless, I don't have any trouble adding a folder to a home screen that has an existing app icon on it. To even begin to guess why you can't do so, we need all of the information that you forgot to include in your original post e.g. what model of S5 you have, your carrier, firmware version, the exact steps you try to put the folder.. and so forth. A screen shot would be good too.